MADE
SMARTER.
REVIEW 2017
2
MADE SMARTER. REVIEW 2017
8
Appendix 1
133
Digital Points of View
by Industry sector
5
Part 2
28
What are the opportunities for the UK
from Industrial Digitalisation?
9
Appendix 2
176
International Government
industrial interventions
6
Part 3
70
What is stopping the UK
achieving the IDT vision?
4
Part 1
17
Introduction to Industrial Digitalisation
7
Part 4
83
How can Industry and Government work
together to address these barriers?
3
Our Recommendations
12
2
Executive Summary
6
Becoming a global leader in
Industrial Digitalisation by 2030
1
Foreword
4
Professor Juergen Maier,
CEO Siemens UK
CONTENTS
11
Appendix 4
224
Industrial Digitalisation Benefits
Analysis Approach and Methodology
12
Appendix 5
228
Acknowledgments
10
Appendix 3
195
Overview of key IDT technologies
3
MADE SMARTER. REVIEW 2017 1
FOREWORD
PROFESSOR JUERGEN MAIER,
CEO SIEMENS UK
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MADE SMARTER. REVIEW 2017
I have been working within the British industrial sector for over thirty years, and have always
been impressed with our capabilities as a nation. But, at the same time, I have been disappointed
that we haven't reached our full potential and have left too many of the opportunities arising from
the Third Industrial Revolution to other nations.
It has therefore been an absolute honour and pleasure to lead the Made Smarter Review,
which we hope will form the basis of a sector deal and become a key pillar of the UK's emerging
Industrial Strategy. I believe that it can make a real difference in helping the UK take a much
more significant leadership role and a much greater slice of the opportunities arising from the
Fourth Industrial Revolution.
This independent review, which began in January of this year, has attracted immense enthusiasm
and a substantial contribution from the business and academic communities. In ten months,
we have engaged with well over 200 organisations across the UK, including small businesses,
leading universities, as well as global inward investors from various industrial sectors. It has
been a pleasure to work with such an experienced team of industrial leaders.
As a leadership team, we have sought to create a set of proposals that will equip the UK
with the means to fully embrace the next industrial revolution. From the outset, we were clear
that this review needed to result in some bold and far-reaching recommendations. I believe
that, with the publication of this report, we have done so. But I also believe that this review
should be seen as the start of a long journey for the UK. Our proposals don't seek to answer
every question about how we drive and embrace digitalisation. Rather, they seek to establish
the institutional framework and ecosystems that will spur the next generation of domestic
technological innovation.
The review covers multiple industrial sectors and, while this has increased its complexity, it has
made our analysis comprehensive. The business community believes the recommendations
offer a once-in-a-generation opportunity to boost productivity, create new and exciting
businesses, generate new jobs, support rising wages, and increase exports.
In the review, we have focused on the following strategic challenges: the increased pace
of adoption of industrial digital technologies, the faster innovation of these technologies,
and a need for stronger and more ambitious leadership to transform UK industry. As a result,
we have developed three game-changing recommendations (plus one support recommendation),
which can be summarised as:
Adoption. Build a national digital ecosystem that will be significantly more visible and

effective and that will accelerate the innovation and diffusion of industrial digital

technologies. This includes a National Adoption Programme to be piloted in the North
West, focused on increasing the capacity of existing growth hubs and providing more

targeted support. Critical to the success of our recommendations will be the upskilling

of a million industrial workers to enable digital technologies to be adopted and exploited

through a single Industrial Digitalisation Skills Strategy.
Innovation. Refocus the existing innovation landscape by increasing capacity and

capability through 12 Digital Innovation Hubs, 8 large-scale demonstrators, and 5 digital

research centres focused on developing new technologies as part of a new National

Innovation Programme.
Leadership. Establish a national body, the Made Smarter UK (MSUK) Commission,

comprising industry, government, academia, further education, and leading research and

innovation organisations, which would be responsible for developing the UK as a leader

in industrial digitalisation technologies and skills, with a mandate to develop the UK's

own Industry 4.0 domestic and global brand.
Foreword
Professor Juergen Maier,
CEO Siemens

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MADE SMARTER. REVIEW 2017
We have called our proposals, and the brand for this initiative, "Made Smarter". Ultimately, this
is what industrial digitalisation is all about how manufacturers can start their own industrial
revolution by using digital to make things smarter, better, and faster.
I would like to thank the business leadership team who have advised, supported, and committed
to our recommendations. I must especially thank the hundreds of you that reached out directly
to share your experiences of digitalising your businesses. Some of the most valued contributions
came from smaller businesses working at the coal face of the changing technology landscape.
I also thank the University of Cambridge and the University of Newcastle for providing academic
input, as well as the CBI, the Manufacturing Technologies Association, and the Royal Academy
of Engineering for their tremendous support. I also want to highlight key input and resources
provided by the Digital and High Value Manufacturing Catapults in support of our work. Finally,
special thanks to Accenture for providing the project management resources for this review
and for coordinating the input from numerous working groups and pieces of research to bring
together our thinking and recommendations.
We have answered the call of government to set out a vision for growth and increased productivity.
Industry is committed to working in partnership with government through a sector deal to
revive UK manufacturing, and firmly believes that only this combined package of measures,
which go beyond business as usual and historical offerings, will achieve the level of ambition
needed for the UK to be a world leader of the Fourth Industrial Revolution.
My call to action is now for government and the business community to come together and
embrace these proposals. I believe they represent a very positive agenda that we can all
get behind, especially in these times of economic and political uncertainty. Focusing on the
long-term challenge of the new industrial revolution will bring us together as a nation and
make our country more prosperous. I very much look forward to the opportunity of helping
the UK take a much stronger role in the Fourth Industrial Revolution as we get to work and
take these recommendations forward.
6
MADE SMARTER. REVIEW 2017 2
EXECUTIVE
SUMMARY
BECOMING A GLOBAL
LEADER IN INDUSTRIAL
DIGITALISATION BY 2030
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MADE SMARTER. REVIEW 2017
Becoming a Global Leader in Industrial Digitalisation by 2030
This report summarises the findings and recommendations of the Made Smarter Review
(previously referred to as the Industrial Digitalisation review), which was announced in the
Industrial Strategy Green Paper in January 2017.
With this review, UK industry has answered the call of government to set out a vision for growth
and increased productivity across the manufacturing sector by unlocking the potential of
Industrial Digital Technologies (IDTs). The review received an active contribution from more
than 200 organisations, including the Productivity Leadership Group (PLG), the Artificial
Intelligence (AI) and Robotics and Autonomous Systems (RAS) Review teams, and the Additive
Manufacturing Strategy Group.
Industry has put forward a set of recommendations that it firmly believes, if delivered as
a combined package of measures, will achieve the UK's ambition of becoming a world leader
in the Fourth Industrial Revolution by 2030. Delaying action will not only perpetuate the
current productivity challenges within UK industry, but erode the opportunity for the UK
to be an early adopter of transformational technology.
THE UK OPPORTUNITY FROM INDUSTRIAL DIGITALISATION
Digital technologies are transforming industry. In a 2017 report, the World Economic Forum
identified a $100 trillion opportunity for both industry and society through the adoption of
these technologies.1 Each day, around five million devices link up with each other, with the
internet, or with both. There are around 6.4 billion data-communicating objects in the world
today. And by 2020, this number is forecast to explode to around 20 billion.2
Emerging technology breakthroughs in fields such as AI, robotics, and the Internet of Things
are significant in their own right. However, it is the convergence of these IDTs that really
turbo-charges their impact.
The potential size of the prize is huge. IDTs offer the promise of recapturing the UK's industrial
spirit as a nation of 'creators and makers':
Raising UK productivity and international competitiveness;
Creating new, higher-paid, higher-skilled jobs that add value to society and positively

offset the displacement of poor productivity and poorly paid jobs;
Strengthening UK supply chains and creating new value streams;
Addressing regional economic disparities;
Increasing exports through competitiveness;
Creating a new vibrant technology market serving UK industry and attracting FDI;
Improving the resource efficiency of the UK's industrial base, making it more resilient to

global resource supply disruptions and reducing its environmental impact through more

efficient manufacturing and industrial processes and more optimised supply chains.
1 Digital Transformation Initiative Unlocking $100 Trillion for Business and Society




from Digital Transformation January 2017 in collaboration with Accenture
2 Industry X.0 Realizing Digital Value in Industrial Sectors- Eric Schaffer 2017
Executive summary

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MADE SMARTER. REVIEW 2017
The work undertaken for the Made Smarter Review found that the positive impact
of faster innovation and adoption of IDTs could be as much as 455 billion for UK
manufacturing over the next decade,3 increasing manufacturing sector growth between
1.5 and 3 percent per annum,4 creating a conservative estimated net gain of 175,000
jobs throughout the economy5 and reducing CO2 emissions by 4.5 percent.6 Overall, from
the data and evidence collated, we are confident that industrial productivity can be
improved by more than 25 percent by 2025.
We are clear that the faster adoption of technology will result in greater investment and
in more manufacturing taking place in the UK. For example,
The automation of manufacturing processes, coupled with real-time process monitoring

and re-engineering, can result in radical improvements in cost efficiency and accuracy,

allowing work to move back to the UK from low-wage economies and strengthening UK

supply chains;
Technologies such as additive manufacturing can fundamentally change the supply chain,

and mean that competitive advantages afforded by high volumes and low labour costs

are replaced by advantages like proximity to market and the opportunities to make products

unique to each customer.
These technologies will deliver multiplier effects, creating new businesses and jobs

throughout the UK economy. These effects include:
The potential for new industries and services to be created by harnessing the data and

insights flowing from digital technologies, including real-time management of assets such

as trains, jet engines or wind turbines;
The opportunity for the UK to be a leader in the development of digital technologies

themselves, in areas of strength such as artificial intelligence, blockchain and virtual reality;
The need for support for this new economy from new and improved services and

infrastructure in areas like cybersecurity, fibre networks, 5G, and remote monitoring.

CAN THE UK BECOME A LEADER IN IDT?
The UK already has a strong combination of leading-edge R&D and a number of high-
performing sectors in the application of digitalisation in design, manufacturing, and
servitisation. For example,
Aerospace is already supporting the development and adoption of the specific technologies
which will define the industrial digitalisation revolution, including additive manufacturing,

collaborative robots, AI, data analytics, and virtual and augmented reality (VR and AR).
Manufacturers such as Unilever and AB sugar are leaders in the application of IDT to

address sustainability. Within the food and drink sector the UK is seen as a global leader

in refrigeration monitoring systems via the IoT and in food safety and traceability systems.
The UK has the strongest AI and machine learning market in Europe, with over 200 SMEs

in the field (compared to just 81 in Germany and 50 in both the Nordics and France).

The UK is investing significantly in key areas of infrastructure like renewables (owing to
strong incentivisation in this sector), which provides an opportunity to stimulate the creation
of new local supply chains with a high rate of IDT adoption.
3 ACCENTURE REPORT: 2017 Industrial Digitalisation Review Benefits Analysis.
4 BCG; Is UK Industry ready for the Fourth Industrial Revolution. Jan 2017
5 MSR working group report on jobs and the economy
6 MSR sustainability working group report
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MADE SMARTER. REVIEW 2017
But the adoption and application of technology is not consistent across all industrial
sectors. Although the UK is well placed to do so thanks to its rapidly growing digital sector,
it is not currently capitalising on that potential advantage by applying these technologies
in a coordinated and strategic way in an industrial setting.
We see an opportunity for the UK to differentiate itself in this digital industrial revolution.
The relatively flexible and competitive UK labour market has allowed many companies
to achieve world-class productivity at lower levels of automation. This will provide an even
stronger competitive advantage with Industry 4.0 technologies like 'cobots', where humans
work in harmony with advanced technologies to create highly agile businesses attuned
to the changing needs of their customers.
But, other countries are stealing a march on the UK. There are coherent government strategies
in place in most developed countries, for example in Germany (Industrie 4.0), China (Made in
China 2025), and the USA (America Makes). So, the UK needs to act quickly if it is to harness
the potential of this agenda.
WHAT IS PREVENTING THE UK FROM FULLY ACHIEVING THIS VISION?
The Made Smarter Review has identified three themes which are limiting the UK's ability
to achieve its potential:
1. Lack of effective leadership of industrial digitalisation in the UK
There is no clear narrative setting out what the UK already does well or the significant

opportunity for UK industry and the country from the faster development and adoption

of IDTs;
There is no cross-sector national leadership providing market-focused strategic vision,

direction, and co-ordination, so that the UK can maximise opportunities and set out a clear

approach and offer for foreign investors.
Without that clear vision and narrative the UK is failing to inspire current and future workers
with a vision of how they can secure high-quality jobs in a thriving part of the economy.
The UK has centres of technical expertise, including world-class research centres and

the Catapult network, but its capability is fragmented with no coordination for the effective

diffusion of these technologies.

2. Poor levels of adoption, particularly among SMEs
The UK is behind other advanced nations in overall productivity (output per worker),
which is in part due to lower levels of adoption of digital and automation technology.1
This is particularly acute among SMEs.
One of the identified causes is an ineffective and confused landscape of business support,
with no clear route to access help and ambiguity about what 'good' looks like.
SMEs, in particular, perceive significant barriers to adoption, such as risks around

cybersecurity, and a lack of common standards allowing different technologies to connect.
Unlike other developed nations, the UK's tax system is not targeted enough to incentivise

the opportunity.
Businesses also face a skills shortage, particularly in digital engineering capabilities, and

are hindered by a fragmented skills system and a lack of systematic engagement between

education and industry.
1 IFT; World Robotics Report. 2016
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MADE SMARTER. REVIEW 2017
3. Under-leveraged innovation assets to support start-ups/scale-ups
The UK is a leader in research and innovation and has started to establish a support

infrastructure to develop and commercialise technology. However, these innovation assets

are under-leveraged and not focused enough on supporting IDT start-ups, meaning the UK

is falling behind in creating new innovative companies and industries.

