How can cities benefit from digitalisation? With dramatic headlines about jobs being destroyed by digitalisation, and many policy makers resisting change, Alison Partridge argues that the 4th industrial revolution, and industry 4.0, are best seen as an opportunity, not a threat, for Europe's towns and cities.
First, some definitions…
For many this is a complex, unfamiliar and somewhat bewildering landscape. So here are a few explanations of key terms before delving deeper.
4th industrial revolution
This phrase was coined by Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, in his book of the same title. “Previous industrial revolutions liberated humankind from animal power, made mass production possible and brought digital capabilities to billions of people. This Fourth Industrial Revolution is, however, fundamentally different. It is characterized by a range of new technologies that are fusing the physical, digital and biological worlds, impacting all disciplines, economies and industries, and even challenging ideas about what it means to be human. The resulting shifts and disruptions mean that we live in a time of great promise and great peril.”
Mckinsey defines industry 4.0. as “the next phase in the digitization of the manufacturing sector, driven by four disruptions: the astonishing rise in data volumes, computational power, and connectivity, especially new low-power wide-area networks; the emergence of analytics and business-intelligence capabilities; new forms of human-machine interaction such as touch interfaces and augmented-reality systems; and improvements in transferring digital instructions to the physical world, such as advanced robotics and 3-D printing” - Source: University of Sheffield
"Digital disruption is a transformation that is caused by emerging digital technologies and business models. These innovative new technologies and models can impact the value of existing products and services offered in the industry. This is why the term ‘disruption’ is used, as the emergence of these new digital products/services/businesses disrupts the current market and causes the need for re-evaluation" - Source: Oxford College of Marketing
Why is this relevant to cities? Keep reading...
To take the mantra of the URBACT network TechTown - cities and businesses need to adapt or die:
Digitalisation is happening. It's often described as an 'unstoppable juggernaut'. Most businesses really don’t have a choice. They can choose to change nothing and risk fragility and, in the long term, almost inevitably die. OR they can be proactive, adaptive, disruptive, agile and hopefully that will enable them to survive and thrive. It really is as simple as that. Disruption is only a threat to those who choose to ignore it or try to fight it. Those who embrace it find that it can benefit their business in lots of different ways and contribute success and growth.
Cities have a clear role to play supporting the business community. If their businesses can't or won't adapt, city economies will suffer: companies will go out of business and jobs will be lost.
“But isn’t it destroying jobs?!”
Digitalisation is not about reducing headcount or destroying jobs. It is more helpful to think of it as removing non-value-adding tasks or roles. This enables humans to focus on the parts of the business that add value. So yes, it will have a massive impact on the future workforce, and yes, there is much to be done to explore how the existing workforce can be effectively redeployed rather than unemployed. But that is a whole other topic - touched upon in URBACT's own Job Generation and New Urban Economies Capitalisation series.
Here the focus is more on the role of cities in digitalisation itself.
So why is digitalisation important to cities?
The most cited examples of digital disruption are often the least helpful when it comes to considering the potential positive impacts on urban development. Uber and Airbnb, for example, may have revolutionised peoples' ability to travel within and between cities, but they have also provided real challenges in urban development terms, for instance increasing rental prices and often adversely affecting employment conditions for citizens. URBACT has published articles on this topic - focusing for example on the role of cities in the sharing economy and the gig economy.
A number of more positive examples of digital disruption and public sector interventions were highlighted at the TechTown network event in Gävle, Sweden, in June 2017. They show how digitalisation can help address long-term economic challenges like productivity levels, business efficiency and logistics.
Here are three examples of public sector interventions within digital disruption:
KickStart, run by a national cluster called Fiber Optic Valley, is a pilot project covering 10 Swedish Cities. Funded by both the public and private sectors, the overall aim is to increase the understanding, willingness, pace and volume of digitalisation.
The pilot project works with 10 companies in 10 cities. Over the course of 4-6 weeks the companies invest 2 days (1 full day + 2 x half days) in workshop activities to understand how digitalisation can help them to increase productivity and efficiency. The emphasis is very much upon helping the companies to identify their problems - their needs - rather than leaping towards a solution. In 90% of cases the tech solution exists; in the other 10% there is a start up eager to find it - so this is as much about changing mindsets as it is about the technology itself. Often there is a reasonably simple 'fix' and Kickstart can play a useful role in brokering relationships between companies that have an identified need and those that have already found a solution.
