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Reviving Ageing Skills and Marketsthrough Digitalization
Fujitsu Research Institute
Dr. Martin [email protected]
2017.06.13
1 Copyright 2017 FUJITSU
Outline
Ageing Markets - Challenges
Digital Transformation – Promises and Reality Check
Reviving Ageing Markets through Digital Co-Creation and Skill Management
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Reviving Ageing Markets
Ageing Markets – Challenges
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Emerging
Markets
Other Mature
US
World
Potential Growth Rates (%) Labor Productivity Trends
Japan
Note: 10y moving averages. Source: IMF-WEO; OECD (2016). Note: Linear Trends. Source: Data from Conference Board (2016).
“New Normal” of much lower growth:➢ Social ageing slows demand and innovation (Schulz)
➢ New technologies are innovative, but not really revolutionary or efficient (Gordon)
Growth and Productivity have been Falling Everywhere
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35
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45
20
50
Germany
Japan
China
United States
Japan Bubble
Lessons Learned in Japan: Social Ageing Affects Growth
Source: Data from OECD.
9.9% 4.5% 1.2%
% W
ork
ing A
ge
Popula
tion
Japan GDP Growth
Working Age Population (%) and Economic Growth (%)
China
7%->10.2% 5%
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Household Demand Shifts to (Regulated) Services
Source: Data from CEIC.
Household Expenditure (1996=100)
Apparel
Housing
HouseholdDemand (right scale)
Transport, Communication Furniture etc.
Medical Care
Note: 5-quarter moving averages. Corrected by changing household size.
Index Index
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1980 1985 1990 1995 2000 2005 2010
OECD Patents Growth Declines with Ageing Workforce
➢ Ageing workforce results
in decreasing demand
and supply for innovation
➢ Innovative companies
react with product
exports and a “War on
Talent”
Patents
Growth
Young to
Old Ratio
Source: Data from Legge (2016).
Note: Patents per capita growth. Young = 15-34 years old. Old = 45-64 years old.
OECD Young/Old Population
OECD Patents Growth
US Young/Old
German Young/Old
US Patents
German Patents
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Slowing Trade, Services Grow (supported by Digitalization)
0
5
10
15
World
World Merchandise Trade
Developing
Countries
Developed
100
110
120
130
140
2010 2011 2012 2013 2014 2015 2016
%
100
110
120
130
140
150
2010 2011 2012 2013 2014 2015 2016
1000%
Service Trade
Professional Service
Source: Unctad Stat (2017), BEA (2017).
%
Professional
Note: “Professional” Services are Unctad “Other” Services.
Travel
Goods
Service
Transport
Developed
Professional
Developing
Goods Service
Developing
ProfessionalDeveloped: Goods Service
90
110
130
150
170
2009 2010 2011 2012 2013 2014
Professional Service
US MNE Subsidiary Overseas Employment
Information
Mfg
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Reviving Ageing Markets
Digital Transformation – Promises
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Digital Opportunity: New Era of Global Flows (McKinsey)
➢ Trade is retreating
➢ …but data-economy is soaring
➢ Businesses digitalize and thrive
➢ Economic growth is picking up
Source: McKinsey (2016).
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Digital Opportunity: New Era of Participation (McKinsey)
➢ Individuals participate directly in globalization
➢ Digital startups are born global
➢ Digitization makes global flows more inclusive
➢ SMEs become micro-multinationals
Source: McKinsey (2016).
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Technology Revolution: Digital Transformation
Source: Fujitsu Journal (2016.1).
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Digital Strategy - Transformation at 3 Levels
Fujitsu Technology and Service Vision (2016)
Source: Fujitsu Technology & Service Vision (2016).
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Digital Transformation
Reviving Ageing Markets through Digitalization
– Cases: Finance, Automobile, Media, Agriculture
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ICT Investment vs Digitalization Perception
Source: Data: KLEMS (2014); McKinsey (2017)
Japan Sector ICT Contribution, Capital Service, VA Growth
➢ 1% ICT Capital Input contributes 5% VA Growth
➢ 40% Non-ICT Capital Input contributes 45% VA Growth
➢ 1% ICT Capital Input + X% Intangible Inv. contributes 5% VA Growth
Note: Sorted
by ICT VA
Contribution.
Deviation from
Total Industry
average
(=100).
Growth Rates
as 2003-2006
averages.
ICT VA Growth Contribution
(right scale)
Capital ServicesVA Growth% %
Industry Digital Penetration Perception (% Sector Respondents)
10%No change
40%Minor secondary change
60%Some core change
84%Reaching Mainstream
Mostly Digitized
Automotive
Consumer
Goods
Finance
Prof.