HOW CAN INDUSTRY AND GOVERNMENT WORK
TOGETHER TO ADDRESS THESE BARRIERS?
To properly address these barriers, industry and government should focus their efforts on the
same themes. The Made Smarter Review identified the need for the following new approaches,
which form the basis of our recommendations.
Stronger leadership a UK approach
We want to inspire the UK's next industrial revolution and make it a leader in the creation

and adoption of IDTs by providing a clear vision, strategy, marketing, and messaging of the
UK's ambition.
Rapid adoption raising our game
We want to see more widespread and rapid adoption of IDTs by manufacturers (especially

SMEs), and across their supply chains, through the creation of a significantly more


visible and effective ecosystem that will accelerate the innovation and diffusion of

the technologies.
We must upskill our industrial workers in the use of IDTs by standardising and simplifying

the way in which quality training and education can be accessed.
We need to further incentivise IDT adoption by creating clear UK standards for digital

industries and targeted fiscal incentives.
Innovation securing value in the UK
We need to drive forward a more rapid development and scaling of key IDTs, such as additive
manufacturing and AI, and create new IDT companies, value streams and capabilities by

leveraging our research strengths and innovation assets.
STRATEGIC GOALS OF THE INDUSTRIAL DIGITISATION REVIEW
Adoption
Create active
promotion and support
mechanisms on a
National Scale
Leadership
Project the UK as an
international leader,
leveraging our
technological
leadership
Innovation
Leverage UK's World
Class research and
entrepreneurial strengths.
Promoting innovation
and early stage
adoption
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MADE SMARTER. REVIEW 2017
In summary, industrial digitalisation is a massive opportunity for UK industry
and the wider economy. But the technologies that underpin it are also highly
disruptive, requiring business to be innovative, agile and adaptable. Industry and
government will need to work in partnership to provide the infrastructure and
ecosystems that can enable manufacturing businesses and their supply chains
to maximise these opportunities and be competitive. Get it wrong, and we risk
further de-industrialising our economy, and becoming ever more reliant on imports.
Get it right, and we will have found the key to rebalancing and strengthening
our economy, creating many new, exciting, and well-paid jobs, and leading a
renaissance for the UK as a true nation of creators and makers.
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MADE SMARTER. REVIEW 2017 3
OUR
RECOMMENDATIONS
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MADE SMARTER. REVIEW 2017
Recommendation
Strategic outcome
Recommendation 1.0
Create a much more visible and effective digital ecosystem to accelerate the innovation and diffusion of Industrial
Digital Technologies (IDTs)
RECOMMENDATION 1.1
Invest in a new National Adoption Programme (NAP). This would accelerate
the development and diffusion of IDT through focused support to small and
medium-sized enterprises in the UK regions. The programme will be owned
at a regional level by Local Enterprise Partnerships (LEPs) and delivered by
accredited regional partners. Investment will be targeted at strengthening both
the capability and capacity of regional advisory services in digital technologies.
It will provide kick-start funding for companies to leverage assets and expertise
within the ecosystem. It will also increase the mentoring offered by industry
and strengthen the interaction with upcoming talent within universities through
focused projects and placements.
North West pilot
Increase GVA by 15% over a
3-year period delivering an
estimated 70 million benefit.
20 emerging technology start-
ups working directly with
industry on new projects.
National rollout
GVA increase 770 million.
220 emerging technology
start-ups.
RECOMMENDATION 1.2
Scale the support provided by UK innovation centres through a new national
innovation programme. This would bring together a network of existing
distributed Digital Innovation Hubs (DIHs), strategically selected to best serve
the challenges of each local business community. It will demonstrate, with
industry participation, how the industrial and manufacturing sector can be
positively transformed by IDTs.
20,000 businesses supported
by DIH





Increase in GVA by 1.2bn
40 new Digital Innovator
spin outs





Increase in R&D investment
>400m,
RECOMMENDATION 1.3
Implement large-scale Digital Transformational Demonstrator programmes
within the DIHs, co-funded by industry. These would address both sector-
specific and key cross-cutting industry challenges and be focused on delivering
tangible results in both productivity and sustainability. The demonstrators
would be regionally organised and, together with the National Adoption
Programme (Recommendation 1.1), would provide a key accelerator for the
diffusion of IDTs especially within SMEs.
RECOMMENDATION 1.4
Drive forward the UK's global IDT research and development leadership.
Create a network of Digital Research Centres (DRCs) to bring together
the country's expertise in, initially, five areas:
1. Artificial intelligence, machine learning and data analytics;
2. Additive manufacturing;
3. Robotics and Automation;
4. Virtual reality and augmented reality;
5. The Industrial Internet of Things (IIoT) and connectivity (5G, LPWAN etc.)
Each DRC would be tasked with advancing state-of-the-art research and
innovation for industrial digitalisation in its technology field. The network
of DRCs would build on the excellence and infrastructure in the existing UK
science and innovation base and work with the tech developer community to
drive UK leadership in the technologies that underpin industrial digitalisation.
OUR RECOMMENDATIONS
In this report, we make three game-changing recommendations and one support recommendation. These four
recommendations come together as a package and create a strategy for the medium to long term that will ensure that
"By 2030, the UK will be a global industrial leader in creating, adopting and exporting advanced digital technologies,
shaping how the world does business''.
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MADE SMARTER. REVIEW 2017
Recommendation
Strategic outcome
Recommendation 2.0
Upskill a million industrial workers to enable digital technologies to be successfully exploited
RECOMMENDATION 2.1
Create a single national Skills Strategy and Implementation Group (SSIG)
under the governance of the Made Smarter UK Commission (MSUK). This group
would act as a focal point for the engagement of industry and provide a forum
for identifying future skills requirements, synchronising and focusing existing
initiatives, and ensuring quality and consistency through a kite-marking
mechanism.
1 million workers re-skilled or
upskilled over the next 5 years.




At least 200,000 users
completing level 3/ 4
certification per year





Delivery of a platform which
provides modular, up-to-date,
relevant and accessible content
for online and blended up-
skilling and re-skilling





100,000 employees enrolled in
training incentivisation scheme
in year 1.
RECOMMENDATION 2.2
Establish a modern digital delivery platform providing scalable, relevant,
timely and easily 'digestible' content for upskilling and reskilling. This would
enable all companies, but particularly SMEs, to play their part in the Fourth
Industrial Revolution, with incentives and networks in place to drive adoption.
RECOMMENDATION 2.3
Establish an incentivised programme, co-funded by industry and government,
to improve digital skills capabilities. Under the guidance of the SSIG
(Recommendation 2.1) and using the digital delivery platform (Recommendation
2.2), the programme would take the form of personal training and reskilling
allowances which would be targeted at:
Individuals whose jobs are being displaced by automation;
Workers whose skillsets need to evolve to next-generation capabilities
(e.g. the use of additive manufacturing technology or artificial intelligence);
Providing leading skills in all organisations (e.g. the digital engineer of
the future).
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MADE SMARTER. REVIEW 2017
Recommendation
Strategic outcome
Recommendation 3.0
Inspire the UK's next industrial revolution with stronger leadership and branding of the country's ambition
to be a global pioneer in IDTs
RECOMMENDATION 3.1:
Establish a major national brand campaign, delivered by both government and
industry, to significantly increase awareness of how new digital technologies
can transform industry. Delivered within a wider support framework, the
campaign would promote the adoption of digital technologies (especially
among SMEs), address negative preconceptions that IDT is expensive and risky,
and inspire current and future workers with a vision of how they can secure
high-quality jobs in a thriving part of the economy.
Increased awareness of
digitalisation in year one
(as measured by YouGov poll)
by 20%
36,000 additional
manufacturing SMEs accessing
support from Growth Hubs
RECOMMENDATION 3.2
Establish a Made Smarter UK Commission (MSUK). This would be a national
body, comprising industry, government, academia and leading research and
innovation organisations, responsible for developing the UK as a leader in
IDT. With a chair from industry and a Ministerial co-chair this publicprivate
partnership would provide a market-focused view on IDT priorities, and ensure
the faster innovation, adoption and diffusion of IDT to drive maximum value
for the UK economy. The MSUK Commission would establish and govern
a more visible and better-organised ecosystem that will deliver business
transformation through innovation (see Recommendation 1).

Strong and enduring Industry
& Government partnership
established providing
leadership for Made Smarter
RECOMMENDATION 3.3
Set up interim Strategy and Support Implementation Groups (SSIGs) to be
responsible for the delivery of the MSR recommendations. These SSIGs would
comprise industry, government and academia, and would be accountable to the
MSUK Commission.
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MADE SMARTER. REVIEW 2017
Recommendation
Strategic outcome
Recommendation 4.0
Address the key barriers preventing adoption of IDTs
RECOMMENDATION 4.1
Implement a Standards Development Programme (including cyber-awareness
and best practice) for emerging digital industries to promote the greater
interoperability of IDTs. The creation of standards is known to be an effective
way of promoting adoption, by providing confidence and assurance to
businesses that use them. This programme would develop both generic and
sector-specific standards for IDTs, and would be led by BSI in partnership
with industry, the research community, government bodies and regulators.
The resulting standards would then be promoted internationally through BSI's
membership of CEN, CENELEC, ISO, and IEC.
Creation and
internationalisation of key IDT
standards (including 5 priorities
identified) by 2020
Adoption of New Standards
>10,000 firms
RECOMMENDATION 4.2
Implement targeted financial incentives to promote the development and
adoption of IDTs. This would include:
Enhanced capital allowances in the first year of IDT investments,
Broadening the R&D Tax Credit system to include IDT,
An increase in the write-down allowance for specific technologies, and
Working with the British Business Bank to develop policies or programmes
to encourage the adoption of IDT and facilitate the financing of suitably
qualified projects as appropriate.
Increased level of investment*
in IDT >20%
RECOMMENDATION 4.3
Develop data trusts to overcome one of the biggest inhibitors in exploiting
IDT in manufacturing: a reluctance to share data. We strongly endorse
the recommendations of the UK government's AI review which proposes a
government and industry programme to develop data trusts proven and
trusted frameworks and agreements and ensure data exchanges are secure
and mutually beneficial.

Aim is to develop data trusts in
5 key high value sectors in the
first year, which could include
Aerospace, Automotive and
Pharmaceuticals.
*Additional investment achieved will be determined by the level of
incentivisation. The figure quoted is based on evidence from Italy.
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MADE SMARTER. REVIEW 2017
PART 1
INTRODUCTION
TO INDUSTRIAL
DIGITALISATION
4
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MADE SMARTER. REVIEW 2017
What is industrial digitalisation?
At its simplest, industrial digitalisation is the application of digital tools and technologies
to the value chains of businesses who make things (e.g. in the automotive and construction
industries) or are otherwise operationally asset intensive (e.g. power grids and wind farms).
These technologies enable the physical and digital worlds to be merged, and can bring
significant enhancements to performance and productivity.
We call these technologies industrial digitalisation technologies (IDTs). They come in various
forms and various levels of maturity, ranging across artificial intelligence, the Internet of
Things, robotics, and analytics. Together, they are driving what is being called the Fourth
Industrial Revolution. And it's the integration of these digital and physical technologies into
production and logistics that is the key to this revolution. It is this that spurs new businesses
to form, increases speed to market, integrates and strengthens supply chains, and realises
productivity gains. IDTs are also disruptive, forcing companies to adapt to customer-centric
business models, and offer personalised products through mass customisation and
enhanced services.
The term industrial revolution is used to signify a significant change in technology that drives a
seismic change in industrial processes, output and productivity. The First Industrial Revolution
was triggered by the introduction of the steam engine and the mechanisation of manual work
in the 18th century, while electrified mass production drove the Second Industrial Revolution in
the early 20th century. The Third Industrial Revolution followed more recently when electronics
and computer technology began to automate manufacturing and production.
The Fourth Industrial Revolution also known as Industry 4.0 is now upon us. It is
characterised by a fusion of technologies that are blurring the lines between the physical,
digital, and biological spheres. What distinguishes this revolution from its predecessors
PHYSICAL PRODUCTS IN PHYSICAL SPACE
DIGITAL PRODUCTS IN VIRTUAL SPACE
E.G. SENSORS & BIG DATA
E.G. ADDITIVE MANUFACTURE & AUGMENTED REALITY
Figure 1
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MADE SMARTER. REVIEW 2017
is the speed of technological breakthroughs this has no historical precedent. The World
Economic Forum (WEF) has shown that, when compared with previous industrial revolutions,
this one is evolving at an exponential rather than a linear pace. Moreover, it is disrupting
almost every industry in every country. And the breadth and depth of these changes herald
the transformation of entire systems of production, management, and governance.2 Exploiting
technology breakthroughs in fields such as artificial intelligence, robotics, and the Internet
of Things is significant on its own. But what really turbo-charges the impact is seeing them
work in concert.
WHAT IS THE OPPORTUNITY FROM INDUSTRIAL DIGITALISATION?
IDTs are key to both improving prosperity and reducing the environmental impact of industry.
What's more, improved productivity will bring numerous second-order effects. Increased
revenues will enable businesses to pay higher wages, which will have multiplier effects on
other sectors of the economy. Improved competitiveness will lead to growth, increased sales,
greater exports and, thus, increased employment. The cost advantage of low-wage economies
will be reduced and, when coupled with the ability to produce ever-more customised products,
companies will be encouraged to re-shore activities and locate closer to their domestic markets.
Digital technologies will create new forms of higher-paid employment as many new roles
emerge that previously did not exist. Tech City UK estimates that the digital sectors are
creating jobs 2.8 times faster than the rest of the economy. The 'tech sector' now represents
6 percent of the UK economy with an estimated GVA per person in the region of 91,800
well above the UK average. The average advertised salary in digital roles is just under 50,000,
36 percent higher than the national average.
IDTs can improve the resource efficiency of industrial processes. That creates an opportunity
to reduce UK resource costs by 10 billion, and offer novel solutions such as improved grid
management currently valued at over 2 billion. IDTs can perform a crucial role in developing
a resilient UK industrial base that can ride out increasingly frequent disruptions in resource
availability, as well as making the UK industrial system more sustainable over the long-term
in a post-Brexit context.
The positive impact of IDTs on the UK economy over the next decade could be as high
as 455 billion for UK manufacturing,3 increasing manufacturing sector growth between
1.5 and 3 percent per annum.4 The effect: a conservative estimated net gain of 175,000
jobs5 throughout the economy and a reduction in CO2 emissions by 4.5 percent.6 Overall,
from the data and evidence collated, we are confident that IDTs can improve industrial
productivity by more than 25 percent.

However, our review addresses more than manufacturing. If we consider the impact on
asset-intensive industries such as utilities (e.g. oil production) together with the blurring of
manufacturing outputs which are increasingly sold as services, the opportunities for the UK
economy are considerably magnified.
2 The Fourth Industrial Revolution: what it means, how to respond World Economic Forum
3 ACCENTURE REPORT: 2017 Industrial Digitalisation Review Benefits Analysis.
4 BCG, Is UK Industry ready for the Fourth Industrial Revolution, Jan 2017
5 MSR working group report on jobs and the economy
6 MSR sustainability working group report
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MADE SMARTER. REVIEW 2017
Indeed, digital technologies have the potential to add US$14.2 trillion to the world economy
over the next 15 years.7 The global market opportunity is significant:
Internet of Things (expected to reach $7.3 trillion by 2017)
Wearable technologies (expected to reach $70 billion by 2024)
Big Data and data analytics (expected to reach $32.4 billion by 2017)
5G and associated wireless technologies (expecting a 40-fold increase by 2018)
Robotics (expecting to reach $29 billion by 2018)
Autonomous vehicles (expecting to reach $28 billion by 2020)
Advanced manufacturing, building automation (expected to reach $49.5 billion by 2018)8
What threats and challenges does digitalisation bring?

