» The fourth industrial revolution: tearing down the barriers between services and industry
15.03.2016 - Natural Sciences Sector

The fourth industrial revolution: tearing down the barriers between services and industry

Photo: Michael Shick A Google self driving car passes a bus at Google's headquarters in the USA.

Some of the world’s most technologically advanced countries are fostering creative industries, in order to revitalize their manufacturing sector, observes the UNESCO Science Report: towards 2030. This trend is visible in Europe, the USA or the Republic of Korea, for instance. Creative industries have become a driver of what has been termed the fourth industrial revolution, which is bringing the internet of things and the internet of services to industry.

After introducing a policy of ‘low carbon, green growth’ in 2008, the Republic of Korea began emphasizing the ‘creative economy’ in 2013, as part of efforts to revitalize its manufacturing sector in the face of stiff competition from China and Japan. In her inaugural address in February 2013, President Park Geun-hye described her vision for national development as ‘the convergence of science and technology (S&T) with industry, the fusion of culture with industry and the blossoming of creativity in the very border areas that were once permeated by barriers.’

Culture an economic driver in the digital age

Cultural goods have become an economic driver in today’s digital age. Media and entertainment have even become the top digital industry.

The newly released report on the Globalisation of Cultural Goods observes that global trade in cultural goods doubled between 2004 and 2013, despite the global financial crisis of 2008–2009 and a massive shift among film-goers and music lovers towards web-based services. The digitization of products has had an enormous impact on cultural industries. Trade in recorded music has declined by 27% since 2004, for instance, and that in movies by 88%, even as audio-visual services as a whole have gained ground.

After decades of relying on large conglomerates to drive the economy, the Republic of Korea is striving to become more entrepreneurial and creative. The challenge ‘will be to foster a creative culture in small and medium-sized enterprises (SMEs) and to turn the regions into hubs for creative industries,’ observes the UNESCO Science Report. One example of the Park government’s approach is the Creative Economy Town, an offline and online platform which allows individuals to share and commercialize their ideas; professionals from relevant fields act as mentors, providing legal advice on intellectual property rights and other issues and connecting budding innovators with companies which have the potential to market their ideas. A second example is the Innovation Centre for the Creative Economy set up by the government in 2014 in Daejeon, which serves as a business incubator.

Cool Japan

In Japan, the recession triggered by the global financial crisis has had a lasting impact on investor confidence. Japanese firms remain reluctant to raise spending on research and development (R&D) or staff salaries and averse to risk-taking. It has become difficult for Japanese manufacturers to compete in the global market by producing stand-alone commodities. The UNESCO Science Report suggests that ‘Japanese industry can use its technological strength to satisfy global demand with system-oriented, network-based innovation supported by ICTs.’ This would be in keeping with the government’s Comprehensive Strategy for STI (2013) promoting ‘smartization’, ‘systemization’ and ‘globalization,’ which identifies information and communication technologies (ICTs), nanotechnology and environmental technology as priority cross-cutting areas.

The UNESCO Science Report suggests that ‘one possibility for Japan will be to promote creative industries in such areas as digital contents, online services, tourism and Japanese cuisine.’ It observes that ‘the Ministry of Economy, Trade and Industry has been promoting the Cool Japan Initiative for several years now, which culminated in the establishment of the Cool Japan Fund Inc. by law in November 2013 to help Japan’s creative industries spread their wings abroad. Such endeavours could be more tightly integrated into Japan’s overall science, technology and innovation policy.

None of the leading internet-based companies are European

According to Europe 2020, the European Union’s decadal strategy for smart, sustainable and inclusive growth, insufficient use of ICTs is one of the structural weaknesses that have led to a productivity gap in Europe. In order to set the European Union (EU) on the path to smart growth, the Digital Agenda for Europe sets out to exploit the potential of ICTs better by promoting a digital single market. This strategy is echoed by the countries of Southeast Europe, which share a common desire to adopt the EU’s science-oriented innovation model. Their own SEE 2020 Strategy prioritizes smart growth through education and competencies, research and innovation, a digital society and cultural and creative sectors.

The EU is largely absent from the arena of internet-based companies active in new and emerging forms of innovation. Downes observes in an article published the Harvard Business Review in 2015 asking How Europe can create its own Silicon Valley that none of the 15 largest public internet companies today are European. Eleven are US-based and the remainder are Chinese. ‘Indeed, the EU’s attempts to replicate a Silicon Valley-type experience have not lived up to expectations,’ analyses the UNESCO Science Report. ‘The principal EU giants specializing in hardware within the digital economy (Siemens, Ericsson, Nokia) have even lost a lot of ground in the past decade in global R&D rankings,’ even if the German-based software and IT services company SAP recently joined the global top 50 for R&D performers. Although EU-based companies accounted for 30% of total R&D spending by the world’s top 2 500 companies in 2014, only two EU companies figured in the top ten, both of them in the automotive sector: Volkswagen and Daimler.