- Connected Manufacturing
In 2017, Barnsley Council, leaders of the TechTown network, launched a programme to support digitalisation of existing local manufacturing companies while enabling digital companies to grow. “Connected Manufacturing” brings the manufacturing and digital communities together to encourage adoption of digital technologies that can improve manufacturing productivity and competitiveness. This is especially important given that advanced manufacturing is a key industrial sector across much of Europe.
A trusted Barnsley business advisor with a manufacturing background, supported by an independent digital consultant, visited local manufacturers, many of which were family run firms using old mechanical equipment. The advisors helped the manufacturers to identify their industrial challenges and find ways to improve operational efficiency through digital changes that were often small and inexpensive. The findings fed into a big event which brought manufacturers face-to-face with small digital start ups, SMEs and entrepreneurs.
- Case study
Naylor Industries in South Yorkshire, UK, is a fourth-generation family business with a 127-year history. The company has five factories that manufacture construction products, such as clay pipes and plastic drainage systems, for export around the world. Facing global economic uncertainty and rising energy costs, as a large energy user Naylor realised they needed to change. They formed an internal action team and partnered with Siemens Digital Factory to analyse the power usage at their factory sites. Seeing the benefits of real-time data to inform operations and production, Naylor is now digitally enabling their new and existing facilities for an intelligent data-driven future.
Event programme and presentations
Everybody wins - brokering relationships between large and small companies
Sandvik is a global materials engineering company with headquarters in the Gävleborg region in Sweden. Last year it worked with a 'business tailor' from the regional incubator (Movexum – co-funded by local and regional government and a range of private partners) to identify its digitalisation needs. In short the Sandvik site covers a massive industrial area equivalent in size to 800 football pitches. Sandvik was keen to understand how digitalisation might help move materials more efficiently into, and around, the site. Movexum put Sandvik in touch with a local tech start up called Invotech. As a result, the two companies co-created a new GPS system which supports truck drivers and management with the positioning of materials. The impact has been massive for both companies - Sandvik has improved safety and productivity; and Invotech has won a large new industrial client and a gateway into a global market place, not to mention unrivalled PR and media exposure.
None of this would have happened without the intermediary, funded through the public sector - in this case a regional incubator.
So what role can cities play?
Hopefully by now it is becoming clearer that urban economies are being impacted by digitalisation. But what does this mean for cities in practice? Realistically, what can cities do to make sure that their businesses can benefit from digitalisation?
Cities can reach out to their business community - who are as much their customers as individual citizens - and help remove the 'fear' of disruption and digitalisation. This might involve helping them to understand what opportunities it offers in terms of efficiencies and productivity and / or to learn from peers who have already risen to the challenge.
- Broker and enabler
It is clear from the examples above that cities may have a role to play in funding, or directly employing, an honest broker, a navigator or catalyst which brings together large and small companies to benefit both partners and the local economy. Cities can also help established companies to identify their digitalisation needs and find tech start ups , preferably local ones, to address them. 90% of the time the tech solution exists; in the other 10% there is a start up eager to find it. So this brokerage role can help companies to come together to co-create ‘win-win’ relationships between large and small. It can also help peer-to-peer learning - cities can identify and share good local examples of positive digital disruption and stop policy makers focusing on some of the better known disruptive brands like Uber and AirBnB.
There is also a brokerage role around the theme of skills and talent - local authorities can, for example, support companies to identify local talent and embed digital skills into local training provision for people of all ages.
- Early adopter
Cities can - and probably should - lead from the front when it comes to digitalisation. It may not seem obvious - and it certainly won't be easy - but city authorities can ‘walk the talk’ by working with local tech start ups to disrupt and digitalise the provision of public services. They can also run challenge-based competitions to encourage local start ups to address smart city challenges.
- Adapt or die
The message is clear and TechTown cities have used their Action Planning Network to consider their margins of manoeuvre in what is essentially a business-led landscape: How can city authorities help their business community to rise to the challenge of digitalisation? (How) can they support businesses to treat this as an opportunity to improve productivity and grow higher value jobs? What is the role of the public sector?
The emerging action plans call for a more proactive approach to supporting local business, based on the learning from cities which are already doing so. TechTown cities know that digitalisation will revolutionise their economies. They will be doing everything they can to contribute to a positive outcome: more and better jobs for local people.