Summary box of threats and challenges

UK manufacturing as a share of the UK economy has been in decline over the last two
decades. Digitalisation is an opportunity to reverse that trend. But it brings with it a
number of threats and challenges, including:
Competitive threats
Displacement of manufacturing roles
Cybersecurity
Data and privacy
IP Theft
These challenges must be overcome by industry and government working in
partnership if the UK is to increase its manufacturing growth and productivity
in the years to come.
While almost all developed or developing companies have seen a decline in manufacturing
as a proportion of their economies in the last two decades, it has been most marked in the
case of the UK. Here, manufacturing has fallen from nearly 20 percent of the economy in 1990
to just 10 percent in 2015. And UK manufacturing output, although fairly steady, is still below
its pre-recession real-terms peak in 2007.












7 Accenture, The Growth Game-Changer: How the Industrial Internet of Things can drive progress and prosperity
8 House of Commons Science and Technology Committee. Digital skills crisis second report of Session 2016-17
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MADE SMARTER. REVIEW 2017

Why has this decline occurred? Outsourcing, a loss of capability, increased use of technology,
and international competition have all played their part. Manufactured goods are usually more
highly tradeable than services and more vulnerable to competitive pressures. This, combined
with higher levels of technological innovation, drives down global prices for manufactured
goods particularly high-volume, mass-produced goods faster than for services. That, in
turn, leads to relatively lower growth in manufacturing sales values compared with services.
In practice, it means high-volume, mass-production manufacturing sectors must achieve real
growth every year, just to keep their existing share of the overall economy.
Digitalisation offers the promise of reversing this trend. But it brings its own risks. This report
explores some of the most challenging:
COMPETITIVE THREATS
Other countries are taking steps to create industrial digital leaders and promote the early
adoption of IDTs. This poses a threat to the competitiveness of UK manufacturing.
Changing customer demand requires manufacturers to be flexible enough to produce at both
low and high volume while keeping costs low. They can do so by using digital technology to
capture and exploit data, leading to highly flexible and reconfigurable production processes,
optimised energy management, and end-to-end supply chain efficiency.
0
5
10
15
20
25
30
35
% GDP
MANUFACTURING AS A % OF GDP
Source: UNCTAD International Trade Database
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
China
India
Korea, Republic of
United States
France
Italy
Singapore
EU27 (European Union 27)
Germany
Japan
United Kingdom
G7 (Group of Seven)
Figure 2
22
MADE SMARTER. REVIEW 2017
Thus digital is quickly becoming the entry standard for competitive companies. Increasingly,
manufacturers will need to model themselves on digital exemplars if they want to win new
business. Those that fail to do so are likely to be crowded out of an increasingly
competitive market.
Digital technology also lowers barriers to entry. As supply chains become more connected
and 'transparent', opportunities will open for newcomers to develop their own virtual supply
chains. Good ideas with good design can be turned into a market opportunity without the need
for expensive capital assets and factory capacity. New entrants, unencumbered by legacy
business models and assets, will be able to scale up more cheaply and get their products
to market at a faster pace.
Some countries and their manufacturers have already recognised that digital manufacturing
can improve productivity and enhance competitiveness. Those that fail to adapt their processes
to satisfy ever more demanding customers run the risk of being overtaken by the competition.
THE DISPLACEMENT OF OCCUPATIONS AND THE NEED FOR NEW SKILLS
That IDTs could lead to improved productivity, a safer work environment and improved job
satisfaction through the replacement of repetitive tasks is in little doubt. But, while human
judgment and decision making will always have a role to play, it is equally likely that IDTs will
change, disrupt, and displace some manufacturing jobs.
The UK manufacturing workforce has fallen from a high of 9.1 million in 1966 to 2.7 million
today. And the types of jobs that workforce does have changed too. Employees are now more
highly skilled, partly as a result of the greater use of technology. The digital revolution is now
set to change the nature of those manufacturing jobs even further, especially if the UK is to
catch up with its international competitors in the use of industrial robots.
The World Bank reported in 2015 that the UK will need 745,000 additional workers with digital
skills between 2013 and 2017 to meet rising demand from employers. It also said that almost
90 percent of new jobs will require digital skills to some degree.9 The manufacturing sector is
not immune to this.
There are concerns from the public, government, and industry about the potential loss of jobs
resulting from the digitalisation of manufacturing. According to one US study, up to 47 percent
of jobs are at high risk from automation.10 But there is a great deal of uncertainty surrounding
these kinds of estimations. For example, the Made Smarter Review painted a much more
positive picture of the effect of digitalisation and the resulting creation of new jobs. The main
threat lies in whether the UK can equip manufacturing workers with the new digital skills that
they will require in the future.
Increasingly, manufacturers will compete on their ability to create value through the smart use
of IDTs. Employees will be hired for knowledge-based production roles, rather than manual
work.11 These changes will come within an already challenging recruitment environment
for engineers and software and data scientists. Manufacturers, just like employers in other
sectors, should embrace and integrate digital within their business and workforce strategies
to both retrain their workforces and create the new digital-focused roles that will support the
digital health and competitiveness of the business.
9 The Effects of Technology on Employment and Implications for Public Employment Services, The World Bank
Group, Report prepared for the G20 Employment Working Group Meeting Istanbul, Turkey, 6-8 May 2015
10 2013 paper, The Future of Employment
11 Foresight: The Future of Manufacturing
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MADE SMARTER. REVIEW 2017
CYBERSECURITY
Seamless digital communication via the internet, mobile and cloud brings many benefits
to manufacturers, but comes with increased security risks. CISCO's 2017 cybersecurity
report12 highlights some of the reasons why manufacturing is particularly vulnerable: legacy
equipment or industrial IoT devices built with minimal or no security in mind; gaps between IT
and Operations Technology (OT); patchwork architectures increasing risk and vulnerabilities
as networks converge; a lack of documented training, processes, and procedures that outline
responsibilities and access; and a failure to conduct risk assessments.
The report sets out the resulting impact:
28 percent of manufacturers across 13 countries reported a loss of revenue due to

cyberattacks in the past year (the average lost revenue was 14 percent).
46 percent of manufacturers use six or more security vendors (20 percent using more

than ten). 63 percent use six or more products (30 percent using more than ten).
Nearly 60 percent of manufacturers report having fewer than 30 employees dedicated

to security, while 25 percent consider a lack of trained personnel as a major obstacle

in adopting advanced security processes and technology.
Many leading manufacturers are implementing multiple levels of security to ensure that
they do not succumb to security breaches. But all must recognise the necessity of acting
fast to improve the quality of their security infrastructure or risk being exposed to ever
more frequent cyberattacks.
DATA AND PRIVACY
Data is currency in the digital age. And that makes manufacturing potentially rich
it generates more data than many other sectors in the economy. The ubiquitous nature of
sensors (increasingly available at lower costs) means that data generation and capture is
now highly accessible to small and large manufacturers alike. But, as ever more information
and instructions are shared electronically directly between companies or across cloud
applications and saved in different locations, it becomes increasingly challenging to ensure
that the information on which decisions are being made is accurate and up to date.
Privacy becomes a greater challenge too. All companies have information they wish to keep
secret. But, as value chains become more digitally integrated, information that was previously
only available within an organisation might become more readily available to others. The risk of
disclosure to unauthorised parties therefore represents an increasing concern to manufacturers.
Data accuracy is another major concern. Greater connectivity could make it more difficult for
a manufacturer to ensure its data is not modified by unauthorised parties. So, for example,
if information about order quantities or process specifications is altered by a third party, the
impact for the company could prove very costly in terms of quality, time, and, potentially, safety.
Risks can also arise if information is not available to the right people at the right time. Any
temporary or extended loss of access to key databases can have a major impact, not only
within an organisation but also on its clients and suppliers. In the same way that losing access
to our emails would interfere with our daily work, a manufacturer losing access to critical data
could create serious disruption to the continuity of operations across entire supply chains.
12 CISCO Midyear Cybersecurity Report (MCR),
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MADE SMARTER. REVIEW 2017
INTELLECTUAL PROPERTY (IP) AND DIGITAL PIRACY
Digital piracy is becoming low cost and anonymous. As a result, there is an ever greater risk
associated with a manufacturer's IP. Given that IP can constitute more than 80 percent of
a single company's value,13 and is key to competitiveness, it is understandable why it is such
a valuable target for theft.
Digitalisation can increase the risk. Because the IP exists as data rather than hard copy
information, its loss can easily go undiscovered. In addition, while advanced 3D measurement,
digital modelling and rapid prototyping technologies enable improved product and process
development, they also facilitate reverse engineering, cloning and the production of
counterfeit products.14
A manufacturer's approach to IP protection should be considered as part of a wider
cybersecurity strategy. The ambition should be to retain a competitive edge while remaining
responsive and flexible so as not to stifle innovation.
13 Ocean Tomo, 2015 annual study of intangible asset market value, 5 March 2015
14 Foresight: Future of Manufacturing
25
MADE SMARTER. REVIEW 2017
What is the scope of this review?
Assessing the impact of IDTs on the UK economy, in terms of both creators and adopters, is a
very broad endeavour. With that in mind, this review focuses on areas not covered elsewhere
(see Figure 3 for an overview). For example, it does not set out to discuss the adoption of
digital technologies in health and life sciences which was included within the scope of work
being undertaken by Sir John Bell. The review acknowledges various specific studies that are
underway, and seeks to contextualise and build on their findings rather than replace them.
These studies include the Artificial Intelligence Review being undertaken by Dame Wendy Hall
and Jrme Pesenti, and the work of Digital 4 Industry and the AM strategy.


The review nevertheless considers a broad spectrum of IDTs and a wide view of industrial
sectors covering low, medium and high-tech manufacturing and construction. For ease
of analysis the IDTs considered have been grouped into the following families:
Artificial intelligence, machine learning and data analytics,
Additive manufacturing,
Robotics and automation,
Virtual reality and augmented reality,
The Industrial Internet of Things (IIoT) and connectivity (5G, LPWAN, etc.)
SCOPE OF THE REVIEW
The scope of the review spans key technologies across the industrial sectors (inlcuding both creators and adopters)
2017 Accenture. All rights reserved
4th industrial
revolution based
on cyber-physical
production systems
Industry 4.0
TECHNOLOGY SCOPE
INDUSTRY SCOPE
Sector
Low & Med
Tech Mfg.
Industries
4.0
DIGITAL
PHYSICAL
SYSTEMS
Industry 3.0
Industry 2.0
Industry 1.0
Project scope based on the UK standard Industrial
classification of economic activities (UKSIC):
Robotics and process control automation
Industrial Internet of Things
Additive manufacturing e.g. 3D printing
Augmented and virtual reality
Simulation
Data and systems integration
Big data and analytics
Industrial security
Cognitive computing and artificial intelligence
Mobility and wearables
Cloud based platforms
Food,Beverages and Tobacco
Metals, Plastics and non-mineral products
Shipbuilding
Other manufacturing
Med & High
Tech Mfg.
Chemicals
ICT & Precision Instruments
Automotive
Aerospace
Machinery, Electrical and Transport
Equipment
Pharmaceuticals
Other
Production
Agriculture and Forestry
Mining and Quarrying
Utilities
Construction
Knowledge
Services
Digital services
Figure 3
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MADE SMARTER. REVIEW 2017
How was the report developed?
The review underpinning this report was led by a diverse group of organisations, including some
of the UK's most prominent and established companies, start-ups and research organisations
(see Appendix 5). A series of working groups comprising industrial companies were tasked with
reviewing the opportunities and challenges of IDTs from a sectoral, geographical or technological
perspective (see Figure 4). These focused reviews were used to develop a series of cross-cutting
themes which, again, involved wide industrial participation. Our aim was to ensure the
recommendations resulting from the review were ambitious and transformational, as well
as practical so they can quickly be turned into action.
SoS for Business, Energy and Industrial Strategy Greg Clark
Sponsor: Minister of State for Business, Energy and Industrial Strategy Claire Perry
Which technologies?
Which sectors?
Productivity Leadership Group
"Be the Business"
MSR Leadership Team
Horizontal working groups
NTJ = Jobs created due to New Technology
PJ = Jobs created due to Productivity Growth
DJ = Jobs displaced
MSR Government
Partnership Group
Offshore Wind
Newcastle
University
THEME 1
THEME 2
THEME 3
THEME 4
THEME 5
Skills
Phil Smith (CISCO)
Regulatory & Policy
Peter Stephens (Nissan)
Barriers & Delivery Mechanisms and adoption
Grace Gould (Local Globe), Marcus Burton (Mazak)
International Benchmarking
Accenture, Siemens
Job creation quantification: Growth vs Displacement
University of Cambridge, MTA, GAMBICA
Identification, attracting, development, enhancing etc.
Government interventions
Security, access to funding, institutional, societal, catapults, ecosystems,
access to best practice etc.
Lessons learned, comparative advantage, opportunities for
collaboration etc.
NTJ + PJ > DJ (and assessment to what level NTJ are better qualified and
paid than DJ)
Construction
Atkins
Food & Drink
ABB
Aerospace
ATI
Integrated
supply chain
Aero & Auto
Auto &
E-mobility
JLR
Pharma
GSK
Textile
HVM
Artificial
Intelligence
IBM
Robotics
Elec-tech
council
Additive
manufacture
Atos/GKN
Case study
working
groups*
Industry groups and councilsWhat benefits?
Economic opportunities?
Interim review and final recommendations:
Opportunities to create new companies
Employment etc
TEAM STRUCTURE
200 Organisations mobilised providing sector/technology/regional insight into key themes
Figure 4
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MADE SMARTER. REVIEW 2017
Structure of this report
The findings of the review have been structured to address three simple questions:
1) What are the opportunities for the UK from industrial digitalisation?
In this section we examine why IDT is important to the UK and assess the impact
on productivity, jobs and the environment. We ask:
Can IDT kick-start productivity?
Will IDT create or destroy jobs?
Can IDT help create a resource efficient, sustainable and resilient economy?
We review the opportunities to industry of adopting key IDTs and assess how the UK
is positioned to lead in their development and exploitation.
2) What is stopping the UK achieving the IDT vision?
In this section we examine the blockers to the UK becoming a leader in the development and
adoption of IDT. These are discussed in relation to the key themes identified in the review
leadership, adoption and innovation.
3) How can industry and government work together to address these barriers?
Finally, we examine the actions required to ensure the UK is a global IDT leader by 2030.
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MADE SMARTER. REVIEW 2017
PART 2
WHAT ARE THE
OPPORTUNITIES
FOR THE UK FROM
INDUSTRIAL
DIGITALISATION?
5
29
MADE SMARTER. REVIEW 2017
Part 2 What are the opportunities for
the UK from industrial digitalisation?
The UK has a range of strengths which give us confidence that it can realise the opportunities
of industrial digitalisation. It has a combination of leading-edge R&D and high-performing
sectors in the application of digitalisation to product design and manufacturing. More recently,
it has pioneered the use of digital technology to enable servitisation (the shift from selling
'products' to offering 'services').
Aerospace is a good example of the UK's strengths. This sector is already supporting the
development and adoption of the specific technologies which will define the new industrial
digitalisation revolution: additive manufacturing, collaborative robots, artificial intelligence
(AI), data analytics, and virtual and augmented reality (VR and AR).
We can also see UK leadership in the application of IDT to address sustainability in
manufacturing evident in companies such as Unilever, Toyota in Derby, AB Sugar, and in many
start-ups around the country. In the food and drink sector, the UK is seen as a global leader in
refrigeration monitoring systems via the IoT, as well as in food safety and traceability systems.
And a 2015 Accenture study found that UK energy and pharmaceuticals businesses were
industry leaders in digitalisation within their sectors.15
Additionally, the UK is investing significantly in key areas of infrastructure such as renewables
(owing to strong incentivisation within this sector), providing an opportunity to stimulate new
local supply chains with a high rate of IDT adoption.
The UK is especially strong in digital and technology and has a thriving start-up ecosystem
in IDTs such as AI, blockchain and additive manufacturing. Indeed, the UK has the strongest AI
and machine learning market in Europe with over 200 SMEs (compared to just 81 in Germany
and 50 in both the Nordic countries and France).
It has a number of successful tech companies which have attracted foreign direct investment,
including: ARM Holdings (acquired by Softbank for 24.3 billion who have committed to
doubling headcount in the UK), Magic Pony (acquired by Twitter for $150 million), Skyscanner
(acquired by Ctrip for $1.7 billion), and SwiftKey (acquired by Microsoft for $250 million).
And the UK's FinTech sector is generating huge revenues and attracting large investments
(6.6 billion in revenue and over 500 million of investment in 2015), disrupting established
processes and changing the ways that consumers interact with financial services as it does so.
However, the UK is not yet capitalising on its rapidly growing digital sector by applying these
technologies in an industrial setting. This needs to change. We see IDTs providing a significant
opportunity to the UK's industrial economy. They represent a powerful opportunity to recapture
the UK's industrial spirit as a nation of 'creators and makers' by:
Raising UK productivity and international competitiveness;
Creating new, higher-paid, higher-skilled jobs that add value to society and positively

offset the displacement of poor productivity and poorly paid jobs;
Increasing exports through competitiveness;

