HUMAN RESOURCES IN THE AGE OF INDUSTRIAL DIGITALIZATION › cn › oesterreich-in-china › ... · 2017-11-06 · Human Resources in the Age of Industrial Digitalization COST COMPETITIVENESS

HUMAN RESOURCES IN THE AGE OF INDUSTRIAL DIGITALIZATION

AUSTRIA CONNECT

OCTOBER 2017

IoT ONE | Direct HR Group 1 AUSTRIA CONNECT Greater China 2017. October 26th Shanghai

AGENDA

About Us

Introduction

Cost Competitiveness

Productivity

1

2

3

4

Innovation & HR

Talent and Automation

Digital Transformation Readiness Assessment

5

6

7

Discussion 8

IoT ONE | Direct HR Group 2 AUSTRIA CONNECT Greater China 2017. October 26th Shanghai 2

IoT ONE The IoT ONE platform aims to accelerate industrial Internet adoption, by providing decision makers with transparent and comprehensive information about Industrial Internet vendors, solutions and technologies to enable rapid and confident procurement and partnership decisions. IoT ONE also curates offline conferences, delegations and executive reports to educate senior leadership and policy makers on the Industrial Internet technology and business landscape.

IoT ONE Core Competencies

Functional Expertise Industrial Internet trends, Process optimization, Lean Innovation, Business Case Analysis, Asian Economic Analysis, and Strategic Sourcing. Industry Expertise Telecommunications, Renewables, Automotive, Household Chemicals, Specialty Vehicles, and Logistics.

Connecting Stakeholders

Tracking Technology

Trends

Informing Buyers and

Vendors

Erik Walenza-Slabe Co-Founder & CEO IoT ONE

Erik is the Shanghai Director of Startup Grind, the world’s largest network of entrepreneurs. He holds an M.B.A. and M.A. in International Affairs from The George Washington University of Washington, DC. He has five years of management consulting experience with a focus on Cost and Capital Efficiency, and international consulting experience in Asia, Europe, Central America, and North America. He is also business-fluent in Mandarin.


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Leadership solutions to drive performance in times of change.

Obtain up-to-date HR market information, practical guides and compensation insights.

www.directhr.cn www.od-tools.com www.hiddenchampion.cn www.innova-institute.com.cn www.repeatmobile.com

www.directhrgroup.com www.chinahrnews.com

Partner in

Change

In today’s world

and in every organization change starts with its people

About Direct HR Group

Michael Maeder Founder & Managing Partner

Born in China, German by origin. Michael is a true global citizen serving as a bridge between the Eastern and Western hemisphere. After gaining experience in supply chain development for the automotive and machine building sector, he has been engaging as Lead Consultant in executive searches in Asia since 2008. He also in charge of training Researchers and Consultants in talent management, profiling, client industry know-how, research process management, interviewing skills, and salary negotiations. Michael is also a frequent key note speaker on panels, conferences and seminars on topics around Leadership and Talent Management in China.


INTRODUCTION Global Competitiveness Index


Global Manufacturing Competitiveness Index 2016

RANKG. Country Index Score (100=High)

1 CHINA 100

2 United States 99.5

3 Germany 93.9

4 Japan 80.4

5 South Korea 76.7

6 United Kingdom 75.8

7 Taiwan 72.9

8 Mexico 69.5

9 Canada 68.7

10 Singapore 68.4

RANKG. Ranking EVO.

Country Index Score (100=High)

1 ( +1) United States 100

2 ( -1) CHINA 93.5

3 ( ) Germany 90.8

4 ( ) Japan 78.0

5 ( +6) India 77.5

6 ( -1) South Korea 77.0

7 ( +1) Mexico 75.9

8 ( -2) United Kingdom 73.8

9 ( -2) Taiwan 72.1

10 ( -1) Canada 68.1

Source: Deloitte Touche Tohmatsu Limited and US Council on Competitiveness, 2016 Global Manufacturing Competitiveness Index

2016 Expected 2020

TALENT 1

COST COMPETITIVENESS

2

PRODUCTIVITY 3

SUPPLIER NETWORK

4

LEGAL & REGULATORY

5

EDUCATION INFRASTRUCTURE

6

PHYSICAL INFRASTRUCTURE

7

ECONOMIC, FINANCE, TRADE, & TAX SYSTEM

8

INNOVATION, POLICY & INFRASTRUCTURE

9

ENERGY POLICY 10

LOCAL MARKET ATTRACTIVENESS

11

HEALTHCARE SYSTEM

12

Drivers of Global Manufacturing Competitiveness

As of 2016, China tops the rank on global manufacturing competitiveness (as it did in 2010 & 2013). However, it is expected to become 2nd by 2020.

