This week I participated in a panel discussion at Hannover Messe Digital Days, entitled: Industrial Transformation – The new normal as a chance for Europe. The focus for the debate was very timely, and I wanted to share my points of view here, too.
Before I do, I’d like to thank my fellow panelists Thierry Breton, EU Commissioner for Internal Market, Professor Dr. Antonio Krüger, Managing Director, DFKI, and Jean-Pascal Tricoire, CEO, Schneider Electric, as well as Hannover Messe.
The crisis has demonstrated the power of the cloud and digital technology as never before.
Technology played a key role in the initial response to the pandemic, perhaps most tangibly in enabling many millions to work and learn from home. But it was also critical supporting business and economic activities with collaboration, access, remote control, security, ecommerce, supply chain management and more. Solutions were built or scaled at an incredible speed.
German industrial connectivity firm Weidmüller, for example, was able to remotely set up and maintain industrial machines around the world using the cloud and Microsoft Hololens Mixed Reality Headsets. A solution for saving time and travel costs suddenly became critical for business continuity. And that’s the paradox. It’s often said necessity is the mother of invention. In the case of the pandemic, it has been a catalyst for technology-led innovation. As our CEO recently noted, “we’ve seen two years’ worth of digital transformation in two months”.
For instance, food retailers saw unprecedented attention and everyone became concerned about ‘What groceries are in supply and where? How long does it take to re-stock?’. Retailers responded with an urgent rethink of operating models: they needed to restructure supply chains, anticipate dynamic customer demand, start home delivery services and implement new safety and security measures. Coop Norway, for example, powered up an entire eCommerce business with our partner, EPI, in the space of two weeks. The upshot: massive and rapid transformation across the whole industry, enabled by technology.
In healthcare, traditionally cautious about embracing the cloud and AI, these technologies made a real difference to responding to the immediate health crisis – and unlocked transformation that will deliver long-term benefits to patients and medical staff. Emergency Medical Services Copenhagen, for example, now uses an AI-powered healthcare bot for its emergency helpline. The challenges vary, but every industry is putting technology at the heart of its transformation.
In particular, I see real focus on building more adaptable supply chains. Underpinned by the cloud and AI, companies are quickly engineering supply chains with real-time transparency and feedback loops. In France, a national system for distributing medical equipment was developed in just four weeks and has enabled more than one billion items of PPE (Personal Protection Equipment) to be delivered to frontline medical staff across 40.000 hospitals.
Moving forward, the most successful businesses will be those using data-driven insights to augment their employees. Whether it is the right patient data at the right time in a hospital or knowing where critical components are in a supply chain.
As we start to focus on recovery, innovation has never been more essential
By innovation, I mean improving a product or service so it generates better outcomes. For the past decade this has mainly happened through digitalization. Almost all new products and services will have a digital component in the future – the crisis has made this more visible.
There are many things Europe excels in such as automotive, manufacturing and chemicals. Europe’s current global competitive advantage in high value-added products and services translates to more than 20% of the EU’s total value-added, directly providing 35 million jobs. But EU firms lag behind their U.S. peers in terms of digitalization.
For example, 66 percent of manufacturing firms in the EU report having adopted at least one digital technology, compared to 78 percent in the U.S. The difference is particularly large in the construction sector, where the share of digital firms is 40 percent in the EU – and 61 percent in the U.S. The impact of this is clear: In 2019 the Fortune Global 500 listed 130 European companies. 42 less than a decade earlier in 2009 (172), and close to a 25 percent decline. Asia – in particular China – alongside the U.S. are in front of the digital pack. According to a recent Bertelsmann study, the EU currently holds just 11 percent of all world-class digital patents. That’s 50 percent less than East Asia (incl. China, South Korea and Japan) and not even a third when compared to the U.S.
The imperative for Europe, therefore, is to capitalize on the innovation impetus the pandemic has generated – an opportunity we cannot afford to miss. It’s a moment of re-invention or innovation for the now – and an inflection point for the next normal: partly because massive commercial pressure, partly because of the surprising experience of how fast technology can disrupt and transform, and partly due to global rebalancing of markets.
To be successful, European firms need innovation partners who can not only support international scale, but who also share their values. Core to everything will be helping companies better understand and manage their data and insights. And we know the importance to Europeans of managing their own data. We have been strongly supportive of GDPR at the outset and decided early on to apply its protections globally.
As a platform company we make tools to help others create their own innovation. We firmly believe that the value generated by data and technology solely belongs to the customer, and we will never compete with them. Their success is our success.
Building an innovation-led digital economy requires a new deal on skilling
To foster innovation and help Europe to thrive in the future every company needs access to data, to next generation connectivity and employees equipped with digital skills. Upskilling and reskilling is more vital than ever. Many of our European customer ask for contracts to include components on Enterprise Skilling Initiatives, of which SAP or Swedbank are great flagbearers. We recently announced a skilling initiative to provide 25 million people with free training in high-demand technology skills.
Europe’s digital future
Technology played a key role in the initial response to the crisis. It accelerated transformation, and now businesses across Europe have a real opportunity to seize the moment and continue on the path of innovation.
“The crisis really pushed people across every industry to have a deep understanding of data in a business context. I see this becoming a strong competitive edge. Something that can really fuel innovation in Europe. But for this to happen, we need the right technology and skills.”
We are looking forward to helping progress Europe’s digital future, not just in the immediate response to the crisis, but with a long-term view on strengthening the competitiveness of European industries so they can continue to make a strong contribution to local economies.
Author: Ralph Haupter, President, EMEA at Microsoft