Creating a new vibrant technology market serving UK industry and attracting
foreign investment;
Improving the resource efficiency of the UK's industrial base, making it more resilient

to global resource supply disruptions;
15 Smart Service Welt Recommendation for Strategic Initiative Web Based Services for Services
30
MADE SMARTER. REVIEW 2017
reducing environmental impacts through more efficient manufacturing and industrial

processes and optimised supply chains.
CAN IDTS KICK-START PRODUCTIVITY?
THE PRODUCTIVITY PUZZLE
Productivity is the most important determinant of the standard of living of a nation. Increases
in productivity levels are essential to improving economic growth and social prosperity. While
productivity growth has slowed in almost all advanced economies since the financial crisis,
the UK slowdown has been more severe than elsewhere (see Figure 5). It is now estimated
that it takes a UK worker five days to complete what the average G7 worker can do in four days.
A recent press article highlighted that UK worker GVA in 2015 was 19 percent lower than the
G7 average, and below the USA (29 percent), France (29 percent) and Germany (36 percent).16
The stagnation of productivity growth in the UK has been the subject of wide-ranging debate and
analysis. In stark contrast to our major competitors, UK productivity has failed to recover to its
pre-crisis 2008 level. An analysis by the Bank of England17 identified three possible causes:
1. Low level of investment. The UK has historically under-invested in capital relative to other

OECD countries, and the level of investment has not recovered to pre-crisis levels. The UK

level of investment between 2010 and 2014 was 16 percent of GDP (compared with 20 per

cent for other developed countries).
2. The low interest rate environment has resulted in a low level of business failures, keeping

less productive companies in business and therefore lowering average productivity.
16 Telegraph 6th October 2017
17 The UK Productivity Puzzle Quarterly Bulletin 2014 Q2
SLOWDOWN HAS BEEN SEEN IN OTHER COUNTRIES, BUT IS MORE SEVERE IN THE UK
Source: UKCES calculations from ONS International Comparisons of Productivity, First Estimates 2014. Table 3
AVERAGE GROWTH IN LABOUR PRODUCTIVITY, 2001-2007
AVERAGE GROWTH IN LABOUR PRODUCTIVITY, 2008-2014
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
UK
US
Japan
France
Germany
Canada
Italy
UK
US
Japan
France
Germany
Canada
Italy
Figure 5
31
MADE SMARTER. REVIEW 2017
3. As output fell, companies retained staff to secure talent amid a skills shortage within

the economy.
An analysis undertaken by the Productivity Leadership Group (PLG), with support from McKinsey,
shows that while the UK has many high performers, there is a long tail of businesses with below-
average productivity. In fact, 75 percent of UK businesses exist within this long tail. This problem
is seen across the spectrum: in all sizes of business and in all sectors of the economy. But the
long tail of underperformance is particularly acute among SMEs and other businesses with
fewer than 5,000 employees (see Figure 6).
The PLG report identifies that two-thirds of the UK workforce were employed in underperforming
companies and a sizeable gulf exists between high and low performers. Regional differences
also exist. Only six of the UK's 63 towns and cities have a higher productivity than the European
average, and more than half of UK cities (38) are among the 25 percent of cities with the lowest
productivity. Analysis from the ONS, based on GVA per head between 1997 and 2014, supports
this finding. It shows the declining contribution of the regions to UK productivity, with the UK
becoming more reliant on London and the South East to remain competitive.
0
2
4
6
8
DISTRIBUTION OF UK EMPLOYEES BY THEIR EMPLOYER'S PRODUCTIVITY RELATIVE TO THE EXPECTED PRODUCTIVITY
FOR A FIRM OF THEIR SIZE IN THEIR SUB SECTOR. %
0
2
4
6
8
0
5
10
16
20
-200%
-150%
-100%
-50%
0
+200%
+150%
+100%
+50%
Productivity2, difference from expected value as a proportion of peer group median
1. SME =10-499 employees; Large = 500-4999 employees; Very Large = >5000 employees
2. Estimated GVA (EBIT + employee costs) is regressed on a range of variables to control for sub-sector and number of employees using a Weighted Least

Squares method (with employee numbers as the weighting). The output of this regression is used to compute and expected productivity, representing the

average for a firm of that size in that sub-sector. The residual for each firm is plotted as a percentage of the median productivity for a firm in the same size

bracket in the same sub-sector
3. Each company was given a percentile ranking within their group of comparable companies (from the same sub-sector and size category). We then

calculated the gains to overall GVA if each company in the bottom three-quartiles increased its performance to match the productivity of the average

company ten percentiles above them.
SME1
LARGE1
EXPECTED
VALUE
Expected
value
Estimated
opportunity3, b
43
35
53
Source: McKinsey analysis using ORBIS (2013 data); OECD (2013)
Figure 6
32
MADE SMARTER. REVIEW 2017
This creates a significant opportunity. Addressing the productivity performance of the bottom
75 percent of performers could create around 130 billion in additional GVA each year.18

MANUFACTURING IS STILL IMPORTANT TO THE UK ECONOMY
Manufacturing remains vital to the UK. The sector contributes over 6.7 trillion to the global
economy. And, while the UK's manufacturing contribution has declined over the past 20 years,
it still produces 3 percent of the world's manufacturing output (compared with Germany at
9 percent and the USA and China at 19 percent each).19 It accounts for 9.8 percent of the UK
economy (162 billion GVA in 2015). The UK is still one of the top ten manufacturing nations
in the world (the eighth largest in 2017) and is the third largest in the EU. It employs 2.6 million
people directly, and something like 5.1 million across the whole manufacturing value chain.
UK exports of manufactured goods totalled 257 billion in 2015 (50 percent of all UK exports).
The sector accounts for 70 percent of business R&D and 14 percent of business investment.20
EY's 2016 UK Attractiveness Survey found that, for every foreign direct investment project in a
manufacturing plant, there was a matching investment across the supply chain in areas such
as logistics, R&D and sales and marketing.
CAN IDTs DRIVE PRODUCTIVITY IN UK MANUFACTURING?
There is an overwhelming evidence-based consensus that IDTs can provide a step-change in
industrial productivity. A 2017 World Economic Forum (WEF) report identified a US$100 trillion
IDT opportunity for society and industry by 2025 (WEF report). Studies in Germany estimate
that Industry 4.0 the Fourth Industrial Revolution can deliver annual manufacturing efficiency
gains of between 6 and 8 percent,21 and the Germany Digital Strategy 2025 (published in 2016)
projects productivity gains of up to 30 percent by 2025.22 A recent KPMG study of the automobile
industry found that digitalisation could not only increase productivity (by 3 to 5 percent), but
also reduce downtime (by 20 to 35 percent), the costs of poor production (by 5 to 12 percent)
and inventory reduction (by 12 to 20 percent), providing a cumulative single sector benefit of
74 billion by 2035.
IDTs can be transformational within all aspects of a business (see Figure 7), including
Increased labour and resource productivity
Increased asset utilisation due to reduced machine downtime
Reduced maintenance costs
Reduced inventory
Reduced cost of quality
Increased forecasting accuracy
Reduced time to market
18 Productivity Council Business case 14th November 2016
19 Manufacturing International Comparisons, Briefing Paper Number 05809, 18 August 2016
20 EEF, Manufacturing Ambitions: An industrial strategy for a stronger economy, 2016
21 Smart Service Welt recommendations for the Strategic Web-base Services for business
22 Digital Strategy 2025 DE DIGITAL
33
MADE SMARTER. REVIEW 2017

For example, IDTs enable a business to better monitor the health of its equipment and
processes. Issues can thus be predicted and fixed before they impact production ('predictive
maintenance') which increases asset availability. Considering that 80 percent of a typical
maintenance engineer's time is spent undertaking reactive (rather than predictive) maintenance
and that machine downtime can be anything between 5 and 20 percent (see Figure 8), the
potential impact of this technology is obvious. Our research has identified that predictive
analysis can increase operational equipment effectiveness (OEE) by 85 percent.
IIoT / Industry 4.0
Technical Enablers
Business Benefits
HUMANS
ADVANCED
ROBOTS
ADDITIVE
MANUFACTURING
AUGMENTED
REALITY
I
FLEXIBILITY
II
PRODUCTIVITY
III
SPEED
IV
QUALITY
V
SCALABILITY
VI
COMPETITIVENESS/
INNOVATIVE
CAPABILITY
VII
ROBUSTNESS
VIII
COST REDUCTION
IX
SUSTAINABILITY
X
SAFETY
XI
WORKING
CONDITIONS
XII
CONTINUES
LEARNING/
COLLABORATION
SIMULATION
HORIZONTAL/
VERTICAL
INTEGRATION
INDUSTRIAL
INTERNET
CLOUD
CYBER
SECURITY
BIG DATA
AND ANALYTICS
MACHINES
COMPONENTS
CPS
Figure 7
34
MADE SMARTER. REVIEW 2017

IDTs can transform not only the way products are developed and manufactured, but also the
way they are purchased. And that is enabling new services to be offered and new business
models to be formed. For example, advances in IDTs, especially in sensor technology, are
enabling products to be paid for based on their use through new servitisation models:
Sensors are becoming smaller and more sophisticated. And much cheaper. In 2014,

the average cost for an accelerometer sensor was 54 cents.
By 2020, component costs will have reduced to the point that connectivity will become

a standard feature.
In the future, sensors won't need batteries. Companies have already begun to build sensors

that can function without them.
Smart sensors are giving objects the power of perception. And sensor-driven computing

converts perception into insights using industrial analytics that operators and systems

can act on.
Soon, manufacturers will no longer build machines that have only mechanical functions

they will include intelligence as standard.
The applications that come with industrial machines will be a key means of generating new

revenue streams from productservice hybrids.
Breakdown
Action
Solution Architecture
Outcomes
Factora helped
connect Premier's
machines using GE
Historian software to
collect process data
Factora modeled the
processes to visualise
what was happening
on Premier's
production lines
Factora performed
analyses to understand
the correlations and
root causes of issues
Aging systems, lack
of operational insight.
Understand root
causes of issues and
generate data-driven
insights to improve
critical processes
Develop advanced
analytics using Historian
that tie all aspects of
production together to
maximise manufacturing
effi ciency
1
2
Generate real-time
decision support to
empower operators
to make critical
decisions quickly
20% Overall Equipment
Effectiveness improvement
Payback period < 2 years
Improved process
consistancy and higher
quality products
Decreased raw
materials usage
Automotive Chemicals
Food & Beverage
Heavy Industry
Oil & Gas
Power Generation
Other
Asset performance
Management
Automation
Brilliant Manufacturing
Cyber Security
Predix
NA
Europe
MENAT
APAC
China
ANALYTICS FOR FOOD MANUFACTURING PERFORMANCE
Figure 8
35
MADE SMARTER. REVIEW 2017
IDTs BRING BENEFITS TO NUMEROUS INDUSTRIAL SECTORS
Our review analysed the potential benefits of IDT within a number of industrial sectors.
Here, we discuss four of the most important: construction, food and drink, pharmaceuticals,
and aerospace. The methodology is set out in http://industrialdigitalisation.org.uk/
industrial-digitalisation-review-benefits-analysis/.
The analysis, involving UK manufacturing companies, as well as academic and industry
experts, was based on use cases that highlighted the impact of today's digital technologies
within different industrial environments. To quantify the benefit of each use case to both
business and society, we used a value at stake analysis framework developed by Accenture
in partnership with the World Economic Forum (see http://industrialdigitalisation.org.uk/
industrial-digitalisation-review-benefits-analysis/ ).
We found that digital transformation offers huge potential to UK manufacturing over the
next decade. For the four sectors studied, a 185 billion value at stake23 can be expected from
IDT, representing 9 percent growth over the baseline. Extrapolating to all UK manufacturing,
the cumulative value at stake is estimated at between 313 billion and 455 billion (+10 to
14 percent).24
23 Additional value created to stakeholders though value addition or value migration (see Appendix 3)
24 Based on extrapolation of Food and Drink, Pharmaceuticals and Aerospace, which together represent

38% of UK manufacturing, to the remaining 62% of UK manufacturing, at either the lowest growth


rate (Pharmaceuticals at 10% above baseline) or the highest (Aerospace at 21% above baseline)
Agile manufacturing processes providing real-time visibility into manufacturing processes
Reduce product cycles, shorten changeover and launch times through off-line programming
and virtual commissioning
Reduce downtime and improve performance through actionable intelligence and advanced
analytics on apps
Improve quality control through data analysis and automation
Employees cooperate in safe interaction with a fl exible robot, which takes over assembly tasks
that are ergonomically disadvantageous
For service engineers, alongside their usual tools, the tablet represents the principal working tool:
with the help of an app, they are able to detect and rectify machine faults as soon as possible and
directly on-site
Mobile handling assistant takes over monotonous jobs in machine assembly and thus
lightens the workload of the operator
Assembly assistants (cyberphysical systems) support the mechanics in their work and
carry all the product- and customer-related information with them
Logistics assistants navigate independently in the room and supply the assembly islands with the
correct mount-on components at precisely the right time and transport the fi nished gearmotors
out of assembly to the oil-fi lling and testing stations and then on to the paint shop
Smart Factory in Amberg
Real time tracking and tracing of everything within the facility
Recording of all process conditions and parameters
Integration of data from R&D and manufacturing
Real time data analytics, proactive data analytics and reporting of results
IDT SHOWCASE FACTORIES
ABB Heidelberg
FESTO Scharnhausen
SEW Eurodrive
SIEMENS
Graben-
Neudorf
36
MADE SMARTER. REVIEW 2017

