This article is part of our special report Digital in a post-crisis world.
The economic situation is bleak. The IMF predicts a 3% fall in global GDP in 2020 because of COVID-19. Europe’s largest economy, Germany, officially entered into recession earlier this week and according to McKinsey, 60 million jobs are at risk in Europe alone. The manufacturing sector has been particularly affected as factories closed down and complex supply chains were disrupted.
Cecilia Bonefeld-Dahl is Director General of DIGITALEUROPE, the leading digital technology industry association representing over 35.000 digital companies Europe.
As the lockdown lifts, the digital transformation represents a huge opportunity to regain competitiveness, boost the European economy, and make our industry greener and more resilient to future crises. We cannot return to business as usual.
To make the change, Europe needs an ambitious, digital-first budget. On Wednesday, the Commission unveiled its historic new Corona recovery spending plan. Whilst we were very pleased to see a strong focus on digital in the new proposal, we were disappointed to see that the dedicated funding streams for digital, such as the Digital Europe programme, were not increased. The focus on digital transformation of industries, skills and society needs to be maintained during the negotiations with Member States in order to accelerate the recovery and guarantee European competitiveness. Other countries like China, South Korea and the US will not stop moving forward and in many ways they are ahead in areas like AI and 5G. European leaders must prove that digital is not just a buzzword and put their money where their mouths are.
A crisis tends to reinforce trends, and this is also the case with the COVID-19 crisis. As Microsoft CEO Satya Nadella put it recently, in the past two months we have seen around two years’ worth of digital transformation. Firms both large and small are scrambling to move their activities and workers online. This ‘digital leap’ may have been started with a push in the back, but we need to keep moving forwards.
In DIGITALEUROPE’s February paper, A Stronger Digital Industrial Europe, we identified several focus areas that would bring our industry into the digital age. This includes investment in research, and widespread adoption of AI and emerging technologies, 5G, cybersecurity, and big data.
The COVID-19 crisis has not changed our goals, but it has increased the urgency. Digitalisation is not a ‘nice to have’: now it could be essential to business survival. This is especially true of smaller companies.
We should nevertheless remember Europe remains an industrial giant and we are very good at many things, especially in the business to business field. There are fantastic examples all around our continent, such as Nokia’s Oulu factory in Finland, which utilises the full potential of 5G, data analytics and edge computing to boost productivity by 30%. Another is Schneider Electric’s smart factory in Le Vaudreuil, a fully digitalised facility which uses a range of sensors and the Internet of Things (IoT) to increase productivity by between 2% to 7% and achieve energy savings of up to 30%.
The above examples show two key reasons to adopt these technologies. The first is of course the productivity gains and the potential for growth and competitiveness for European manufacturing. Digital businesses grow two and half times faster than non-digital companies.
The second reason is sustainability. Smart factories use less energy, waste fewer resources and pollute less. In other words, the digitalisation of our industry is an essential tool to achieve the goals of the European Green Deal. According to GeSI & Accenture, digitalising Europe’s manufacturing sector could save 2.7 gigatons of carbon emissions by 2030.
Of course, in order to make the most of these new opportunities and ensure that citizens are not left behind, these efforts must be flanked with a huge digital training programme. The manufacturing sector of the future will need ICT technicians, data scientists and robot operators.
Another societal driver that will determine the success or failure of this project is connectivity. Far too few people in Europe have access to high-quality and dependable internet connections. At national level, 5G rollout has been sluggish. This needs to change, and the COVID-19 recovery must put connectivity as a top priority.
In order to get back on its feet in the post-Corona world, and then to thrive, European industry needs to digitalise. This will accelerate the recovery and help us reach our climate goals. To get there, private companies must be encouraged to take their digital leap, and governments need to prioritise investments in digital skills, connectivity and emerging technologies. In short, now is the time to reinvent our manufacturing industry, not rebuild the old one.