Again, consistent with 2010 & 2013 indices, TALENT is the most critical driver of Global Manufacturing Competitiveness. With global economic growth shrinking year after year, containing cots, increase productivity and building a solid network of suppliers are also critical.

Top-3


PHYSICAL INFRASTRUCTURE

7

ECONOMIC, FINANCE, TRADE, & TAX SYSTEM

8

INNOVATION, POLICY & INFRASTRUCTURE

9

ENERGY POLICY 10

LOCAL MARKET ATTRACTIVENESS

11

HEALTHCARE SYSTEM

12

SUPPLIER NETWORK

4

LEGAL & REGULATORY

5

EDUCATION INFRASTRUCTURE

6

Global Manufacturing Competitiveness Index 2016

A

Let’s look into the main drivers, although following a slightly different order

TALENT 1


2

PRODUCTIVITY 3


PRODUCTIVITY

INNOVATION & HR

B

C


COST Competitiveness. Wages in China


Human Resources in the Age of Industrial Digitalization


Manufacturing Costs in China (%)

Sources: 2005 & 2016 data: China’s supply-side structural reforms: Progress and Outlook (page 21). The Economist Intelligence Unit; German companies data: Labor Market & Salary Report 2017-2018, German Chamber of Commerce in China (GCCC). *Environment costs: purchase of equipment, waste treatment and carbon-emission certificate. ** Other: includes inputs, logistics, depreciation and other operational costs

17.1 20.1 4.2

7.9

25.0

12.1 13.0 6.9

19.6

6.0

4.9

11.1 54.8

22.4

2005 2015 2017

Social Security

Government Administration Charges and Fees

Labor Wages

Taxes

Environment*

Other**

Financing

Labor Wages + Social Security Developments from 2005 to 2015: Rising Labor Costs Increasing weight of Social Security

contributions Increasing weight of Government fees

Margins Under pressure

Company

Developments Recent

Corporate income tax (CIT) rate is 25%, though lower rates (20%, 15%) may apply for small-sized and high-tech firms.

Pilot programs in 19 provinces to reduce employer’s social security contributions started in 2017, though unlikely to see dramatic cutbacks since the pension system is underfunded.

Reductions on the number of government charges and fees to continue (almost 500 in 2013 vs. 106 in 2016).

Environmental Protection Tax coming into effect in January 2018 (targets enterprises that directly emit taxable pollutants).

German Companies in Automotive,

Machinery and Industrial

Equipment Industries

Minimum wages to remain stable.


5%

8%

11%

14%

17%

20%

2013 2014 2015 2016 2017*

17.7

41.8

3.8

9.6

14.7

41.1

3.5

9.6

Turnover (in %)

White Collar Workers

Blue Collar Workers

2017 2016

Average duration in company

(months)

Average annual sick days

Average annual leave

12.8

44.5

3.9 11.7 12

48.5

3.4 11.5

Turnover (in %)

2017 2016

Average duration in company

(months)

Average annual sick days

Average annual leave

COST COMPETITIVENESS | Salary Trends in China

Growth Indicators: Wages and GDP (in %)

Minimum Wage

Source: Labor Market & Salary Report 2017-2018, German Chamber of Commerce in China (GCCC).*National wage growth estimate. The number of provinces issuing adjustments for wage guidelines and minimum wages varies every year. GDP for the first semester of 2017.

German Companies National Wages Wage Guidelines

10.7

8.4

8.0

China’s GDP

China’s Total Labor Force

6.2

Wage Growth Estimates in China, 2017

Note: wage growth rates by Korn Ferry and Willis Towers Watson are originally provided in real terms (discounting inflation): 4% an 4.7%, respectively. To allow for comparison with the other wage growth rates we have added inflation: 1.50%, average inflation in China in the first 8 months of 2017; 1.99% in 2016. Wage growth from Zhaopin.com: 2017Q3 vs. 2016Q3, of white collar professionals across 37 cities in China.

6.10%

6.23% 6.20%

0.90%

6.30%

Salary increase budgets are declining. All wage growth indicators available point towards moderation, with drops in salary increases in 2017 versus growth registered in the previous year.

-1.90

-0.87 -0.69

n.a.

-0.40

Wage Growth Evolution 2017 - 2016 (in percentage points)

With the exception of Zhaopin.com, wage growth estimates coming from non-official (government sponsored) sources fall in the vicinity of the expected performance of the economy (China’s GDP).