It should be noted that, when comparing absolute benefits, each is relative to the size of the
industry's output within the UK. So, while the value at stake for aerospace is lower in absolute
terms than for other sectors, the relative growth opportunity is the greatest at 21 percent.
Overall, the main contribution to value at stake in this analysis comes from cost reductions.
However, significant opportunities for new revenues were also identified, especially in the
pharmaceuticals and aerospace sectors. In pharmaceuticals, for example, more than half of
the value at stake (11.7 billion) was estimated to arise from new business models, illustrating
the recognition in the sector that digital technologies will be central to future outcome-driven
healthcare models.
THE FOUR INDUSTRIES STUDIED HAVE AN ESTIMATED 185BN VALUE AT STAKE (+9%) OVER THE NEXT DECADE
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
CONSTRUCTION
88.9
+
Cost savings from construction
passed on to individuals
Improved living standards
+
365,000 tCO2e reduction in 20271
105 lives saved over the next
decade due to increased health &
safety during construction
FOOD AND DRINK
55.8
+
2.3bn saved from household
spend due to waste reduction
25% increase in customer
satisfaction
+
32 million tCO2e reduction
throughout the food supply chain
in 20271
27,370 injuries avoided in food &
drink production over the next
decade
PHARMACEUTICALS
22.4
+
1bn of cost savings passed on to
consumers
30 minutes per year are likely to
be saved per clinical trial patient +
86,000 tCO2e reduction in 20271
due to effi cient manufacturing
processes
1,555 accidents avoided in
production and 14,804 lives
saved from improved dosage
accuracy over the next decade
AEROSPACE
17.5
+
3bn of cost savings passed on to
consumers
69% increase in customer
satisfaction
13% increase in job satisfaction
+
63,000 tCO2e reduction in 20271
15,310 injuries avoided during
aerospace manufacturing over
the next decade
1) Reduction of emissions is not presented as a cumulative fi gure, rather as the reduction saving potential in 2027
Copyright @ 2017 Accenture. All rights reserved
FIGURE 8
Figure 9
37
MADE SMARTER. REVIEW 2017


We now consider each of these four sectors in detail.
CONSTRUCTION
Our analysis identified 89.2 billion of value at stake in the UK construction sector over the
next ten years through the adoption of currently known digital technologies. See Appendix 1
for a point of view on how IDTs will impact construction.
Today, UK construction contributes 6.5 percent (103 billion) of economic output and 6.2 percent
of total employment (2.1 million people). It also represents 20 percent of the total workforce of
SMEs across all sectors (BEIS, 2015). But the sector's productivity lags global productivity by over
30 percent, with as much as 98 percent of global infrastructure projects over budget or delayed.
IDTs offer significant opportunities to rectify this. For example, advanced sensors and
monitoring can bring a step-change to the sector's ability to plan and monitor works. Currently,
significant costs and risks are associated with unknown ground and site conditions which can
impact project costs by up to 20 percent (European Commission, 2017). And roughly 40 percent
of the UK construction market relates to maintenance and refurbishment. Advanced scanning
technologies, including drone mounted LIDAR, DIC and ground-penetrating radar, enable better
decisions to be made early in the design process to mitigate risk. And the introduction of smart
IoT sensors and advanced composite materials (such as self-healing concrete and polymer
RELATIVE UPLIFTS DRIVEN BY NEW REVENUE STREAMS SUGGEST HIGH VALUE GROWTH AREAS FOR MANUFACTURE
SPLIT OF VALUE AT STAKE UPLIFT
ABSOLUTE ( BN)
RELATIVE (%)
CONSTRUCTION
88.9
8%
Cost savings form the largest value at
stake in absolute terms
The majority of growth from digitalisation
of the four industries is expected to be
from effi ciency gains, as opposed to new
revenue.
With an estimated 88.9bn cumulative
value at stake over the next decade,
Construction has the most signifi cant
impact in absolute terms, as the largest
industry studied.
However, when looking at the relative value
in proportion to each industry, new revenue
streams have a more signifi cant impact
Proportionally, digitisation has a far
stronger benefi t on new revenue streams
within Pharma and Aerospace, with this
uplift providing 52% and 43% of the total
growth in these, respectively.
Pharma new revenue streams include
integrated patient support and control,
healthcare-as-a-service and innovation
services
Aerospace new revenue streams include
commercialisation of data and an
automated brokerage system among
suppliers
Aerospace has the greatest potential to
grow by adopting digital. This is true
despite being the smallest industry
analysed, therefore, new revenue streams
are key for overall industry growth.
FOOD AND DRINK
55.8
12%
PHARMACEUTICALS
22.4
10%
AEROSPACE
17.5
21%
Copyright @ 2017 Accenture. All rights reserved
6.1
3.2
11.7
7.5
82.87%52.611%10.75%1012%9%5%FIGURE 9
1%
1%
Figure 10
38
MADE SMARTER. REVIEW 2017
matrix composite materials) will lead to a new approach to maintenance and refurbishment,
driving down cost and improving efficiency across the sector.
Additive manufacturing and 'flying factories' (a mobile method of manufacturing outside of
a fixed factory) could enable high-precision manufacturing to occur on site and minimise the
need to transport bulky prefabricated building parts. Flying factories (and similar innovations)
reduce the fixed costs associated with large off-site manufacturing plants.
The economic multiplier effect within the economy could be significant. It is estimated that
every 1 invested in construction delivers 2.84 in direct impacts (wage income and profit),
indirect impacts (increased productivity in the product and service supply chain) and induced
impacts (employment, household income).
Case studies
The Beck Group used Building Information Modelling to create 100 visualisations for
a church in Seoul. This enabled them to adjust the design of the building to appear
curved, but using only flat glass, saving over $1 million on glazing and mullions, and
1,000 hours of design time (https://damassets.autodesk.net/content/dam/autodesk/
www/case-studies/sarang-community-church/beck-group-customer-story.pdf).
Construction Robotics, a New York-based start-up, has developed a bricklaying robot
called the SAM100, which is being used on job sites across the US. The robot can
lay around 2,000 bricks a day, working collaboratively with masons to increase their
productivity by 3 to 5 times, while reducing lifting by more than 80 percent (http://
www.construction-robotics.com/sam100/).

VALUE AT STAKE FOR THE CONSTRUCTION INDUSTRY IS ESTIMATED TO BE 88.9BN BETWEEN 2017-2027
VALUE LEVER DESCRIPTION
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
Revenue growth through new
revenue streams
6.1
A percentage of cost savings are
passed through from the
Construction industry to consumers
Living standards will improve due to
digital technology enabling higher
quality construction
In 20271 digitalisation of
Construction could achieve a
reduction of 365,000 tonnes of
CO2e due to more effi cient
manufacturing techniques and
smarter monitoring of in-use
energy consumption
An estimated 105 fatalities could
be avoided over the next decade,
through automation of more
dangerous tasks
Cost reduction through digitally
enabled R&D
30
Cost reduction through workfl ows
2.6
Cost reduction through digitally
enabled construction and asset
maintenance
28.9
Cost reduction through automation
of labour
3.8
Cost reduction due to digitally
enabled supply chain management
8.2
Cost reduction through resource
effi ciency
9.3
Total value to industry
1) Reduction of emissions is not presented as a cumulative fi gure, rather as the reduction saving potential in 2027
Copyright @ 2017 Accenture. All rights reserved
88.9
6.1
Figure 11
39
MADE SMARTER. REVIEW 2017
FOOD AND DRINK
We identified a 55.8 billion opportunity for the food and drink sector over the next ten years
through the adoption of currently known digital technologies. See Appendix 1 for a point of view
on how IDTs will impact the food and drink industry.
The global food sector has sales of over US$8 trillion and is worth five times as much as the
automotive sector. It has a compound annual growth rate (CAGR) for consumer expenditure
of 6 percent per annum. Food manufacture and distribution consumes 15 percent of global
fossil fuels and accounts for 28 percent of global greenhouse emissions. And the sector suffers
significant waste, with over 8.4MT of UK food dumped as waste per annum (WRAP, 2017).
Food and drink is the largest manufacturing sector in the UK, contributing over 28.2 billion to the
UK economy and employing 420,000 people.25 The wider food chain generates GVA of 108 billion,
employing 3.9 million people (DEFRA 2017) in a truly international industry (20 billion of exports
in 2016). Between 2006 and 2015, the UK food chain grew GVA by 30 percent, exports by 72 percent,
branded food exports by 100 percent and food chain employment by 5 percent (DEFRA 2017).
Yet there is potential to grow both the food processing industry and the associated UK food
technology sector further (in part by replacing imports of food processing equipment and
systems) to exploit the growing global market for food technology.
Within the food processing industry, digital technology provides significant opportunity to:
improve production efficiency (e.g. through robotics, automation, and connectivity);
improve traceability by connecting the whole supply chain (e.g. through the IoT, Blockchain,

cloud data architectures, and data analytics);
create more efficient and rapid supply chains (e.g. through intelligent just-in-time delivery,

IoT monitoring, and highly connected planning software);
improve feedback from retailers, consumers and food services (e.g. through automatic

supply and demand forecasting systems);
improve consumer trend monitoring to assist in the development of new products (e.g.

through point of sale data analytics and social media analytics).
Automation could increase productivity growth in food processing and wholesaling from
1.4 percent to 3.0 percent per annum. That would increase food chain GVA by 8.3 percent
above the underlying trend by 2022. Furthermore, it could reduce greenhouse gas emissions
by an estimated 29 percent throughout the food supply chain by 2027 due to efficiencies
from digitally managed processes in manufacturing and distribution. There would also be a
corresponding reduction in waste management and food waste of 17.6 million tonnes over the
next decade, factoring in greater visibility of shelf life.
Case study
Blue Yonder's Replenishment Optimisation is a machine learning tool that automates
store replenishment, reducing out-of-stock rates by up to 80 percent without
increasing waste or inventory. The tool takes external inputs (such as weather
forecasts, holidays or other events that will impact demand) into account to create
an accurate model of future demand for different products. This model informs
restocking plans, increasing product availability tenfold with 50 times fewer manual
interventions. The result: higher profitability with less wastage (https://www.blue-
yonder.com/en/solutions/replenishment-optimization).
25 DEFRA (2017), Agriculture in the UK 2016
40
MADE SMARTER. REVIEW 2017
PHARMACEUTICALS
Our analysis identified a 22.4 billion opportunity for pharmaceuticals over the next ten years
through the adoption of currently known digital technologies. See Appendix 1 for a point of view
on how IDTs will impact the pharmaceuticals sector.
The sector is one of the UK's most valuable assets, with exports worth 25.8 billion and
a projected total global value of $1.2 trillion in 2016. UK data shows the GVA per head for
pharmaceutical manufacturing was double that of any other manufacturing sector.26 It makes
a significant contribution to the UK economy and to the population as a whole:27
11.5 million is invested in the UK each day on R&D;
25 percent of all expenditure on R&D in UK businesses is made by pharmaceuticals;
107,000 people are employed directly by bio-pharmaceutical companies in the UK;
Each employee contributes 149,000 to UK GDP every year;
An eighth of the world's most popular prescription medicines were developed in the UK;
The sector has a critical role in improving the wellbeing of the UK population and reducing

the cost of healthcare.
Yet global competitive pressures, coupled with changes in patient expectations, provide
real business challenges for this sector's competitiveness. The UK is in a global race to
attract investment and sustain its vibrant and innovative research community and advanced
manufacturing expertise.
26 http://www.abpi.org.uk/media-centre/newsreleases/2017/Pages/PwC-analysis

highlights-economic-footprint-of-UK-Life-Sciences.aspx
27 "Delivering Value to the UK. The contribution of the pharmaceutical

industry to patients, the NHS and the economy". API 2014.
VALUE AT STAKE FOR THE FOOD AND DRINK INDUSTRY IS ESTIMATED TO BE 55.8BN BETWEEN 2017-2027
VALUE LEVER DESCRIPTION
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
Revenue growth through new
revenue streams
3.2
2,266 saving per household due to
improved waste management
25% increase in product
satisfaction related to
customisation of products
32 million tCO2e reduction
throughout the food supply chain
in 20271, due to more effi cient
production processes and
reduction of waste. This represents
a 29% reduction in overall food
emissions in the UK
17.6 mn tonnes of food waste
reduced over the next decade
An estimated 27,370 injuries
avoided over the next decade from
implementation of digital
technologies
Potential to reduce the number of
food poisoning cases by up to 4.5m
through better traceability in the
supply chain and monitoring of
shelf life
Cost reduction through digitally
enabled R&D
0.5
Cost reduction through digitally
enabled manufacturing and asset
maintenance
13.2
Cost reduction through digitally
enabled supply chain management
1.1
Cost reduction through automation
of labour
24.7
Cost reduction due to increase in
resource effi ciency
13.2
Total value to industry
1) Reduction of emissions is not presented as a cumulative fi gure, rather as the reduction saving potential in 2027
Copyright @ 2017 Accenture. All rights reserved
55.8
3.2
FIGURE 11
Figure 12
41
MADE SMARTER. REVIEW 2017
How will IDTs impact the sector? Advanced digital design techniques, such as high-throughput
testing, robotics, artificial intelligence and Big Data analysis (integrating structured and
unstructured data and subsequent advanced analytics) can help eliminate non-viable drug
candidate formulations earlier in the development process by better predicting the properties
and performance of the target molecule and its formulation. This will streamline product
development, reducing the time to market and the associated risks and costs.
Digital technologies will also support the transformation of today's large-scale manufacturing
plants designed for blockbuster high-volume medicines. More targeted and outcome-driven
healthcare approaches will call for more agile manufacturing processes, such as small-scale
production facilities located close to the point of use, autonomous batch and continuous
processes with instream quality control, scalable processes, and distributed and additive
manufacturing. Furthermore, digital process and plant design will enable the rapid translation
of new lab-based processes to commercial production facilities.
The adoption of digital technology in existing and new production facilities will result in
significant productivity improvements, expected to be in the order of 30 to 35 percent by 2030.
Digitally enabled processing techniques and IIoT plant equipment connected to cloud-based
software systems can monitor, predict and control production in real time. Ultimately, that will
facilitate greater knowledge generation and robustness, and lead to autonomous production
systems for pharmaceutical manufacturing processes. Data captured during production
can be used for simulating future plant performance, preventing plant failures and aiding
operational decision making. And digital tools using virtual or augmented reality can be used
in upskilling and training the existing and future workforces.
By tracking pharmaceutical products throughout the supply chain (using technologies like
low-cost sensors, NFC (near field communication), RFID tags, smart labels, printable
electronics, integration with microelectronics, real-time data capture, Big Data and analytics)
companies will be able to improve shelf-life management and establish clear and accurate
demand signals eliminating anything between 10 billion and 15 billion of waste.
The IIoT is giving rise to a smart healthcare ecosystem. The potential for digital technology to
help measure, maintain and improve health and wellbeing through preventative approaches
and supported health management is considerable. It represents a massive opportunity for the
pharmaceutical sector.
Case studies
Lilly has a long-standing focus on the Open Innovation (OI) initiative, based around its OI
Drug Discovery (OIDD) platform. The OIDD initiative has enabled the company to access
chemistry from both academia and biotechnology companies since 2009 and has proved
to be a source of biologically active molecules that significantly complements their
internal compound collection. The platform offers testing of compounds in both disease-
relevant phenotypic and target-based assays (https://openinnovation.lilly.com/dd/).

