Technology, Society, and the Digital Transformation

A couple of days ago, I had the pleasure to talk at the German-Swedish Tech Forum in Stockholm about “Technology, Society, and the Digital Transformation”, particularly in the manufacturing industry. The question is no longer whether the Fourth Industrial Revolution will happen – and Sweden is a good example that it’s already happening. Here is the text of my speech. I’m looking forward to hearing your thoughts. 

Ladies and gentlemen,

Why should we care so much about the digital transformation? Well, we’re witnessing the greatest economic shift human civilization has ever known: the Fourth Industrial Revolution. This shift affects manufacturing, a sector that accounts for 70 percent of global trade.

As far-reaching as the impact of previous industrial revolutions was – the invention of the steam engine, the introduction of mechanized assembly lines and the automation of factories with electronic controllers – none of them unleashed such enormous transformative power. The Fourth Industrial Revolution changes practically every human activity: the way we communicate and interact with each other, the way we learn, the way we make things, the way we work, the way we use our planet’s resources.

In economic terms, the digital transformation affected consumer markets first. Physical products, for example, were replaced by digital versions that offer better capabilities and greater convenience – and were cheaper in most cases.

• Instead of traditional phone calls, we began using Skype and WhatsApp.
• Instead of buying CDs, we started using iTunes and then Spotify.
• Instead of transferring money through paper-based transactions, we began using digital payment services such as PayPal, Klarna and Swish.

You may have realized that most of these examples involved companies from Sweden or other Nordic countries. I’m sure that you’ve heard the expression “the Internet cuts out the middleman.” That’s exactly what happened in the consumer industries. Value creation shifted to software and digital platforms. In this new world, there’s a clear logic: The winner takes it all – just as a famous Swedish pop band phrased it in a song from 1980. To stay with the analogy: while the winner takes it all, the losers of the digital transformation face their personal Waterloo. It’s a game of one or zero, in or out, success or failure, with all the consequences.

The second wave of digitalization is now about the world of industry

We’re already in the middle of it – and it’s happening as we speak. This time, digitalization is not so much about replacing a physical product with a digital one. Rather, it’s about using digital technologies to enhance the physical world.

What we call Industrie 4.0 enables manufacturers to create a “digital twin” of the entire manufacturing environment. Manufacturers can design, simulate, and test sophisticated products in the virtual domain before making the first physical prototype, before setting up production lines and before starting actual production. Once everything works in the virtual world, the results are transferred to the real world. This seamless integration in so-called cyber-physical systems – that’s the giant leap we’re seeing today. And with the integration of new technologies such as 3D printing and artificial intelligence into industrial processes, the possibilities are expanding even further.

Digitalization offers major advantages – For businesses of any size

So, what are the concrete benefits of digital manufacturing for our companies and economies? I’d like to mention four: speed, efficiency, flexibility, and higher quality.

• Speed: Digital technologies can cut in half the time between the conception of a product and its availability on the market.
• Efficiency means boosting the productivity of workers and using energy and other resources in a more economical way.
• Flexibility means that manufacturers can offer highly customized products. Small batches can be produced almost as efficiently as large ones – down to lot a size of 1.
• Quality means that you can compete with the best of the best in your business and meet the highest quality requirements.

At world’s largest industry fair, which is taking place in Hanover, you can see in real life how Industrie 4.0 changes manufacturing processes. At the Siemens booth, we’ve lined up some great examples:

• How Industrie 4.0 revolutionizes aircraft production.
• Why the lawn at FC Bayern’s football stadium is always in top condition – thanks to MindSphere, Siemens’ open, cloud-based operating system for the Internet of Things.
• Or: How Stora Enso uses our Digital Enterprise solutions in Skoghall and China to be the best-in-class supplier in the global fiber industry. MindSphere will play a crucial role here as well.

Big companies are not the only ones to benefit from industrial digitalization. About three years ago, two students from Lund University had the idea to build an electric car that is as intuitive and easy to use as a smartphone. It’s called Uniti and has a really futuristic design. Inside the car, there are no pedals or buttons. Instead, you control all key functions via an intelligent steering wheel and a tablet.

How can a startup company move from idea to product so fast? Again, the answer is digital manufacturing. Before production kicks off, the car and its entire production process are simulated with the help of Siemens PLM software and Siemens expertise. So there are many innovative projects here in Sweden – and Siemens is proud to be a partner, a partner in innovative manufacturing and societal development.