COST COMPETITIVENESS | 2017 Compensation Levels in China

2017 Wage levels China

Source: Labor Market & Salary Report 2017-2018, German Chamber of Commerce in China (GCCC) and Zhaopin.com. Data from Zhaopin.com represents average salaries for white collar professionals in the third quarter of 2017. Data from the GCCC is the median value of total cost per employee based on a 12-month year period, including tax, variable costs, social insurance, performance bonuses, cash allowances and overtime. GCCC’s data is sourced from members of the German Chamber in China, mostly from Automotive, Machinery and Industrial Equipment companies, from both blue collar and white collar positions. * Data from the German Chamber of Commerce report in Shenyang includes also Dalian and Changchun.

Shanghai Suzhou

Kunshan Beijing Taicang

Shenyang*

Shenzhen CHINA Guangzhou

7.6 9.9 9.4

7.3 6.8 7.8 6.0

8.7

12.3

18.4 15.7

12.0 11.9 11.0 11.0 10.6 10.3 10.0

Tianjin

Monthly. In Thousand RMB

n.a. n.a.



-2.9

7.6

-2.2

-4.7

-2.0

6.5

12.9

5.8

5.3

12.9

8.9

9.7

84.8

83.4

81.8

81.3

81.1

70.4

70.2

52.2

46.9

32.8

24.7

23.1

11.5

China

Supplementary Medical Insurance

Supplementary Housing Fund

Annual Medical Check-up

Meal & Transportation Allowances

Training (In-house or External)

Life & Accident Insurance

Critical Illness Allowances

Other Bonuses (Skill, Retention, Mgt.)

Company Car

Schooling / Welfare for Children

Supplementary Pension Plan

Subsidize Studies to Employees

Annual Variable Bonus / Sales Commission

79.2

84.0

80.8

79.2

73.6

64.0

74.4

54.4

46.4

33.6

28.0

24.0

14.4

82.1

76.4

83.0

79.2

78.3

66.0

67.9

41.5

40.6

28.3

15.1

15.1

4.7

Companies in China with LOW staff turnover (Up to 5.0%)

COST COMPETITIVENESS | 2017 Compensation Levels in China

Most Common Components of Variable Compensation (in %) Ranked by “Very Common” and “Common” mentions

Companies in China with HIGH staff turnover (> 17.5%)

Difference in the degree of usage (in percentage points)

Source: Labor Market & Salary Report 2017-2018, German Chamber of Commerce in China (GCCC).

2 out of the Top-3 most common components of variable compensation are health related.

Companies with low staff turnover use more often critical illness allowances and supplementary pension plans in comparison with those of high turnover.

In Percentage (%) In Percentage (%)

The use of health and social related benefits in variable compensation packages appears to have a higher impact in employment stability than the use of cash-related benefits.



PRODUCTIVITY


PRODUCTIVITY

China’s Output per Worker: Overall and by Sector

Labor productivity growth rate in China has been decreasing since 2010. Only in 2016 bounced back, gaining +0.2 percentage points (p.p.) over the previous year.

Source: NBS and Labor Market & Salary Report 2017-2018, German Chamber of Commerce in China (GCCC). GDP deflator (rebased, 2010=100) has been used to deflate prices. Productivity increase refers to the percent variation in output per worker (total) compared to the previous year.

0%

3%

6%

9%

12%

15%

18%

0

20

40

60

80

100

120

140

2010 2011 2012 2013 2014 2015 2016

Thousand RMB per Employed Person, at 2010 Prices

Total Secondary Tertiary Primary Productivity Increase (%)

Sector / China 2015 2016 Increase (%)

Primary 24,366 25,629 5.2

Secondary 108,473 114,914 5.9

Tertiary 91,928 98,484 7.1

Total 77,656 82,970 6.8

RMB per Employed Person, at 2010 Prices. Increase 2016-2015 in %

0

20

40

60

80

100

2005 06 07 08 09 2010 11 12 13 14 2015 2016

Austria

Japan

Brazil

Bulgaria

CHINA

Czech Rep.

India

China’s Productivity in Context

GDP per employed person at 2011 Purchasing Power Parity (PPP) $ prices

Source: World Bank Data. GDP per person employed is gross domestic product (GDP) divided by total employment in the economy. Purchasing power parity (PPP) GDP is GDP converted to 2011 constant international dollars using PPP rates. An international dollar has the same purchasing power over GDP that a U.S. dollar has in the United States.



-3.5

7.6

-4.2 -10.8

19.2

-8.4 -6.3

15.5

-9.2

PRODUCTIVITY

Evaluation of Productivity Increase Compared to Overall Wage Increases in 2017 (%)

Source: Labor Market & Salary Report 2017-2018, German Chamber of Commerce in China (GCCC). Direct HR Group analysis.