Service
Telecom
Travel
Transp.HiTech
RetailMedia
15 Copyright 2017 FUJITSUSource: McKinsey (2017); Commerzbank (2017)
US Top-10 Public Companies (Market Cap.)
Platform-Business Companies (50%)
Japan UK US Euro Z. China
Consumer
Finance25 14 14 10 8
Payment 24 24 17 18 9
Asset
Management22 22 17 17 4
Deposits 5 5 4 4 1
Corporate 1 1 1 1 1
Digital Revolution Impact in Finance
Margin Reduction (%)
Digital Transformation – Case I: Finance
Digitize… …but it costs you!
Commerzbank 4.0 (until 2020): -7,300 Fulltime Jobs (-9,600 + 2,300)
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Agricultural MarketNo wallet living A Beggar on the Street
!Source: eMarketer; FRI – Jin, Jianmin (2017).
Digital Banking Transformation: Fintech in Asia
!
https://i0.wp.com/www.aseantoday.com/wp-content/uploads/2017/02/图片1-1.png?w=1145
0
200
400
600
800
1000
2013 2014 2015 2016
Alipay vs. WeChat (monthly Users; Mill.)
WeChat Pay
AliPay
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100
150
200
250
300
350
400
450
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Source: Bloomberg (2017); PWC (2013); Oliver (2017)
US Media Stock Indices Digital Revolution of Music Production
Digital Transformation – Case II: Media
CreationMarketing /
Discovery
CreationConsumption /
Participation
Marketing /
Discovery
Production DistributionConsumption /
Participation
Prod. Distrib.
Consumption /
ParticipationCreation
Marketing /
Discovery
0
200
400
600
800
2011 2015
0
100
200
300
400
500
2011 2015
GDP
(Art, Rest. &
Entertainment)
SP500
SP500
Movie & Entertainment 40% -> 73% of Sales Price 46% -> 13%
Business Model Change:
Small
Movie
Big
UK
Movie
Starts
Foreign
Language
Documentary
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Digital Transformation – Case III: Mobility
Toyota Hybrid Engine
Toyota Hydrogen Car
Toyota Home Energy Management SystemFujitsu SPATIOWL
Mobility PlatformsEfficiency, Service, Sustainability
Source: www.consulab.com; www.toyota-global.com; www.jp.fujitsu.com
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Source: http://www.fujitsu.com/global/about/resources/news/press-releases/2012/0718-01.html
Digital Transformation – Case IV: Agriculture
Fujitsu Akisai
SaaS
Agricultural and
Food Production
Management
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30
50
70
90
199119931995199719992001200320052007200920112013
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6
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8
9
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Agriculture Labor Productivity(Value Added per Worker, 1000USD)
Cereal yield (tons per hectare)
Holland
USA
France
Japan
Switzerland
Holland
Japan
Germany
Source: Bayer Crop Science (2015), World Bank (2015).
Germany
…increasing Productivity of Small & Intensive Farms
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Digital Transformation
A Key Challenge – Digital Skills & Learning Management
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Skill Gaps Holding Back Highly Connected EU
Source: EuroStat (2017) – DESI, EuroStat (2017) – E-business integration.
Note: Percent of companies.
0
10
20
30
40
50
60
70Advertise
User Tracking
Big Data
Use Social Media
Cloud
Cloud DB
Cloud CRM
Cloud Infra
ERP
Supply Chain
e-Sales
e-Sales International
20
30
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50
60
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80
90
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2014 2015 2016 2017
EU Business Digitization IndexEU Digitalization Scoreboard
EU Connectivity Index
EU B
asic Digital Skills (%
Pop
.)EU IC
T Sp
ecia
lists
(%
Em
p.) EU DESI Country Index
Germany
EU28
SpainHolland
DE
NE
SP
DE
NE
SP
Germany
EU28
Spain
Holland
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11507
3456 3563 26725165
7878
10885
9462
10647
4301
4080
3543
2889
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
5-14 25-34 35-44 45-54 55-64
Source: Data from MIC Statistics Bureau (2016).
Missing Workforce
(38% less than 1985)
Japan: Qualifications by Age Group (1000 Person)
Skill Gaps Unfolding at Unprecedented Speed
3750 ?
Missing Trained Workforce?
(66% less than 1985?)
Note: Vocational Qualification = Senior High, Junior College, Professional School. Total numbers for 2014,
Qualification numbers for 2010, shifted by 5 years, 25-34 age group estimated from 2014 total and 2010
education ratios. 1985 5-14 age bracket is the current 35-44 age bracket.
➢ Better higher education and
vocational training cannot fill
the generation gap
➢ Full-potential development
of shrinking workforce,
including old-age and part-
time employment
Source: Puls(2015); Statistisches Bundesamt.