Clearly, the question is no longer whether Industrie 4.0 will happen

It’s already happening here in Sweden, even faster than in many other countries. It’s happening in Germany and all over the world. Therefore, the question is rather who will be the great shapers (and shakers) of this transformation.

At the end of March, I took part in the China Development Forum in Beijing. One thing was very clear there: the battle for our technological and industrial future is full-on. As of today, China and the U.S. are leaders in many digital technologies. They are also manufacturing nations. And with trade policies like “America first” and the “Belt-and-Road Initiative,” both countries want to change the global economic landscape.

And Europe? I’m convinced that Europe has a big role to play in the Fourth Industrial Revolution, especially in highly competitive nations like Germany and Sweden, but also in some other countries. And I’m even more convinced that we can be very successful: our strong industrial bases and our deep domain know-how are an asset when it comes to digital manufacturing. In terms of technology, we’re already well on our way.

The Fourth Industrial Revolution is not just about technology. It’s about agreeing on a vision for our countries, for Europe, and for joint economic development. A vision that unleashes energies and provides us with the fortitude we need. It’s about technology and society. Here are a couple of thoughts in this direction.

No company is an island

First, digitalization should not only be a boon for large companies like Siemens, SKF, Stora Enso, Scania, or Volvo, but also for others. Small and medium-sized suppliers need to benefit as well. Today, no company is an island; no company produces everything from scratch. Rather, we operate in ecosystems that include customers, suppliers, research institutes, service providers and companies big and small. We can use digitalization to strengthen these ecosystems.

A year ago, Chancellor Merkel and Prime Minister L?fven inaugurated the German Swedish Tech Forum. I think it’s an excellent platform to promote this kind of collaboration and innovation. And at Siemens, we’ve been happy to share our experience and to learn from others.

Security matters

Second, digitalization produces vast amounts of data. And it’s associated with a vast amount of questions. Who has access to it? Who owns it? How can it be protected? The recent Facebook scandal reminds us that we’re still far from having standards for data privacy and security at an international level. It also highlights another big question: How should society deal with supranational companies that pursue their very own political agendas?

Data is the oil, some say the gold, of the 21st century – the raw material that our economies, societies and democracies are increasingly being built on. I’m sure we all agree: when it comes to the digitalization of industry, there can be no compromises in the areas of integrity and security! That’s why Siemens, together with the Munich Security Conference, launched an initiative that we’re calling the Charter of Trust. This Charter sets forth 10 principles in order to achieve three tasks:

• protect the data of individuals and businesses;
• prevent harm to people, businesses, infrastructure and assets;
• establish a reliable basis upon which confidence in a networked, digital world can take root and grow.

The Charter of Trust is the first of its kind. Besides Siemens, a number of partners have signed it so far – big names like Airbus, Allianz, Atos, Daimler, Enel, IBM, Deutsche Telekom, and others. We hope that many more will join us – if your company or organization is interested, let us know!

We hope that this initiative will lead to a lively public debate on cybersecurity and, ultimately, to binding international rules and standards. That will make the real world and the digital world safer places for all of us. For the physical world, we have a World Trade Organization. We need to expand these activities to cover aspects of trading in the cyber world, which is borderless.  

Worldwide, up to 375 million workers could be affected

Third, some thoughts on employment and education – to me, one of the most important aspects of the Fourth Industrial Revolution. The McKinsey Global Institute recently published a study on the future of work. One outcome: In advanced economies such as Germany and Sweden, up to one third of the workforce may need to change professions by 2030. Worldwide, up to 375 million workers could be affected – what a gigantic number, accounting for 14 percent of the global workforce!

Forecasts like these give us a pretty good idea of the pace of change and of the impact that we’ll see in the working world in the coming decade. “Qualifying,” and especially “requalifying,” people will be even more important than it is today. Lifelong learning will become standard practice. Our countries, including our societies, will have to adapt! And we as leaders need to lead the way!

Can the public sector take care of this huge educational task on its own? Probably not. Can companies do it on their own? They probably can’t either. We’ll need to rethink how professional education can be structured in the form of a close cooperation between government, companies, and academia. Our schools will have to change, too. After all, learning is not just about concrete professional skills. It’s also about inspiring creativity, about fresh approaches, about learning how to learn and interact.