18.8

68.8

12.5 24.3

60.7

15.0 22.5

64.0

13.5

Lower Similar Higher39.4

37.4 41.8 41.1

45.4 44.5 44.5 48.5

16.2% 16.7% 17.7% 14.7%

9.5% 11.6% 12.8% 12.0%

0%

20%

40%

60%

80%

0

10

20

30

40

50

60

2014 2015 2016 2017

Turnover and Employment Stability

Annual Turnover (in %) and Average Duration in Company (in months)

Blue collar professionals:

Employment stability

Annual turnover

White collar professionals:

Employment stability

Annual turnover

Source: Labor Market & Salary Report, German Chamber of Commerce in China (GCCC). Various Editions

EVOLUTION 2017 - 2016

(in p.p.)

China Automotive Machinery, Industrial Equipment



38.1

26.6

21.0

15.2

15.2

22.4

11.5

52.4

58.7

63.0

60.3

58.4

38.1

46.4

8.1

10.2

12.7

22.2

19.2

24.0

34.4

2.3

4.4

5.8

4.6

9.7

Improved Internal Processes

Better Internal Training

Better Work Experience

Use of KPI’s

Improved Retention

Increased Automation

Improved General Education

PRODUCTIVITY

Main Drivers for Productivity Increase (%)


Ranked by “Very Important” and “Important”

Very important Important Neutral Not important n/a

Impact of HR Related Issues in Business Operations (%) “High Impact” and “Medium Impact”

88.0

87.5

79.9

57.0

55.9

53.3

27.9

19.9

18.9

15.9

14.5

Recruiting Qualified Staff

Social Insurance / Housing Fund

Rising Labor Costs

High Cost for Training

Labor Arbitration Cases

High Staff Turnover

Dealing with Labor Bureau

Strikes / Unrest

Union Organization

Collective Bargaining

Retaining Qualified Staff

T

O

P

3


Improvements in productivity (3rd most important component in explaining Global Manufacturing Competitiveness Index) highly dependent on talent (1st component).

Recruiting and retaining qualified staff , as well as rising labor costs remain top-3 HR issues.



Innovation & HR


Labor Market Trends in China

Growth Rate & Regional Distribution of Migrant Workers (%)

The traditional pool of migrant workers for manufacturing industries and low value added services is drying up. Two major factors help explain this: a) the increase cost of living in urban areas at coastal and central zones (these two areas account for almost 70% of all migrant workers); b) lack of significant hukou reform.

4.4 3.9

2.4 1.9

1.3 1.5 3.4

3.0

1.7 1.3 0.4 0.3

5.9 5.4

3.6 2.8 2.7

3.4

2011 2012 2013 2014 2015 2016

Source: China National Bureau of Statistics (NBS). Outside province: Working in a province other than their household registration; Inside province: Working in the same province of their household registration. In 2016 the Northeast region was introduced for the first time.

Population Over 65 (%)

Total Outside Province Inside Province

2016 2030 2050

9.7 17.1 26.3

Source: AON Hewitt 2017 Human Capital Intelligence Study Result Sharing – Machinery Industry. * Labor force increase rate in 2015.

Labor Force Increase Rate (%)

0.9* 0.0 -2.3

Demographic challenges posed by an ageing population and the relative availability of population in working age. Some regulatory policies aim at tackling this issue, such as family planning policies (since January 2016 all couples allowed to have two children) or talks about increasing the retirement age (so far nothing has been put forward, despite adjustments were expected already for 2017).

West 26.9

East 36.9

Central 32.9

Northeast 3.3

0.97 1.14

3.80

2.50

Growth over 2015 (in %)

2016



Labor Market Trends in China

Rural & Urban Population (%)

600 cities in China, 15 with more than 10 million residents (megacities). Since 2011 more than half of China’s population live in cities. 13th Five Year Plan establishes an urbanization rate of 60% by 2020.

Source: NBS. Urban population with residency status (does not imply household registration – hukou. *2016: Estimates by World Bank.

Urban Rural

Growing urbanization is meant to drive higher consumption, which in turns will set higher requirements for manufacturing (higher efficiency, higher sustainability).

52.6 53.7 54.8 56.1 56.8

47.4 46.3 45.2 43.9 43.2

2012 2013 2014 2015 2016*

6.8 7.0 7.3 7.5 7.7 7.9

12.7 13.1 13.2 13.1 13.1

7.4

2012 2013 2014 2015 2016 2017*

New College Graduates and Urban Jobs (in millions)

Source: NBS & Reuters. * Jobs created in the first semester of 2017; Expected college graduates by the end of the year.

