New technology still underused by businesses

B
usinesses need to step up the adoption of cutting-edge technologies, materials and processes if countries are to reap their full potential in terms of productivity gains, according to a new OECD report.

Development and implementation are taking place mostly in large firms, and even then new technologies are underemployed and could be contributing much more than is currently the case. The report highlights the potential effects of a wide range of technological developments in production - from the environmental impact of 3D printing, to autonomous digital systems and the latest advances in industrial biotechnology. Governments must seize the potential of technological advances to boost economic growth, living standards and environmental sustainability, but at the same time manage the risks and disruption this next “production revolution” will cause.

Policy makers have a key role to play in helping to create the right conditions for the adoption of new technologies and knowledge, particularly among smaller businesses. Action on multiple fronts is required. It includes encouraging life-long skills development and greater interaction between industry and education, improving conditions for business creation and development, and supplying the infrastructure needed by firms using advanced, digital technologies. Assisting research and technological scale-up and establishing agencies to aid the spread of technological innovation are also key.               

Even in the most advanced economies, diffusion can be slow or partial. A 2015 survey of 4 500 German businesses, cited in the report, found only 4% had implemented digitalised and networked production processes or had plans to do so.

The productive potential of new technology is illustrated by estimates from Japan suggesting that the use of big data and analytics among some manufacturers could lower maintenance costs by almost JPY 5 trillion. More than JPY 50 billion could also be gained in electricity savings. And major energy savings have been recorded in early application of artificial intelligence (AI) to data centres.

Estimates for Germany indicate that the use of advanced information and communication technologies (ICTs) in industry could boost productivity by 5% to 8%. Industrial component manufacturers and automotive companies are expected to achieve the biggest productivity improvements. Other estimates cited in the report suggest that a major acceleration in the adoption of new technology could boost value-added in Germany’s mechanical, electrical, automotive, chemical, agriculture and ICT sectors by an additional EUR 78 billion by 2025.

Many businesses lag in adopting the ICTs necessary to digitalise industrial production. The adoption by firms of cloud computing, supply-chain management, enterprise-resource planning, and radio-frequency identification (to automatically track processes and objects) is still far below that of broadband networks or websites.

The report points to research showing that productivity-enhancing technology causes job losses in some cases and job gains in others but that the overall employment and economic effects to date have been positive. This is not to underestimate the disruption caused by technological change and the hardship suffered by workers who have lost their jobs because of it. Implementing effective systems for life-long learning and ensuring labour markets can adapt to the shock of technological change are central to effective adjustment policies.

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