Vocational
University
Untrained
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Old<->Young Skill Transfers are Key to Innovation
➢Learning + experience
leads to innovation and
growth
➢Old > young
innovation turns to
“sophistication”
➢Continuous innovation =
continuous learning,
skill management,
change-10
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50
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10,000
Patents etc.%
Total
Population
Source: Data from UN, WIPO.
Note: UN Population Statistics estimates and low-fertility model. WIPO statistics for 1885-1979 and 1980-2014.
15-24 Old Population
50-59 Old Population
Patents, Trademarks, Designs, Models
PatentsInnovation “Hump”
Japan Working Age Brackets & Patents
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Digital Transformation - Human Capital Management
SAP SuccessFactors(Oracle Taleo, WorkDay, …)
Talent Management
Fujitsu MetaArcFujitsu Global HCM
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Digital Transformation – Connecting the Millennial World
Cloud-based HR
Talent Management
UniversitiesConsultantsPartners
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Lifecycle Learning Becomes Basis of Skill Development
Chart Source: BIBB (2015) – Toolbox berufliche Weiterbildung in Betrieb; Fraunhofer (2011) - Karrieresysteme
Performance
Time
Study
Training Master
CertificateCareer Change
Part-time
Integration
Parenting
Re-IntegrationOn-the-job
training
Retaining
Employees
Continuous
Qualification
pmentProfessional Development
College<->Business
Cooperation
Certification
Training Centers
Online MBAs
Vocational Univ.
Telecommuting
Part/Flex Time
Skill
Management
IoTS Learning
Services
Open
Universities
Part-time
Consultants
Training
Individualization
10% Formal 20% Informal
70% Professional Development
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Digital Transformation
Reviving Ageing Markets through Digitalization
– Consumerization, Complex Business Models, Co-Creation
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Industry PlatformsSmart Factories
Mfg.20%
Digital Consumer Revolution for Industry (4.0) Evolution
7%Consumer29%
13%
ConsumerPlatforms
Global User Access, Markets, Standards, New Business Models
SmartAutomob.
1.5%
SmartMachines
2.2% SmartIT
1.2%
SmartAgricult.
1.2%SmartChemical
2.2%
7%7%
RetailTransport
Healthcare
Government
4% Utilities
Internet of ServicesPartner Ecosystems
Internet of ThingsDevice Integration
IoT Market Shares
Source: Data from IDC, Fraunhofer (2014)
IoT & Industry 4.0 StrategySecurity, Standards, Infra., Cooperation
I40 Productivity Growth
2010 2018
IoT Market “Revolution” +20% YoY (Market Size)
1970 2030
I40 Market “Evolution”+1.5% YoY (Value Added)
Source: Graphs: Acatech, Siemens.
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Transforming Existing Systems, Creating New: MetaArc
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1979 1984 1989 1994 1999 2004 2009 2014
Own Account (ex. R&D) Custom Pre-Packaged
Software Production Evolution and Network Effects
Source: Byrne (2016) - ICT Prices and ICT ServicesSource: Corrado (2014) - Communication Networks, ICT and Productivity
Growth in Europe
EU ICT Network Effects Contribution to Growth
-1.5
-1
-0.5
0
0.5
1
1.5
2
2005 2007 2009 2011
ICT Capital ICT TFP Network Effects
US Software Investment (% of Total)
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Industry 4.0 Smile Curve – Where is the Smart Value?
Value Expansion
Industry Platforms
Va
lue
Ad
de
d
OperationsSupply Assembly Distribution
R&DService
Value Creation
Virtual Insourcing Virtual Insourcing
Smart Factory Smart
Service
Smart
Products
Smart
LogisticSmart
Grid
Smart
BuildingsSmart
Production
Open
InnovationCrowd
Sourcing
1960, 2030
2000
➢ Mfg value added
delined since the
1960s (smile curve)
➢ Virtualization and
service integration
allow a reversal
➢ Business models
can become very
complex
Ou
tso
urc
ing
Ou
tso
urc
ing
Outsourcing
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Productivity for Efficiency and/or Growth
Productivity
Input
Reduction
Volume
Reduction
Operation
Efficiency
Best Practice
AdoptionNew Operations
Development
Output
Increase
Value
Increase
Volume
Increase
Structural
Change
New Products
Development
Innovation
Growth
Economy
Efficiency
Economy
Product
Orientation
Service
Orientation
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Reviving Ageing Markets
Ageing economies face a “new normal” of low growth
➢ Digitalization adds efficiency to production, services, globalization
Increasingly complex business models gain from incremental innovation
➢ Digital platforms support co-creation and new services
Skill management and livelong learning become key
➢ Digital learning management puts the employee at the center
35 Copyright 2017 FUJITSU