New college graduates

New urban jobs

Sectors with Highest Job Vacancies

Sectors with Highest Job Applications

Sales Professionals 1 Internet / E-commerce

Admin./ Logistics / Secretary 2 Real Estate / Construction /

Engineering

Software / Internet Develop. 3 Education / Training / College

Sales Management 4 Investment / Funds / Securities

Education / Training 5 Computer Software

Finance / Auditing / Tax 6 Professional Services / Consulting

Customer Svce. / Sales Support 7 Trade / Import and Export

HR Professionals 8 FMCG

Civil Engineering / Construction 9 IT Services

Marketing Professionals 10 Media / Publishing / Movie and TV

Top Sectors by Job Vacancies & Job Applications: 2017Q2

Source: Zhaopin.com. Sectors with the highest number of vacancies for white collars published in 2017Q2; Roles / occupations with the most vacancies for white collars in 2017Q2. Based on the monitoring of 37 cities.

Additionally urbanization is to boost human capital for the services industry, often at the expense of labor available for manufacturing industries.



Innovation & HR | Trajectory & Types of Innovation



Innovation & HR | Collaboration Partners in Innovation in China



Innovation & HR | Top Challenges for Innovation in China



Innovation & HR



Innovation & HR



Innovation & HR



Innovation & HR



Innovation & HR



TALENT & Automation


IoT ONE | The Industrial Internet and HR in China

TALENT | Employment and Automation in China

Potential for Automation (%)

Source: A Future That Works: Automation, Employment and Productivity. McKinsey Global Institute Report. January 2017. Europe Big 5: France, Germany, Italy, Spain and UK. Based on the analysis of approximately 2000 activities across 800 occupations.

Percentage of work activities that could be automated by using current technology

Labor Affected by Technically Automatable Activities

Source: A Future That Works: Automation, Employment and Productivity. McKinsey Global Institute Report. January 2017; International Labor Organization, World Bank, UNdata.

55

52 51

46 46

50

Japan India

China U.S.

Europe Big 5

Rest of the World

35

233

394

60 54

332

Japan India

China U.S.

Europe Big 5

Rest of the World

Full Time Employees, In Millions

45 X 8.7

49.1% China’s Total Labor Force

Austria’s Total Population

MILLION

803 MILLION



Robot to Employee Ratio in Manufacturing

Source: World Robotics Report 2016. International Federation of Robotics.

531

398

305 301

212 170 150 136 127

49 69

MILLION

69 World Average

Korea

Singapore

Japan

Germany

Sweden

U.S.

Spain

France

Canada

China

World Avge.

178 221 254

36 50 68.6

2013 2014 2015

Annual Sales of Industrial Robots In Thousand Units World China

1 CHINA

2 KOREA

3 JAPAN

4 U.S.

5 GERMANY

75%

Top 5 Markets Combined Share

of the Global Sales Volume

Top-5 Global Markets By Robot Units Sold



Despite the degree of automation in China is still at a low level the country is already the largest and fastest growing market for automation products.

Installed Robots per 10,000 Employees



531

398

305 301

212 170 150 136 127

49 69


Robot to Employee Ratio in Manufacturing


69 World Average

Korea

Singapore

Japan

Germany

Sweden

U.S.

Spain

France

Canada

China

World Avge.

1262

850 733

555

210 10

405 317 500

680

383

144 200 73

186 149 18 41

TraditionalIndustrial

Robots

WirelessSensor

Networks

Smart Sensors,Embedded

systems

InformationSecurity

Cloud & BigData

AdvancedRobots

Source: Mercator Institute for China Studies (2016)

Despite the degree of automation in China is still at a low level the country is already the largest and fastest growing market for automation products.

Number of Patent Families by Technology Process and Use Patents Excluded

U.S. China Germany

China’s innovation focus in traditional industrial robots, wireless sensors networks and smart sensors.


Installed Robots per 10,000 Employees


76.0

56.0 55.0 46.0 43.0

36.0

9.0 2.0

53.0 47.0

60.0 64.0

21.0 12.0 14.0

5.0

50.0

33.0

67.0 72.0

27.0 20.0 20.0

3.0

Barriers Inhibiting Businesses from Adopting Industrial Internet Technologies (in %)



Lack of Interoperability

of Standards

Legacy Equipment

Uncertain ROI (Business Case)

Security Concerns

Immature Technology

Lack of Skilled Workers

Privacy Concerns

Societal Concerns

Source: World Economic Forum Industrial Internet Survey, IoT ONE Industrial Survey

North America China Europe

3 X In China greater concern

than in North America 2 X 1.4X

Chinese businesses’ core concerns are ROI and legacy equip.

When comparing businesses in China with those North America the highest differences are in the lack of a skilled talent and technology.