Pfizer subsidiary Pharmacia used Computer-Aided-Drug-Design (CADD) tools to screen
for inhibitors of tyrosine phosphatase-1B, an enzyme implicated in diabetes. The screen
identified suitable compounds with an accuracy of nearly 35 percent, compared with
0.021 percent using conventional methods (https://www.ncbi.nlm.nih.gov/pmc/articles/
PMC3880464/).
42
MADE SMARTER. REVIEW 2017

AEROSPACE
Our review identified a 17.5 billion opportunity for the aerospace sector over the next ten
years through the adoption of currently known digital technologies. Of all the sectors we
examined, aerospace offers the greatest potential in terms of both cost reduction and new
business models. See Appendix 1 for a point of view on how IDTs will impact aerospace.
Widely considered to be a global leader with a 15 percent market share, the UK's aerospace
and defence sector's turnover was 55 billion last year,28 making a significant contribution to
the UK economy and securing over 250,000 high-value jobs. The sector is also one of the most
productive in the UK almost double the national average.29 And with a forecast market for the
civil aerospace sector over the next 20 years predicted at US$6.3 trillion (equivalent to 35,000
new aircraft), and a further US$1.9 trillion forecast in through-life support,30 the future for
aerospace in the UK looks positive.
The sector has a great opportunity to demonstrate leading digital capabilities across the entire
lifecycle of product and process. With clear challenges that span multi-tier supply chains,
IDT offers a means to satisfy the industry's aspirations for cycle time reductions in the region
of 25 to 35 percent and productivity gains across the product lifecycle of 30 to 50 percent.
IDT will support new techniques in model-based systems engineering, as well as the creation
and validation of digital twins and the transformation of factories to provide the lean and
integrated delivery of new products. IDT will also enable the use of real-time data to dynamically
improve in-service product performance, minimise downtime and enhance future products.
28 https://www.adsgroup.org.uk/wp-content/uploads/sites/21/2017/06/ADS-Annual-Facts-2017.pdf
29 ATI Analysis of ONS data
30 ATI Civil Aircraft Market Opportunity Outlook 2016
VALUE AT STAKE FOR THE PHARMACEUTICAL INDUSTRY IS ESTIMATED TO BE WORTH 22.4BN BETWEEN 2017-2027
VALUE LEVER DESCRIPTION
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
Revenue growth through new
revenue streams
11.7
10% of cost savings (1.1bn)
realised through the deployment of
digital are expected to be passed on
to consumers
Up to 13,854 days per year could be
saved for clinical trial patients, due
to better tracking and monitoring
86,000 tCO2e reduction in 20271
due to more effi cient
manufacturing processes
An estimated 1,555 accidents could
be avoided in production
An estimated 14,804 lives saved,
due to a reduction of dosage
blunders through personalised
medicine
Cost reduction through digitally
enabled R&D
1.3
Cost reduction through digitally
enabled manufacturing and asset
maintenance
5.3
Cost reduction through digitally
enabled supply chain management
2.3
Cost reduction due to increase in
resource effi ciency
1.9
Total value to industry
1) Reduction of emissions is not presented as a cumulative fi gure, rather as the reduction saving potential in 2027
Copyright @ 2017 Accenture. All rights reserved
22.4
11.7
FIGURE 12
Figure 13
43
MADE SMARTER. REVIEW 2017
Furthermore, it will enable a system of virtual certification which will significantly reduce both
the time to market and development costs for future products.
In addition, IDT supports an analysis-driven culture which will enable products to be better
understood. It will allow the design space to be explored more quickly and with little cost
incursion. It offers a more holistic approach that understands product and manufacturing
trade-offs and provides engineering with the opportunity to make informed decisions and
adopt a highly confident 'right first-time' philosophy.
Future aircraft and services can be developed on the newfound wealth of engineering and
asset performance data that IDTs provide. For example, a new Airbus model has around
20,000 individual sensors in its wings,31 while GE's new jet engines collect 5,000 data points
every second.32

31 http://www.datasciencecentral.com/profiles/blogs/that-s-data-science-airbus-

puts-10-000-sensors-in-every-single, accessed 15 January 2017
32 http://www.aerospacemanufacturinganddesign.com/article/millions-ofdata-

points-flying-part2-121914/, accessed 1 February 2017
VALUE AT STAKE FOR THE AEROSPACE INDUSTRY IS ESTIMATED TO BE 17.5BN BETWEEN 2017-2027
VALUE LEVER DESCRIPTION
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
Revenue growth through new
revenue streams
7.5
30% of cost savings (worth 3bn
over 10 years) are expected to be
passed on to consumers as the
manufacturing process becomes
more effi cient through the use of
digital technologies
69% increase in customer
satisfaction due to personalisation
of manufactured products
13% increase in job satisfaction as
jobs will shift to higher value jobs
and tasks
63,000 tCO2e reduction in 20271
from more effi cient manufacturing
and production processes as well
as better in-use aircraft effi ciency
15,310 injuries avoided over the
next decade as a result of improved
safety during aerospace
manufacturing, through digital
tools and analytics
Cost reduction through digitally
enabled products, processes
and services
4.8
Cost reduction through digitally
enabled manufacturing and asset
maintenance
4
Cost reduction through digitally
enabled supply chain management
1.2
Total value to industry
1) Reduction of emissions is not presented as a cumulative fi gure, rather as the reduction saving potential in 2027
Copyright @ 2017 Accenture. All rights reserved
17.5
7.5
FIGURE 13
Figure 14
44
MADE SMARTER. REVIEW 2017
EXAMPLES OF TECHNOLOGY DEVELOPED FOR DIGITAL PRODUCTIVITY IMPROVEMENTS

APROCONE (Advanced Product Concept Analysis Environment) is an Airbus-led
collaborative project including Rolls-Royce, GKN, CFMS, MSC Software and two
universities. The project will develop a highly productive collaborative design
environment and associated methodologies that will mean wings and engines can be
designed more innovatively and more quickly to meet future market and environmental
needs.

MEGGITT M4 (Meggitt Modular Modifiable Manufacturing). Working in collaboration
with the AMRC, MTC, Cranfield University and IBM UK, Meggitt leads a programme of
work to challenge current value stream conventions by integrating digital tools and
enabling multi-component workflows. This ATI-funded project targets productivity
improvements and operational excellence through dynamic scheduling, generating
simulations and data analytics to predict capacity requirements and performance, and
the visibility and traceability of components.

ENABLES (External Network Advanced Build Lifetime Engineering System) is a
collaboration between Rolls-Royce, the NCC and bf1 systems (a SME). The technology
delivers a near 30 percent reduction in part count, weight reductions, build time/cost
savings, and a predicted enhancement of in-service reliability of around 50 percent. It
has also fundamentally changed bf1systems's manufacturing capabilities.

AMROCCS (Aircraft Maintenance Repair & Overhaul Configuration Capture System)
is a collaboration between various SMEs to develop a virtual reality headset. It aims
to reduce the time/cost of maintaining in-service aircraft by guiding locally trained
engineers through the repair and maintenance process, reducing the need for
specialist repair staff to be flown around the country.

VIEWS (Validation and Integration of Manufacturing Enablers for Future Wing
Structures) brought together 13 partners in a 30 million project aimed at reducing
the cost of wing manufacturing and assembly by 20 percent and process time by
80 percent. The VIEWS team was led by GKN Aerospace, but included other top-tier
industrial partners and four leading UK universities.

Augmented reality. Accenture, as an Airbus Innovation partner, developed an AR
supported-worker solution for the fitting of aircraft seats on the A330 final assembly
line in Toulouse. Using 'smart glasses' technology, seat fitters are provided with
operational instructions and fitting positions as they work. Defects were reduced
by 100 percent and costs by 85 percent. And our research indicates that wearables
typically increase productivity by 8 percent.
IDTS CAN STRENGTHEN SUPPLY CHAINS
UK manufacturing relies on complex and highly integrated supply chains (see Figure 15).
What's more, these supply chains are often spread across numerous countries. And, whether
they operate in the automotive, aerospace, construction or food and drink sectors, they must
support the 'just in time' models that are critical to efficiency, productivity and competitiveness.
This is another area where IDTs can bring significant benefits to UK manufacturers.
45
MADE SMARTER. REVIEW 2017
By removing delays, eliminating faults, increasing flexibility and improving efficiency
throughout the supply chain, manufacturers can make themselves more productive, maintain
competitiveness and boost their profits. But effectively managing the supply chain relies on
fully understanding how it operates. To do so, data is critical. Indeed, manufacturers have long
used data to increase the productivity of their supply chains.
The advent of a wide range of new digital technologies is now enabling new levels of increased
connectivity and the more effective use of data. Technological advances mean that more data
can now be collected more quickly. And this data can be easily accessed from multiple sites,
safely shared between different partners in a supply chain, and more effectively analysed.
What's more, these technologies will allow manufacturers to respond to increasing consumer
demands for faster delivery and more personalised products. And technologies such as 3D
printing have the potential to introduce untold flexibility into production processes.
Taken together, these technologies could revolutionise the way that supply chains operate.
They could facilitate a transition from current linear supply chains (with limited use of data
and new technologies) to a digitally connected supply chain network driven by connectivity
and the rapid use of data. These digitally connected supply chains would be able to respond
to feedback instantly and automatically reconfigure themselves according to predetermined
rules and algorithms, thereby boosting a manufacturer's efficiency and its ability to cope
with temporary disruptions.
Digitalisation could significantly
improve suppliers' output,
resulting in 2.6 billion of
benefits in the automotive
industry alone.
Digitalisation in the UK Automotive
Industry, SMMT/KPMG, 2016
Integrated Business Planning
& Optimization
SC Control Tower: Visibility,
Execution Systems & Analytics
Supply Chain Segmentation
Service Chain Transformation
& Value Targeting
Circular Economy:
Sustainable Supply Chain
Packaging
Raw
Materials
Active
Ingredients
Transportation
Network &
Sourcing Optimization
Supplier 1
DC Manufacturer
Distributor
Importer
Hospitals
Pharmacies
Surgery Centers
Patients
Supplier 2
Warehouse
(income)
Manufacturer
(Country,
EU, Row)
Warehouse
(outcome )
Supplier 3
Supplier
Integration &
Collaboration
Flexible
Production
Scheduling
Distribution
Network &
Flow Path
Optimization
Multi-Echelon
Inventory
Optimization
Customer Collaboration
Demand Sensing
Omni Channel
SUPPLY CHAIN
Supply Chain Value Transformation & Optimisation
P L A N
S O U R C E
M A K E
D E L I V E R
Figure 15
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MADE SMARTER. REVIEW 2017


In bringing about this transition, a number of key technologies will be critical:
Sensors, smart packaging, cloud-based storage and 5G. These will support the introduction

of the IoT in supply chains, and will facilitate data collection, traceability and the

development of a detailed understanding of a supply chain. Specifically, a network of

connected sensors across plants and supply chains will enable asset tracking, condition
monitoring, predictive maintenance and anti-counterfeiting solutions.
Predictive analytics and PLM software. These will support data analysis, and provide

flexibility and responsiveness within supply chains.
Virtual reality, mobile and tablet technology and visualisation tools. These will support more

active interaction with data and the real-time operations of a supply chain.
Cybersecurity, digital trust tools and Blockchain. These will help provide the necessary

assurance that connected supply networks are secure.


Contract
manufacturer
Customers
Logistics
Provider
Retailer
Distributor
Service
Partner
Suppliers
Design
Plan
Source
Digital
Supply
Network
Make
Deliver
Service
Existing Linear Supply Chains
TRADITIONAL LINEAR SUPPLY CHAINS
In a digital age traditional linear Supply Chains no longer work
Digitally Connected Supply Chain Networks
Plan
Make
Deliver
Service
Source
Figure 16
47
MADE SMARTER. REVIEW 2017
Will industrial digitalisation create or destroy jobs?
The UK is currently enjoying historically high levels of employment. Official statistics show the
present unemployment rate (4.3 percent) is the lowest it has been in over 40 years, while the
workforce participation of those aged 16 to 64 is at 75.3 percent the highest since records
began in 1971. The strength of labour market demand is at a near record high, with 768,000
vacancies advertised in the period from May to July 2017.
The impact of the digital economy on employment is already evident. The World Bank reported
in 2015 that the UK will need 745,000 additional workers with digital skills to meet rising
demand from employers between 2013 and 2017, and that almost 90 percent of new jobs will
require digital skills to some degree.33
But the effect of IDTs and other technologies on employment is a perennial concern for the
public. There is a popular belief that the rapid automation of jobs made possible by these
technologies will result in mass unemployment. For example, a 2013 paper estimated that
around 47 percent of all US employment is at high risk of being "automated relatively soon,
perhaps over the next decade or two".34 Although the authors did go on to say that "we make
no attempt to estimate the number of jobs that will actually be automated, and [we] focus
on potential job automatability over some unspecified number of years."
In contrast to this gloomy analysis, our review leads us to strongly believe the net impact of
IDTs on employment will be positive. The application of digital technologies within UK industry
will increase productivity and revenues, enabling firms to pay higher wages and thus creating
multiplier effects on other sectors of the economy. Increased competitiveness will lead to
growth, increasing sales, exports and hence employment. Productivity improvements will
eliminate the cost advantage of low-wage economies, encouraging companies to re-shore
activities and locate closer to their domestic markets. Digital technologies will in themselves
create new higher-paid forms of employment as many new roles emerge that did not previously
exist, including those in new servitisation business models. What's more, existing roles will be
augmented rather than replaced by IDTs, thereby creating more fulfilling and safer jobs.
"The number of weaving jobs increased when automation took place.
The number of bank tellers in the US has grown since ATMs were
widely deployed"35

33 The Effects of Technology on Employment and Implications for Public Employment Services. The World Bank
Group. Report prepared for the G20 Employment Working Group Meeting Istanbul, Turkey, 6-8 May 2015.
34 Frey, C.B. and Osborne, M.A., 2017. The future of employment: how susceptible are

jobs to computerisation? Technological Forecasting and Social Change
35 Bessen, J.(2015) Learning by doing: The Real Connection between Innovation, Wages and Wealth, Yale University Press
48
MADE SMARTER. REVIEW 2017