France and Germany: embracing the digital economy

Both France and Germany are striving to modernize their industrial infrastructure and embrace the digital economy, in order to tear down the barriers between services and industry and, in France’s case, combat the dis-industrialization that has been responsible for the loss of 750 000 jobs over the past decade. France announced its Industry of the Future project in April 2015. The project focuses on nine priority markets: new resources; sustainable cities; ecological mobility; transportation of tomorrow; medicine of the future; the data economy; intelligent objects; digital confidence; and intelligent food. A first call for project proposals has since been launched in future-oriented fields such as 3D printing, augmented reality and connected objects. Companies which modernize will be entitled to tax cuts and advantageous loans.

France and Germany intend to develop joint initiatives, as the Industry of the Future project has been designed in tandem with Germany’s own Industry 4.0 project, a reference to the fourth industrial revolution. The six guiding principles of Industry 4.0 are: interoperability (between cyber-physical systems and humans), virtualization (through which cyber-physical systems monitor production), decentralization (with cyber-physical systems making independent decisions), real-time capability (to analyse production data), service orientation (internally but also by offering individualized products) and modularity (adapting to changing requirements).

Creative industries are being targeted for government support by smaller EU countries. The Netherlands’ innovation policy of 2011, for instance, sets out to foster a favourable business environment for nine top sectors: agriculture and food; horticulture and propagation materials; high-tech systems and materials, energy; logistics; life sciences; chemical; water; and creative industries.

Europe’s competitors have also been investing in research on the digitization of industry, recalls the UNESCO Science Report. Examples are the Chinese Internet of Things Centre, the Advanced Manufacturing Partnership in the USA and the Indian Cyberphysical Systems Innovation Hub. India’s information technology (IT) industry has the particularity of accounting for six out of ten patents for new inventions in India, 92% of which are secured by foreign-owned multinational firms.

ICT giants: blurring virtual and physical reality

Some of the most innovative technology is coming from ICT giants in the USA. Amazon has developed services like Pantry to meet consumer needs in almost real time. A recently introduced pilot allows a user to re-order a household consumable by pressing a physical button. Google has acquired several products at the interface of computation and the physical world, including autonomous thermostats, and has developed the first operating system specifically for such low-power devices. Perhaps the most ambitious project is Google’s self-driving car, which is scheduled for commercial release in the next five years.

Facebook, meanwhile, is developing virtual reality technology based on its acquisition of Oculus Rift, an approach that will integrate people into the digital environment, rather than the other way round. The small sensors that facilitate this connectivity are also being applied in industry and health care. New enterprises are also experimenting with the use of data from personal activity trackers to manage chronic diseases like diabetes. Another example is General Electric. Since it relies on service contracts for much of its revenue, it is currently investing in sensor technology to collect more information about the performance of its aeroplane engines in flight.

Digital societies and economies: a global priority

Developing countries are determined not to miss the boat for the fourth industrial revolution. Many are putting policies in place to foster digital societies and economies. Smart Sri Lanka, for instance, aims to spur economic development through innovation in ICTs. Its goals could be summed up as: smart leadership, smart government, smart cities, smart jobs, smart industries and a smart information society. Some 800 telecentres (nensalas) have been set up across the country in the past decade to connect communities of farmers, students and small entrepreneurs to information, learning and trading opportunities. Smart cities are futuristic urban centres that use ICTs to improve public services, such as transportation, health care and utilities providing electricity, water, etc.

In Africa, where internet remains largely inaccessible but most people have a mobile phone, technology hubs are developing applications for economic sectors that range from agriculture to health and disaster risk reduction. Examples are the Cameroon Innovation Hub, MEST in Ghana, iHub in Kenya, the Co-Creation Hub in Nigeria, SmartXchange in South Africa, Hive Colab in Uganda and BongoHive in Zambia. In December 2013, the Kenyan government announced plans to establish technology innovation hubs in all 47 counties.

Morocco’s third technopark opened in Tangers in 2015, supported by the Ministry of Industry, Commerce, Investment and the Digital Economy. Like its predecessors in Casablanca and Rabat, the new technopark hosts start-ups and SMEs specializing in ICTs, green technologies and cultural industries.

Costa Rica’s software sector has grown into one of Latin America’s most dynamic industries since the arrival of Intel, Hewlett Packard and IBM in the late 1990s. Today, more than 300 companies produce software for local and international markets. High-tech goods accounted for about 45% of manufactured exports in 2013, far more than any other Latin American country, although this market has been affected by the departure of Intel in 2014.

Elsewhere on the continent, competitive sectorial funds such as FONSOFT (Argentina) and PROSOFT (Mexico) are improving the quality of software production and strengthening linkages between academia and industry. Ecuador is planning to develop the continent’s first knowledge hub, Yachay, with a focus on life sciences, ICTs, nanoscience, energy and petro-chemistry. The Inter-American Development Bank forecasts that Buenos Aires and Córdoba (Argentina), Montevideo (Uruguay), San José (Costa Rica) and Santiago (Chile) will be the five most important poles in Latin America for the development of the ICT and software industries by 2025.

Source: UNESCO Science Report: towards 2030 (published in 2015)

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