Information Technology (IT)

Operational Technology (OT)

Industrial Internet of Things

(IIoT)

Source: Industrial Internet Consortium

TALENT | Trustworthiness Conceptions between IT and OT Professionals


CULTURE SKILLSETS PRIORITIES TECHNOLOGY PROCESSES COSTS IT – OT Differences


Plan

1 Current status assessment

2 Strategy definition

3 Solution brainstorming & prioritization (brainstorm / audit / business case)

4 Solution architecture (project planning and analysis)

Execute

5 Technology selection

6 Vendor selection

7 Quality assurance / testing

8 Technology implementation

9 Post-implementation integration (security, enterprise software)

10 Business process upgrade (evolve processes to enable new capabilities)

11 Talent upgrade (retrain / recruit to take full advantage of new capabilities)

Improve

12 Run normal operations

13 Evaluate results / testing

14 Refine technology, business processes, or talent to optimize

15 Scale (pilot -> small scale implementation -> wide scale implementation)

Note: # - Stages that differ markedly from typical IT / OT implementation.


IoT projects are more dynamic than enterprise IT.


DIGITAL Transformation Readiness Assessment


Employees capabilities and skills for a successful digital transformation strategy: assessment, based on the impressions of 7 regional / country business heads in China and Global C-level executives.

IoT ONE | Digital Transformation Readiness Assessment

Interviewees tend to rate their organizations capabilities and skills as industry average when it comes to Digital Product Lifecycle Management, Digital Fluency and Social Media Skills.

Only 28.6% respondents consider their capabilities in IoT on the shop floor on par with their respective industry average. Agile methodology also poorly perceived.

Today 27

Expected 3 Years from Now

Social media skills expected to move forward the most: 42.8% see their organizations above industry average. To a less extent, improvements in skills related to IoT.

Applying agile practices into business processes remains weak.

Only 2 respondents consider their capabilities in IoT on the shop floor on par with their respective industry average. The rest consider this capability below industry average or as a critical weakness. Agile methodology also poorly perceived.


We gathered opinions from 11 companies in China with regards their respective Digital Implementation Strategies.

54.5% NO strategy or strategy under development as of today. 36.4%

In 3 years from now still see themselves with NO strategy or strategy under development.

We asked 8 of them to tell us how ready they think they are for digital transformation within their companies’ departments (Finance, HR & Admin, IT, Production, R&D, Sales & Marketing, and Supply Chain).

2 8

12.5% consider Digital Transformation Readiness as HIGH (at least 50%) for 3 departments: Finance, HR & Admin, and IT. 12.5% see R&D ready in a high proportion.

25.0%



Relevant contributors and perceived obstacles for implementing a company’s digital strategy.

Contributors and Obstacles interlinked.

3

Contributors

1 2

IT, R&D Head Quarters

Management

Sales & Marketing,

Supply Chain, Production

Ranking based on the relative importance assigned (“Very Important” or “Important”) to 9 different factors that were evaluated.

3

Obstacles

1 2

Outdated Technology & IT

architecture Lack of Crucial Employee Skills

Corporate Culture for

Change

Ranking based on the relative importance assigned (“Very Important” or “Important”) to 9 different obstacles that were evaluated.

Lack of Vision by Management

Uncertainty About Strategy

Implementation Low

Involvement of Leadership

8 9 Consider the role of the Regional / Country Management as either “Important” or “Fairly Important”.

89%

In addition to the TOP-3 Contributors:



Open Communication: information exchange within departments of the same organization or with third parties (suppliers, vendors, customers)

Information exchange within company departments are little or non existent.

Little to no exchange when communication entails third parties .

Today 27

Expected 3 Years from Now

Expect at least an extensive information exchange within departments.

Sharing at least extensive information with third parties.

3 8

4 8

5 8

2 8

37.5% 62.5%

50% 25%



DISCUSSION What Jobs Do You Believe Will be Tranformed in Your Organization?


Do we need car retailers?

• Model:

Browse available cars in the vending machine on your smartphone. After picking the desired car, Alipay assesses your social credit rating on the spot and indicates the required down payment (as low as 10%). You pay with Alipay and can drive off in your new car.

• Drivers:

Increasing customer trust in mobile shopping.

Reduced cost for real estate and staff.

Growing demand for luxury automobiles in China.

• Enablers:

Sophisticated online payment system that enables contracts and loans to be established.

A social credit system based on Alipay data enables Alibaba to require down payments as low as 10%.

Alibaba launches car vending machines based on personal credit


Do we need taxi drivers?