THERE IS STRONG EVIDENCE THAT IDTs WILL CREATE JOBS
The potential impact of IDTs on productivity has been clearly identified in this report.
Digitalisation-related productivity increases the return on capital employed and will generate
after-tax profit growth which can be reinvested. These reinvestments will then create new
employment opportunities.36
In addition, IDT will provide employment opportunities within new servitisation business
models, where the customer pays for 'use' instead of 'ownership'. The classic example is
Rolls-Royce's 'Power by the Hour' business model that has worked for many years for a
high-complexity, high-value, mission-critical capital good. Other examples include tyre
manufacturers who sell tyres on a usage basis.
Various studies have shown a positive correlation between automation and jobs. For example,
a 2016 discussion paper for the Centre for European Economic Research found that, "overall,
labour demand increased by 11.6 million jobs due to computerisation between 1999 and 2010
in the EU27, thus suggesting that the job-creating effect overcompensates the job-destroying
effect".37 The study found that while routine-reducing technological change decreased labour
demand by 9.6 million jobs, it was compensated by product demand and spill-over effects that
increased labour demand by around 21 million jobs.
This point is backed up by other surveys. In July 2016, Manpower Group asked more than
18,000 employers from 43 countries across six industries about the impact of automation
and digitisation on headcount over the next two years. They found that 83 percent of employers
plan to maintain or increase their headcount and only 12 percent intend to decrease their
headcount due to automation.
36 The Industrie4.0 transition quantified: how the fourth industrial revolution is reshuffling

the economic, social and industrial model, April 2016, Roland Berger
37 Arntz M., Gregory T. and Zierahn U., 2016, The risk of automation for jobs in OECD countries:

A comparative analysis. OECD Social, Employment, and Migration Working Papers
DIGITALISATION LEADS TO JOBS BEING CREATED
NEW JOBS
New digitally skilled jobs that did not previously exist are created based on the
introduction of new technology and techniques. Technology has driven this job
creation model for centuries.
GROWTH
Being more productive and competitive, winning additional business leads to need
for more of the existing jobs to meet the increased demand.
RESHORING
Digitalisation makes it economically viable to have localised, fl exible manufacturing,
closer to the market with shorter lead times. Jobs are reshored to the UK from previously
low labour-rate countries.
SUPPLY CHAIN
There is a multiplier effect in the supply chain for every job created in industry,
several jobs will be created in product suppliers and service providers throughout
the supply chain.
SERVITISE
Digitalisation allows a servitization model, where products are sold as a service
with a performance guarantee. In addition to manufacturing jobs, further service
based jobs are also created.
Figure 17
49
MADE SMARTER. REVIEW 2017
When Boston Consulting Group modelled the effect of technology on the German economy,
they found that increases in employment depend on the rate of adoption of Industry 4.0
technology. In their base case, where German companies generate additional growth of
1 percent a year due to Industry 4.0 and achieve a 50 percent adoption rate of the technology,
robots and computerisation reduced the number of jobs in assembly and production by about
610,000. But this was more than offset by the creation of 960,000 new jobs a net increase of
350,000 jobs (5 percent). These new jobs come from demand for an additional 210,000 workers
in IT and R&D, as well as 770,000 new jobs from revenue growth.38
Other studies have made similar findings. In his 2016 paper, Roland Berger estimated that
flexible factories, reinvestments and growth in the service sector will create 10 million new jobs
in Europe by 2035.39 A review of the economic impact of industrial robots across 17 countries
found that robots increased wages without having a significant effect on total hours worked.40
And, although the number of manufacturing jobs has been declining for a number of years,
Brookings Institution analysts report that countries that invested more in robots lost fewer
manufacturing jobs than those that did not.41 Indeed, a study by Barclays in the UK argues
that an investment in automation of 1.24 billion over the next decade could safeguard 73,500
manufacturing jobs and create more than 30,000 jobs in other sectors.42
Furthermore, a PwC analysis of data from the US Bureau of Labor Statistics found that
the most robotics-intensive manufacturing sectors in the US as a proportion of the total
workforce (automotive, electronics and metals) employ around 20 percent more mechanical
and industrial engineers and nearly twice the number of installation maintenance and repair
workers than other manufacturing sectors and pay higher wages too. These sectors also
tend to have a higher proportion of better-paid production-line workers.43
This positive picture was neatly summarised by consultants Deloitte, who argued that "while
technology has potentially contributed to the loss of over 800,000 lower-skilled jobs (in the UK)
there is equally strong evidence to suggest that it has helped to create nearly 3.5 million new
higher-skilled ones in their place".44
38 Man and Machines in Industry 4.0: How will Technology Transform the Industrial
Workforce through 2025? September 2015, Boston Consulting Group
39 The Industrie4.0 transition quantified: how the fourth industrial revolution is reshuffling

the economic, social and industrial model, April 2016, Roland Berger
40 Graetz and Michaels 2015
41 Muro and Andes 2015
42 Barclays 2015
43 PwC 2014
44 Deloitte LLP 2015
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MADE SMARTER. REVIEW 2017


IDTs WILL LEAD TO HIGHER-PAID JOBS
As companies increasingly adopt IDTs, they will create a buoyant demand for these technologies
and the employees who have the skills to support them. These new higher-skilled jobs
command a wage premium. For example, Deloitte estimates that in the UK, higher-skilled jobs
that have replaced lower-skilled jobs pay on average 10,000 more per annum, adding 140 billion
to the UK's economy.45 The 'tech sector' alone represents 6 percent of the UK economy with
an estimated GVA per person in the region of 91,800, well above the UK average. Tech City UK
estimates that the digital sectors are creating jobs 2.8 times faster than the rest of the economy,
and now provide 1.56 million jobs in total, 80 percent of which are based outside of London.46
IDTs WILL ALSO CHANGE THE NATURE OF JOBS
Automation will inevitably displace some jobs. However, the impact will not be as great as
some predict. A McKinsey report found that the demand for roles involving simple, repetitive,
predictable tasks will decrease due to automation. But cognitive and interactive roles are
less likely to be replaced. Indeed, the indications are that automation and digitalisation are
being deployed alongside human workers to increase their productivity and quality of output.
Automation is focused on replacing tasks, not jobs. And that means, ultimately, that it will
increase the effectiveness of the worker. When studies take this kind of task-based approach
to predicting the effect of automation on employment, they find that only 9 percent of US

45 Deloitte LLP 2015
46 TechNation 2016: Transforming UK industries
VARIOUS INFLUENTIAL REPORTS
The Future of Jobs
World Economic
Forum Jan 2016
The Future
of Employment
Frey and Osborne
2017
The Global
Information
Technology Report
World Economic
Forum 2012
The Skills
Revolution
Manpower Group
Jan 2017
Man & Machines
in Industry 4.0
Boston Consulting
Group Sep 2015
Automation, labor
productivity
and Employment
Copenhagen
Business School
2011
CONS7.1 million jobs lost
globally across all
sectors
47% of jobs in USA
at risk of being
computerised
The report does not
estimate specifi c
losses, but a positive
net effect
12% of employers will
decrease headcount
due to automation
Reduction of 610,000
jobs in Germany in
assembly and
production
-10% employment
in the short term
if UK automated at
highest level
PROS2 million jobs gained
globally across
all sectors
The report does not
estimate how many
jobs could be gained
A 10 point increase in
digitalisation score
would decrease
unemployment by 1%
19% of employers will
increase headcount
due to automation,
64% will not change
headcount.
960,000 new jobs
created in Germany
760,000 due to
growth 210,000 in IT/
analytics
+7% employment
in the long term
if UK automated at
highest level
COMMENT 4.7m jobs lost in
offi ce administration
and 1.6m from
manufacturing.
The report says
"Manufacturing and
Production roles are
anticipated to have
relatively good
potential for upskilling,
redeployment
and productivity
enhancement through
technology rather than
pure substitution" .
"at risk" is defi ned as
"meaning that
associated occupations
are potentially
automatable over
some unspecifi ed
number of years,
perhaps a decade or
two". This may mean
some tasks have the
potential to be
automated rather than
actual jobs lost.
The report estimates
45m jobs created
globally by
digitalisation from
2007-2011.
The report estimates
that the UK will
increase employment
by 1-10%, compared to
a 0-9% reduction in
Germany, France,
Switzerland and
Finland.
The net effect is a
350,000 gain in jobs.
The report assumes a
scenario of 50%
adoption of Industry
4.0 leading to 1%
economic growth.
A growth of 1.5%
would double the
additional jobs
needed to 760,000.
The net effect is a 7%
increase in
employment over the
long term. The report
also estimates a 22%
productivity growth in
the UK, which is the
driver of both short
term need for less
labour and longer term
growth and need for
more labour.
CHART 20
Figure 18
51
MADE SMARTER. REVIEW 2017
jobs are in danger of being replaced by digitalisation (compared with the 47 percent figure
predicted by Frey and Osborne).47
The International Federation of Robotics makes the same point. They say that "robots
substitute labour activities but do not replace jobs. Less than 10 percent of jobs are fully
automatable. Increasingly, robots are used to complement and augment labour activities; the
net impact on jobs and the quality of work is positive. Automation provides the opportunity for
humans to focus on higher-skilled, higher-quality and higher-paid tasks."48
IDTs should therefore be seen as a positive for employees. They will result in safer workplaces
with fewer accidents and less exposure to harsh environments. They will lead to improved job
satisfaction through the replacement of dull and repetitive tasks. And they will improve yield
and quality through increased accuracy and repeatability. Human judgment and decision
making will remain a core part of the workplace.
Cobots (collaborative robots) provide a valuable illustration of how technology is changing
the workplace. Low-cost cobots provide a flexible, safe and affordable alternative to fixed
automation. They are a particularly positive development for SMEs because they don't require
specialist systems integrators and can easily be set up by workers themselves. They can also
be quickly adapted to new processes and production run requirements. Companies around the
world have introduced cobots into their workforces and by doing so have gained a competitive
advantage. They are finding that their human employees can work alongside the cobots to drive
intelligent process automation, increase efficiency, and eliminate low value-add activities,
releasing those employees to focus on creating customer and business value.
At BMW's US factory in Spartanburg, cobots help fit the company's car doors with sound and
moisture insulation, a task that used to cause wrist strain for workers. Canadian electronics
manufacturer Paradigm Electronics uses cobots to carry out delicate polishing and buffing
tasks on loudspeakers, working with employees who handle the final finish and quality
check. These robots have led to a 50 percent increase in productivity, but with no job losses
employees who previously carried out these tasks have been promoted from machine
operators to robot programmers.
2.6 million industrial robots are expected to be deployed worldwide by 201949

The value of the collaborative robotics industry is expected to grow to
$1 billion by 202050

A 4,800%+ increase in cobot shipments is predicted between 2016 and 202551
47 Arntz, M., Gregory, T. and Zierahn, U., 2016. The risk of automation for jobs in OECD countries:

A comparative analysis. OECD Social, Employment, and Migration Working Papers
48 IFR 'The impact of Robots on Productivity, Employment and Job April 2017.
49 https://ifr.org/news/ifr-press-release/world-robotics-report-2016-832
50 https://www.abiresearch.com/press/collaborative-robotics-market-exceeds-us1-billion-/
51 https://internetofbusiness.com/iiot-rise-cobots/
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MADE SMARTER. REVIEW 2017
In this way, IDTs will shift employment from one occupation to another. Technology
has dramatically changed the appearance of numerous industries and employment
opportunities have shifted with the changes. Consider the pre-press industry. This sector
dramatically declined with the rise of electronic media. But graphic communications
employment opportunities have shifted from the press to the computer and have now joined
the fast-developing creative sector.52 Similarly, as the number of telephone operators has
decreased, there has been a corresponding increase in the number of receptionists. And as
demand for typesetters has decreased there has been an increase in the need for graphic
designers.53
Economist David Autor sums up the effect of automation like this: "Automation does indeed
substitute for labour as it is typically intended to do. However, automation also complements
labour, raises output in ways that lead to a higher demand for labour, and interacts with
adjustments in labour supply. Even expert commentators tend to overstate the machine
substitution for human labour and ignore the strong complementarities between automation
and labour that increase productivity, raise earnings and augment demand for labour."54

"All industries are changing; 65% of today's grade school kids will
end up in a job that hasn't been invented yet"55

IDTs CAN LEAD TO THE RE-SHORING OF JOBS
Capital investment in digitalisation and automation removes the competitive advantage of low-
cost labour. This means the attractiveness of off-shoring to low-cost locations is reduced.56
And it will enable companies to relocate activities close to significant markets. For example,
digitalisation, automation and related technologies such as 3D printing will shift the focus of
manufacturing away from mass production and de-localisation. Instead, customisation and
flexibility of production will become the watchwords, making it sensible to site manufacturing
plants close to the local market. This will only be reinforced in the future as the need to reduce
carbon footprints grows.
52 Sartorius, M.U., 2000. Digitization and Graphic Communication Education: From Print
Reproduction to dynamic Image Generation. Journal of Industrial Technology, 16(2).
53 Why automation doesn't mean a robot is going to take your job. September

2016, James Bessen, World Economic Forum article
54 Autor 2015
55 US Department of Labour Study
56 Man and Machines in Industry 4.0: How will Technology Transform the Industrial
Workplace through 2025? September 2015, Boston Consulting Group.
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MADE SMARTER. REVIEW 2017
WHAT IS THE LIKELY NET EFFECT OF IDTs ON JOBS IN THE UK?
To assess the impact of IDTs on UK employment, we used the methodology that Boston
Consulting Group developed in their analysis of the German economy.57 Thus, a best-case
scenario could be modelled for UK manufacturing.
NOTE:
This scenario assumes that the UK government policy and industry investment levels match
the German model. It is not a forecast, but an estimate of the potential gain in the best case.


From this analysis it can be seen that, in most scenarios, the net effect is to increase
employment, unless higher adoption rates result in low growth. In the base case, the net effect
components are:

Jobs displaced
- 295,000
Jobs created through growth
+ 370,000
New jobs created
+ 100,000 (IT, analysts, R&D)
Net Increase
175,000
57 Man and Machines in Industry 4.0: How will Technology Transform the Industrial
Workforce through 2025? September 2015, Boston Consulting Group
REVENUE GROWTH GENERATEDADOPTION RATE OF INDUSTRY 4.0 TECHNOLOGIES
30%
50%
70%
0.5%
65
-20
-90
1.0%
265
175
100
1.5%
475
380
300
Net change in number of UK jobs (thousands) 2015-2025
Base case
Figure 19
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MADE SMARTER. REVIEW 2017
MTL Instruments Ltd is a UK-based process control company specialising in
instrumentation for hazardous and potentially flammable atmospheres the sort
found routinely in the oil and gas, petrochemical and pharmaceutical industries.
MTL's electronic products are protected from their harsh operating environments by
a combination of electronic design, circuit board coatings, and mechanical housing.

MTL was founded by three entrepreneurial engineers in Luton in 1971, went public on
the USM in 1988 and became a fully-listed company on the London Stock Exchange
in 1995. It now has sales of over 100 million per annum and is part of multinational
electrical group, Eaton Electric.

