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Transforming Production in Europe – comparing with US Transforming Enterprise Conference Department of Commerce Washington D.C., 27 January 2003 Olli Rehn, University of Helsinki
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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
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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...
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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
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Mobile penetration in the EU
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Internet penetration in the EU
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Broadband penetration in the EU
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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
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