• Model:

Baidu has opened up the company’s smart car operating system (OS), including its software and cloud-based data services platforms, to help car manufacturers to develop autonomous vehicles. Baidu seen an opportunity to become the Android of the smart car.

• Drivers:

Every major car manufacturer is planning for connected vehicles but few have the capability to build an OS.

Governments are eager to tap connected car data streams to improve road planning, maintenance, and regulation.

• Enablers:

Rapid advances in machine vision hardware (LIDAR, camera systems) and software (machine learning).

Improvements in over-the-air software updates.

Critical mass of driving data for algorithm optimization.

Apollo project aims to support the development for autonomous cars


Do we need lawyers?

• Model:

Qtum’s platform and SaaS tools help customers build their business processes on top of blockchain technology. Smart contracts provide a high degree of trust without the need to involve a costly third party intermediary (i.e., a lawyer).

• Drivers:

Our dependency on third party intermediaries to secure business processes is expensive and time consuming.

Increasing acceptance and awareness of the technology.

Chinese government policies research into blockchain.

• Enablers:

A modified Bitcoin Core infrastructure is combined with an intercompatible version of the Ethereum Virtual Machine.

Formally verifiable translation of human-readable agreements to smart contracts, and error-resilient specification of their elements, terms and conditions.

Shanghai-based Qtum builds business processes on blockchain


Do we need cashiers?

• Model:

To buy something in the Tao Cafe at the Taobao Maker Festival in July all you had to do was scan a QR Code with your Taobao app. Then simply take items off the shelves and leave the store. You never see a cash register. Leaving the store triggers the payment automatically through Alipay.

• Drivers:

Increasing retail labor costs in Chinese cities.

Customization of the customer experience in offline retail as it is already done online.

Increased convenience and efficiency for customers.

• Enablers:

Hardware and algorithm advances in facial recognition and object tracking technology.

Universal adoption of mobile payment solutions.

Alibaba showcases 100% automated retail at the Maker Festival


Do we need guards and secretaries?

• Model:

The city of Hangzhou established a cyber-court that exclusively hears internet-related cases, especially e-commerce. The whole process from filing a case, identity verification, pre-trial mediation and submission of evidence is handled through online channels.

• Drivers:

Rapidly increasing volume of e-commerce lawsuits in China (600 in 2013 vs. 10,000 in 2016).

Chinese law requires lawsuits against a company to be handled in the city where it principally operates (Hangzhou is “China’s capital of e-commerce”).

• Enablers:

Video streaming technology and reliable broadband.

Cloud encryption solutions providing necessary security.

New Cyber-court handles internet-related lawsuits 100% online


Thank You


You can find Erik at:

[email protected]

+86 21 6010 5085 http://www.linkedin.com/in/erikwalenzaslabe/

Unit 2707-09, Tian An Center,

338 Nanjing Road (West) Shanghai 200003, China

www.iotone.com

Erik Walenza

CONNECT

You can find Michael at:

[email protected] +86 21 6010 5010

www.linkedin.com/in/michaelmaeder/

Unit 2707-09, Tian An Center, 338 Nanjing Road (West)

Shanghai 200003, China

www.directhrgroup.com

Michael Maeder


ANNEX

TABLES SURVEY


Implementation Status of your Organization’s Digital Transformation Strategy (in %)

IoT ONE | Digital Potential Assessment Survey. Tables of Results

27.3 9.1

27.3

27.3

18.2

27.3

9.1 18.2

18.2 18.2

Today Expected in 3 Years

NO Strategy

Strategy Under Development

Pilot Projects in Progress / Implemented

Operational Projects in Selected Regions / Facilities

Operational Projects Globally

Sample size: 11 responses

n.a.


As of TODAY: Digital Transformation Readiness within your company’s departments in terms of infrastructure, organizational capabilities, knowledge, talent and leadership (in %).

NO Strategy

50.0 62.5

25.0 25.0 25.0 37.5 32.1

25.0

37.5

37.5 12.5

25.0 19.6

25.0 50.0

25.0

37.5 37.5

25.0 28.6

12.5 12.5 12.5

12.5 25.0

12.5 12.5

12.5 12.5 12.5 5.7 12.5 1.8

Sample size: At the specific department level we have 8 responses. ALL combines the data collected at each department, totaling 56 data points

Almost None (Readiness considered to be below 10%)

Very Low (10 – 20%)

Low (20 - 30 %)

Medium (30 - 50 %)

High (50 – 70 %)

Very high ( >70 %)

