2015 ZEW Economic Forum: How to Improve Europe's Competitiveness in the Digitalised Economy?

Our world is becoming increasingly digitalised, with "Industry 4.0" being the catchword of the moment at business locations across the globe – and expectations are huge. The areas of business and politics likewise expect profits, increasing welfare and productivity gains from integrating cutting-edge information technologies into the value-added chain. But: this year's ZEW Economic Forum at the Centre for European Economic Research on 11 June showed that the much-touted fourth industrial revolution harbours as many challenges and risks as it does opportunities.

The event, held under the title "Europe in Digital Competition", made the audience of around 220 attendants aware that there are still a number of problems to be solved to propel the European economy into a successful 4.0 future. A possible solution is the implementation of a pan-European single digital market, as promoted by EU Commissioner for Digital Economy and Society, Günther H. Oettinger, in his keynote speech.

In her introduction, Professor Irene Bertschek, head of the ZEW Research Department "Information and Communication Technologies" (ICT), addressed the main factors within the context of digitalisation and Industry 4.0. According to Bertschek, the importance of the ICT sector for Germany as a business location is considerable: In 2013 the ICT sector contributed 4.7 per cent, i.e. about EUR 88 billion, to German gross value added, thereby drawing level with the German automotive manufacturing industry.

"The ICT sector is the driving force for innovations," emphasised Bertschek. In other words, ICT provides users with access to new and improved products and services, a fact of which the German economy is becoming increasingly aware. Moreover, the topic has entered the political agenda, Bertschek said. Policy-makers will not only have to deal with IT security and the expansion of broadband networks, but also with the setting of European-wide technical standards for data security.

In his argumentation, the EU Commissioner for Digital Economy and Society, Günther H. Oettinger, took the same line. "The Digital Future of Europe", which was the title of his keynote speech, lies first and foremost in a pan-European strategy for a single digital EU market, according to the former Minister-President of Baden-Württemberg. Oettinger outrightly promoted this strategy: "Only a uniform European data protection law can ensure sustainable value added chains." If the European Commission had such an instrument, Europe would be more a powerful player in the competition with US companies. He brought forward the example of Google, Apple, Microsoft, Facebook and Amazon, the five US Internet and technology giants, whose market value is twice that of the DAX 30, i.e. of the 30 largest German companies, such as Siemens, BASF and Daimler.

"Infrastructure will be a decisive factor" on the path towards improved competitiveness, said Oettinger. In practical terms, this means that "we have to invest more in modern networks." Because economic regions know no physical borders between nations, the Commissioner explained, a pan-European strategy towards digitalisation could only be implemented as a cooperation of EU Member States. This effort must also include the cultivation of an EU-wide data security environment. "So far, we have been too incautious and negligent with respect to data security," said Oettinger. He pointed out that the debate about the digital economy is not only about services that facilitate daily life, but also about services that increase security. Oettinger emphasised that Europe must not sit back and wait for others to implement standards: "The digital world requires quick decisions."

In his speech, the Director of the Fraunhofer Institute for Manufacturing Engineering and Automation IPA in Stuttgart, Professor Thomas Bauernhansl, also called on Europe not to lag behind its competition from the US, China, South Korea and Japan. "We cannot afford to underestimate international competition." He pointed out that Internet giant Google alone spends the same amount on Research and Development every year as the entire German engineering industry taken together.

"The days of net neutrality are definitively over," Bauernhansl continued. Previously clearly defined IT architectures, Professor Bauernhansl explained, are vanishing, and a change of paradigm in the ICT sector is just around the corner. "We are standing on the verge of the fourth industrial revolution, which will foster real-time information, decentralisation, and open communication." Bauernhansl gave the example of driver-less transport systems, which are already being tested. These systems are able to navigate autonomously since they continuously map out their environment, move according to algorithms and can be connected with other vehicles in the Cloud. He explained that, by way of these systems, the industry aims to achieve the greatest possible customer proximity while accomplishing maximum productivity. According to Bauernhansl, "it is not the machines but humans who pose the greatest risk in traffic."

In their presentations on "Ubiquitous Working" and the "Opportunities and Challenges Arising from Networked Work Environments", Dr. Susanne Steffes, deputy head of the ZEW Research Department "Labour Markets, Human Resources and Social Policy", and Steffen Viete, researcher in ZEW's "ICT" Research Department, shifted the focus from the more general level to an individual level and shed light on the spatial and temporal flexibility of employees thanks to Home Office and teleworking models. They arrived at the conclusion that not all individuals and businesses are affected to the same extent by digitalisation. Teleworking is particularly commonplace among higher qualified employees and executives, while the intense use of mobile ICT and flexible forms of work are particularly common in the services sector.

The final highlight of the 2015 ZEW Economic Forum  was a panel discussion on "Does Industry 4.0 Mark the Economy of the Future and the Abolition of Work?". The panellists were ZEW's Professor Irene Bertschek,  Professor Martin Przewloka, Senior Vice President of software producer SAP SE in Walldorf as well as global divisional and programme director of the company's Innovation Center, Dr. Peter Adolphs, managing director "Development & Marketing" of Mannheim-based company Pepperl+Fuchs, which is specialised in sensor manufacturing and process automation, as well as Gerhard Steiger, head of the "Chassis Systems Control" Division at automotive supplier Robert Bosch GmbH in Gerlingen near Stuttgart.

Despite some points of friction, the panellists agreed that data security must be taken seriously, that Germany still has some catching up to do regarding expertise on elaborate algorithms, and that joint and swift action of EU Member States is required. Valuable contributions to the discussion were made by members of the audience, who addressed topics such as electrosmog, possible risks to health due to radiation as well as legal issues concerning fully automated driving.