Astrid Lindgren once said: “What the world of tomorrow will be like greatly depends on the power of imagination in those who are learning to read today.” What a vision! So, how do we best inspire imagination? Are our schools up to that task? Are our companies? Are our societies? Are we? Sweden, alongside its Scandinavian neighbors, is already pretty good at fostering an entrepreneurial mindset from elementary school onwards. Many other European countries can definitely take a cue from that.

We need more European integration, not less

Fourth: Dreaming big also has a political dimension. Growing up in a small village close to the Iron Curtain, near the border between Germany and what was then the country of Czechoslovakia, I experienced the division of Europe every day. It was a cold, threatening reality, and it was sometimes really scary. And yet, against all odds, my parents’ generation and my own generation dreamed of a new Europe – united in peace, freedom, and prosperity.

This dream did come true. That iron curtain fell, but new ones and different ones are being built. In times of Brexit, the Euro crisis, nationalism and populism, many people have lost their faith in Europe or at least are questioning it.

We have to take this challenge seriously. We have to stir up the European spirit with our thoughts, words, and, most of all, our actions. We have to make sure our continent never falls back into division, nationalism and a lack of freedom and peace. In our times, we need more European integration, not less.

This should be true for security policy and is a “must” for economic policy if Europe also wants to be an economic power like the United States and China in the future. The European Union – with 500 million consumers – is the biggest free trade area ever created. A market that big has enormous potential. Entrepreneurs with visionary ideas can scale up new business models and build global companies.

Spotify showed how to do it. And there are more examples: Between 2014 and today, 227 so-called unicorns came into being worldwide. I’m not speaking of fantasy creatures here – I’m speaking of companies that reached a valuation of $1 billion or more. Out of those 227 unicorns, 109 are based in the U.S., 65 in China, and only 26 in Europe.

The easier it is to do business in different countries, and the better we align our economic and fiscal policies, the easier it will be for innovative companies to grow. And the easier it will be to define European standards that can conquer the world.

Contributing to society

Finally, my fifth point: “What the world of tomorrow will be like is greatly dependent on the power of imagination in those who are learning to read today.” This quote really inspires me. The world of tomorrow that Astrid Lindgren spoke about is not just about technology and machines. It’s a world that people will live in, people like us right here in this room. And our children – and their children.

Will it be a place with a few winners and many losers? A place in which some people reap the rewards of digitalization and most people struggle? An even more divided world with an iron curtain between rich and poor?

Or will it be a place in which advanced technologies help all of us to lead lives that are fuller and better than we can imagine today? Will we live in an inclusive society? The answer to this question is up to us, our imagination and our actions. And the answer must be yes!

So, how can we make it happen? In the middle of the 20th century, the German economist Alfred Müller-Armack was one of the intellectual fathers of the Social Market Economy, Germany’s model for success to this day. He envisioned an open society that aims to “unite the principle of the free market with fair distribution of prosperity.” In Sweden, thinkers such as Per Albin Hansson, G?sta Rehn and Rudolf Meidener conceived a welfare state that inspired reformers around the world, the famous “Folkhemmet.” They were entrepreneurs in societal innovation.

What are our dreams for the future? I believe that everyone has to contribute to realizing these dreams – leaders in politics, society and companies alike. Nobel prize winner Milton Friedman was of the opinion – I’m paraphrasing him – that the business of business is business. However, I find this alone cannot be the yardstick. I, honestly, even disagree! Today, stakeholders – customers, shareholders, suppliers, employees, political leaders and society as a whole – rightfully expect companies to assume greater social responsibility. Social value is becoming the benchmark for a company’s performance.

At Siemens, we call this “Business to Society.” So, we say: a company that does not serve society should not exist. And a company needs to be strong to help the weak. Business to Society is also about employment. I’m convinced that creating and securing jobs is a value in itself – because it strengthens the societies we live in. Today, 386,000 people work for Siemens. That’s more people than at Facebook, Google/Alphabet, Apple and Microsoft combined! And we spend 500 million euros a year on professional training in order to keep professional skill sets up to date.

Ladies and gentlemen,

We live in exciting times. The Fourth Industrial Revolution is one of the most fundamental shifts that the world has ever seen and that society has ever dealt with. Should it scare us? I think it shouldn’t. The challenges ahead are great, but the opportunities are even greater. It’s up to us to ensure that this revolution will benefit our companies, our economies, and above all, our societies. It’s up to us to shape the world of tomorrow. It’s up to us to make a difference!