Finance HR &

Admin

IT Production R&D Sales &

Marketing

Supply

Chain

ALL



CONTRIBUTORS towards implementing your company’s Digital Transformation Strategy

NO Strategy

66.7

22.2

44.4

11.1

22.2

33.3

22.2

66.7

22.2

44.4

33.3

55.5

11.1

22.2

11.1

11.1

22.2

33.3

22.2

22.2

44.4

66.7

44.4

11.1

11.1

11.1

11.1

11.1

22.2

11.1

0.1

22.2

11.1

22.2

Ranked by “Very Important” + “Important” (in %)

IT

R&D

HQ Management

Sales & Marketing

Supply Chain

Production

Finance

Regional / Country Management

HR Admin

OBSTACLES for implementing your company’s Digital Transformation Strategy Ranked by “Very Important” + “Important” (in %)

44.4

22.2

22.2

22.2

22.2

22.2

11.1

44.4

55.6

55.6

55.6

44.4

44.4

44.4

44.4

44.4

11.1

11.1

22.2

11.1

33.3

11.1

22.2

44.4

11.1

11.1

11.1

22.2

22.2

33.3

11.1

11.1

Outdated Technology & IT Architecture

Lack of Crucial Employee Skills

Lack of Vision by Management

Uncertainty about Strategy Implementation

Corporate Culture Not Change Supportive

Low Involvement of Leadership

No Sense of Urgency among Employees

Unclear Business Case

Lack of Funds for Necessary Investments

Very Important Important Fairly Important Slightly Important Not Important n.a.

Sample size: 9 contributors



To what extent information is exchanged between departments within your company (in %).

NO Strategy

12.5 12.5

25.0

50.0

37.5

12.5

37.5

12.5


No Information Exchange (below 10%)

Little Information Exchange (10-30%)

Some Information Exchange (31-50%)

Extensive Information Exchange (51-70%)

Most Information is Shared (71-90%)

All Information is Shared (>90 %)

Today Expected in 3

Years

To what extent information from your company is exchanged with suppliers, customers and vendors outside your company (in %).

25.0

37.5

37.5

37.5

37.5

12.5 12.5

Today Expected in 3

Years




Percentage of Production Processes that Can be Remotely Adjusted in Real Time (Average)

NO Strategy


Today

21.5% Expected in 3 YEARS

37.4%



Rate your Employees Capabilities in the Following Fields

NO Strategy

14.3

14.3

14.3

14.3

42.9

57.1

57.1

57.1

28.6

14.3

42.9

28.6

28.6

28.6

57.1

42.9

14.3

14.3

28.6

Global Leader Above Industry Avge. Industry Average Below Industry Avge. Critical Weakness n.a.

14.3

14.3

14.3

14.3

42.9

28.6

14.3

42.9

42.9

71.4

28.6

42.9

28.6

28.6

42.9

14.3

28.6

28.6

42.9 14.3

Data Analytics (ability to transform data into practical business intelligence)

Digital Product Lifecycle Management (e.g. cloud based information exchange)

Digital Fluency (ability to rapidly adopt new technologies)

Social Media Skills (e.g. brand building)

IoT Kaizen (ability to identify new applications for IoT technologies)

Agile Methodology (ability to apply agile practices into business processes)


Successful digital transformation requires employees to have certain skills sets. How do companies perceive their employees with regards specific skill sets related to digital transformation.

TODAY Expected in 3 YEARS




In China

CONTRIBUTORS SNAPSHOT

Number of Employees (in %)

57.1 28.6

14.3

Up to 500

1001 to 2000

501-1000

28.6

14.3

14.3

14.3

28.6

2001 to 5000

1001 to 2000

501-1000

Globally

5001 to 10000

More than 10000


In China

57.1 28.6

14.3

50 or Less

501 to 1 Billion

51 to 500

14.3

28.6

28.6

28.6

1 Billion to under 5 Billion

51 to 500

50 or Less

Globally

5 Billion or more

By Revenue in 2016 (Million USD)

25.1

12.6 12.5 12.5

6.3 6.2 6.2 6.2 6.2 6.2

Manufacturing

Engineering, Construction

Financial Services

Energy

Farm Machinery, Construction

Electronics, Electrical Equipment

Automotive

Consumer Electronics

Dairy Products

E-commerce

By Industry/ies a Company Operates (in %)

Note: Each participant could mention up to 5 industries. 16 mentions for a total of 10 different industries were collected. The percentages presented in the table represent the proportion over the 16 mentions.

By Job Title of Contributor (in %)

14.3

57.1

28.6

Global C-Level Executive

Regional Country Business Head

Regional / Country Leadership Team Member



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HUMAN RESOURCES IN THE AGE OF INDUSTRIAL DIGITALIZATION › cn › oesterreich-in-china › ... · 2017-11-06 · Human Resources in the Age of Industrial Digitalization COST COMPETITIVENESS