1. Transforming Production in Europe – comparing with US Transforming Enterprise Conference Department of Commerce Washington D.C., 27 January 2003 Olli Rehn, University of Helsinki

2. 1. Not a ”revolution”, rather a long- lasting economic transformation IT-enabled change did not begin with the internet or e- commerce – got off the ground before cf. Robert Bosch in the 1980s & Mikkelin Autotarvike cf. Alfred Chandler: a life span of an industrial revolution is not 2-5 but rather 25-50 years contemporary digital transformation will only take full effect once IT in all its senses will be part of daily activities in business, government, life e-business is primarily technology- and business-driven, but public policy can either facilitate or hinder progress

3. 2. Not mere IT, but process and managerial innovations to simplify: ”the Wal-Mart effect”; cf. EU Commission 2002: ”Wal-Mart is credited with directly causing the acceleration of labour productivity by developing a successful format based on ongoing managerial innovations and intensive use of IT.”  Forced competitors to copy Wal-Mart’s best practice Europe trails behind the US, where productivity grew fast both in industries that produce and use IT (and IT-using industries tend to be dominated by service sectors) in Europe: Finland, Ireland and Sweden match with the US productivity gorwth – all are producers of IT (EU dualism!) catch-up potential  Euro, Single Market in services...

4. 3. Yet, Europe is making progress, and its fundamentals are right Enlargement speeds up cross-national production networks: Philips: R&D of electronics to Shanghai Nokia: a global network of electronic and component producers e.g. Elcoteq (MBO 1991; est. 1984): the biggest employer in Estonia cf. Tallinn in 1983: nuclear warheads; in 2003: production outlets! Fundamentals of digital transformation: steady progrebss mobile penetration 75% internet penetration 45-50% BUT: broadband only 4%  competition in local telecom markets the European social model to be revisited: basic education and digital literacy are Europe’s strengths structural reforms needed, and revival of entrepreneurship

5. Mobile penetration in the EU

6. Internet penetration in the EU

7. Broadband penetration in the EU

8. 3. Yet, Europe is making progress, and its fundamentals are right Enlargement speeds up cross-national production networks: Philips: R&D of electronics to Shanghai Nokia: 15 major subcontractors, a global network e.g. Elcoteq (est. 1993, FIN): the biggest employer in Estonia cf. Tallinn in 1983: nuclear warheads; in 2003: production outlets! Fundamentals of digital transformation: steady progrebss mobile penetration 75% internet penetration 45-50% BUT: broadband only 4%  competition in local telecom markets the European social model to be revisited: basic education and digital literacy are Europe’s strengths structural reforms needed, and revival of entrepreneurship