Back in 1991, MTL had sales of around 18 million per annum and employed
approximately 250 people of which 208 were employed in direct production. Its products
were mainly assembled manually and, in addition to the production staff in the factory,
it also used home workers on a piece part basis, making use of the fine assembly skills
of Luton workers who had come from the hat industry.

MTL had a reputation as a technology leader and several tier-one instrumentation and
automation companies were looking to incorporate its products into their systems. This
threw up two challenges how to scale up to the required volumes and how to meet their
strict quality targets which included "Right First Time" (RFT) performance of 99.5 percent or
better (the manual assembly process was yielding an average of less than 95 percent RFT).

MTL management decided to automate the printed circuit board assembly process,
acquiring a large pick-and-place machine and moving to surface mount technology for
its newer products. The total investment at that time was around 500k. Existing staff
were retrained on the new machine and no production positions were lost, although the
company did encourage home workers to transition to in-factory work, which most of
them did. Over the next two years, output doubled.

By 1995, MTL had grown its sales to around 35 million per annum and had opened a
factory in India to make its legacy labour-intensive products. It realised it still needed to
increase capacity, so it acquired an adjacent building in Luton and invested in additional
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MADE SMARTER. REVIEW 2017
machinery and new robotic sprayers for coating circuit boards. It also further automated
its end-of-line test equipment. The company moved to a permanent double-day shift
with occasional additional night shift (made up of volunteers from the production staff).
Again, no production staff were lost. In fact, additional staff were recruited. And existing
staff were retrained on the newly automated plant. Indeed, this retraining indirectly led
to several of MTL's production staff later launching careers at companies like Rolls-
Royce, or setting up their own consultancy businesses. The number of production staff
rose to 312 in 1995 and then to 367 in the following year.

By the end of 2008, MTL's sales had risen to over 100 million and it was acquired by
Cooper Industries, a US-based multinational, making the combined operation the
largest hazardous area company in the world. This, in turn, became part of the Eaton
group in 2012. MTL still manufactures the majority of its products in its Luton factory
and continues to invest in automation.
THERE IS NO ALTERNATIVE
As the UK exits the EU and becomes fully exposed to the competitive pressures of the free
market, companies will need to focus on productivity to survive. If businesses are unable to
stand on their own two feet they will fail, risking entire factories and industry-related supply
chains and services. Therefore, the greatest threat to employment is not automation but an
inability to remain competitive.
We can learn from history. The UK car industry appeared to be in terminal decline in the 1970s.
But it was saved through a combination of direct foreign investment and the introduction of
new production techniques and technologies. It has now been transformed into a global leader.











UK AUTOMOTIVE INDUSTRY
1984
2011
2016
Vehicles produced
1.1m
1.3m
1.8m
People employed
298,000
124,000
151,000
Productivity (vehicles/person)
3,700
10,500
11,900
Source SMMT, ONS
CHART 22
Figure 20
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MADE SMARTER. REVIEW 2017
Can IDTs create a resource-efficient, sustainable
and resilient economy?

THE ENVIRONMENTAL IMPACT OF INCREASED INDUSTRIALISATION
By 2050 we can expect UK manufacturing to produce something like four times as much value
add than it does today. But it needs to do so while creating zero waste, creating zero climate
change emissions, and using half its current resources (materials and water).
IDTs have a crucial role to play in developing a resource-efficient UK industrial base. The effective
adoption of IDTs can help deliver over 10 billion in reduced resource costs adding both to
profits and to the nation's balance of payments through less reliance on imports and increased
export opportunities. Recent research from the EPSRC Centre for Innovative Manufacturing
in Industrial Sustainability identifies the potentially transformational role of digital technology
in the journey towards a restorative, regenerative and net-positive economy.58
IDTs also have a crucial role in developing a resilient UK industrial base that can ride out
increasingly frequent resource availability disruptions, as well as offering novel solutions to
grid management currently valued at over 2 billion. And IDTs are shown to perform a crucial
role in any move to make the UK industrial system sustainable over the long term in a post-
Brexit context.
The UK already has leading examples of how innovative IDTs can deliver these new capabilities
to industry worldwide. They illustrate the UK's potential to be a world leader in exporting IDT
for sustainability and they highlight the potential new companies, jobs and profits that would
flow as a result. But these positive benefits are far from guaranteed. Our analysis shows that
few organisations are setting resource efficiency or resilience goals for their exploratory use
of IDT. Government is yet to prioritise these benefits, nor has it investigated the potential for
improved resilience in our energy and resource systems at lower cost than presently.

What is 'sustainable development'? The World Economic Forum defines it as
development that increases the living standards of current generations without
sacrificing that of future generations. This addresses issues such as economic and
resource efficiency, environmental accountability and social equity.

What does sustainability mean for manufacturing? The production of all that is
made or manufactured undeniably contributes to modern well-being. But it also
contributes to many of the environmental challenges we see around the world today.
Industrial sustainability (IS) is the practice and study of how industry responds to
current sustainability challenges and eventually becomes part of a larger and fully
sustainable system.
A RESOURCE-EFFICIENT NATION
IDTs enable a radical improvement in non-labour resource efficiency. As much as 50 percent
of manufacturing costs are in materials, parts, energy and utilities. And these costs have been
stubborn at yielding the productivity gains that businesses have seen in their use of labour.
58 Smart, P., Hemel, S., Lettice, F., Adams, R. and Evans, S. Forthcoming 2017. Pre-paradigmatic status of industrial

sustainability: a systematic review. International Journal of Operations and Production Management.
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MADE SMARTER. REVIEW 2017
Using benchmarking analytics and the huge quantities of data produced by just a single
factory, manufacturers can identify the 'golden moments' where one product can be produced
for half the energy or CO2 emissions of the same product manufactured at a different time.
Alternatively, the same data can be used for anonymous comparison between factories.
One study estimated that this would yield up to 10 billion extra profit for UK manufacturing
by lowering material, energy and utility costs, while simultaneously delivering a 4.5 percent
CO2 reduction for the UK. This kind of 'win-win' opportunity exists if we can rise to the technical
challenge of unravelling large and complex sets of data to make sensible comparisons.
IntelliSense (see case study below) is doing just that for the natural resources and mining
industry. The company is using AI, the IoT and analytics to identify target energy savings and
deliver resource productivity gains for its customers worldwide, while creating new jobs and
companies in the UK.
Augmented Reality (AR) is an important part of the drive for productivity. It enables, for
example, engineers to see energy, water and waste flows in real time in the factory setting.
Engineers can thus bring their traditional skills of productivity improvement to bear against
a real cost that was previously only visible in spreadsheets. We can expect this kind of AR
technology to eventually lead to improved factory design tools.
INTELLISENSE.IO

IntelliSense.io is a market leader in the Industrial Internet of Things (IIoT), machine
learning and AI sector. It provides a range of applications and services through an
innovative platform to help eliminate inefficiencies and improve productivity yields
in plants, processes and people.

Its platform uses technologies like machine learning and physical models that analyse
real-time and historical data to predict and simulate future performance. It also uses
virtual sensors based on its customers' data and sensor networks to plug data gaps
as well as advanced analytics and automation outputs from statistical, physical and
machine learning models. These allow businesses to identify areas for improvement.
They can, for example, monitor the quality and safety status of materials during
transportation, track the supply chain from end to end, and identify and respond
to any bottlenecks more quickly. Reduced performance variability, less unplanned
downtime, and the optimised use of resources lead to lower energy consumption
and associated costs.

IntelliSense.io delivers optimisation as a service (OaaS) through a combination
of software and networks, wherein the IoT platform and Big Data technologies are
integrated in ready-to-use software applications.

The company's client base is primarily in capital and asset-intensive industries and
it has built substantive partnerships in the natural resources and mining industry.
Its customers include one of the largest copper and gold mines in Latin America,
which has seen a 55 percent reduction in its variability, and a uranium mining site
in Kazakhstan which has seen a 15 percent increase in system efficiency and
energy savings and a 7.5 percent increase in yield.

The success of IntelliSense.io is founded on the power of new technology. Older
technologies could not continuously manage changing operating environments and
did not have the ability to predict the mineral composition of feed. The company's
leading technologies, in contrast, significantly benefit its mining customers, where
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MADE SMARTER. REVIEW 2017
input materials vary on an hour-by-hour basis and connectivity has been difficult in the
industry's often harsh and extreme environments.

Benefits to IntelliSense.io:
Being a market leader allows it to gain a competitive first-mover advantage and

develop more global customers. As the costs of the IoT, data analytics, and AI

technology decrease, its profits will further increase.
Benefits to its customers:
Optimisation is delivered as a service with no CAPEX investment required.
Deployment is realised with minimal disruption to existing operations.
Improved business efficiency from the optimisation of production processes

reduces energy consumption, water requirements, unplanned downtime, and results

in higher yields.
Lower costs/higher revenue from reduced unit costs can be reinvested or passed

onto consumers in the form of lower output prices.
Enhanced natural resource use.
Extended equipment lifetime further reduces production costs and waste.
More stable and secure operations.
Wider benefits to the UK economy:
IntelliSense.io helps the UK lead in emerging sectors and markets, improving

national competitiveness.
Builds on critical UK industry strengths in the wider IoT market.
Building international business relationships helps improve trade prospects and exports.
Contributes towards entrepreneurship, innovation and job creation.
Potential future value:
The Department of Energy and Climate Change estimates that 293 million of energy

savings could be realised among SMEs by making use of Big Data analytics in logistics

and transportation alone.59
The latest PwC Global Data and Analytics Survey found that 49 percent of manufacturers

expect advanced analytics to utilise assets efficiently.60

A RESILIENT NATION
The government report 'The Future of Manufacturing' predicted that the UK would see
increasingly frequent and large disruptions from material availability due to geopolitics,
floods, droughts and energy disruptions. IDTs have the potential to mitigate these kinds of
disruptions because they enable manufacturers to drive resource productivity and reduce
the resources required for each unit of value-add they produce.
Smart energy systems are a clear example of IDT's potential, and the current UK market for
such systems is already worth approximately 160 million per year. Open Energi (see case
study on the following page) is a growing IDT company using sensors to identify short-term
strains on the National Grid and adjust the amount of electricity being consumed by industrial
equipment (such as refrigerators or heating systems) for short bursts. These adjustments have
59 https://www.gov.uk/government/publications/smart-technologies-in-smes
60 https://www.pwc.com/us/en/advisory-services/data-possibilities/big-decision-survey.html#ToolSpeed
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little or no effect on operational processes but perform a service to the grid in helping
to balance electricity supply and demand.
Future advances will see IDTs used to connect sets of factories or supply chains, or even
local clusters of factories, to deliver grid services such as demand shifting, peak-lopping
and frequency response. This represents a 2 billion market in the UK.
Material efficiency can also be enhanced through IDTs. Many factories are potentially able
to use other factories' waste as an input material. IDT can predict future waste availability,
and its qualities, with a level of accuracy never previously possible. We predict the rise
of new UK start-ups offering services to increase this kind of waste exchange. What's more,
IDT enables the mapping and analysis of material flows at a national level. This is something
that the House of Lords has described as a massively powerful but as-yet unavailable tool
for government and sector level planning.61
OPEN ENERGI

Open Energi is a UK company using innovative digital technology to connect a range
of distributed energy assets and aggregate and optimise their electricity demand
in real time. Its service is an example of business model innovation with triple
bottom-line benefits.

The company's technology platform is a demand side response (DSR) service that
helps the National Grid balance electricity supply and demand in real time. Sensors
detect the frequency in the electricity system. If it is higher or lower than the balanced
frequency, it will send a request to thousands of IDT devices across the country and ask
if they can temporarily increase or reduce power consumption to restore the optimal
balance between electricity supply and demand. The responses are aggregated and
adjusted in real time, creating a virtual power station, without compromising operational
performance. The company's technology also provides an interactive, customisable
portal that helps identify energy savings.

One of its largest customers is water company United Utilities, which owns connected
assets such as water pumps, motors and blowers at some of its largest wastewater
treatment works across the North West. By 2020, the company aims to provide over
50MW of DSR for the National Grid, equating to a reduction of over 100,000 tonnes
of carbon for the UK per year.

Open Energi will be launching a new platform in 2017 further utilising AI, machine
learning, Big Data analytics and the IoT to deliver data-driven savings and revenues
to its customers from multiple markets and services.

Benefits to Open Energi:
Open Energi is paid by the National Grid for providing demand flexibility. The National

Grid's Power Responsive initiative is a stakeholder-led programme designed to stimulate

interest in and the adoption of technologies to help balance electricity supply and

demand through financial incentives.
61 House of Lords report on Waste, 2008
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Benefits to its customers:
Revenue: Open Energi distributes part of its revenue from the National Grid to its

customers (over 40 in total) in return for sharing their demand flexibility.
No disruption: the technology functions almost invisibly, requiring minimal behavioural

change. The installation process is simple and does not require large input costs.
Efficiency: through data-based insights into how its customers' processes and

equipment are working, Open Energi can identify problems and possible efficiency

gains, thereby lowering their customers' production costs.
Carbon emissions: demand flexibility reduces the National Grid's reliance on fossil

fuelled power stations for balancing the grid thereby cutting carbon emissions

in addition to creating a smarter, more resilient and more secure energy system.
High satisfaction: according to a survey of over 200 businesses conducted by The


Energyst, a specialist publisher in the energy sector, 78 percent of DSR users are

satisfied with the outcome.62

Wider benefits to the UK economy:
Public good: enables the National Grid to manage peak loads, increase resilience and
meet their target of achieving up to 50 percent of electricity balancing via DSR by 2020,

accelerating the UK's transition to a cleaner, more affordable and more secure energy

system. No upfront infrastructure costs are required and it reduces the need for the
National Grid to rely on backup power systems.
Lower energy bills: the National Grid currently spends just over 1 billion a year on

balancing electricity supply and demand. The company predicts that this could double

to 2 billion a year within the next five years.63 Not only does this save the National Grid
money, but it also reduces the costs being passed on to consumers.
Potential future value:
The Association of Decentralised Energy calculated that wider DSR adoption by

businesses could reduce electricity costs by 8.1 billion per year and that 16 percent of

the UK's peak electricity requirement could be provided by firms shifting energy loads.64
The National Grid estimates that increasing flexibility could deliver up to 2 billion of

consumer value per year by 2030.65
78 percent of survey respondents in the Demand Side Report in 2016 by the Energyst

reported that they would or already use revenues gained from DSR provision to offset

energy costs or invest in energy efficiency measures. A previous survey suggested

that firms could shift around 10 percent of their energy loads with minimal impact on

operations. This would save UK energy consumers 600 million by 2020 and 2.3 billion

by 2035, equivalent to removing 1,300 diesel engines from service.66
Open Energi estimates that 1.7 million tonnes of CO2e could be saved per year from

dynamic frequency response.67
62 Demand Side Response, The Energyst, 2017
63 http://www.telegraph.co.uk/business/2016/06/26/balancing-demand-could-cost-national-grid-2bn/
64 http://www.smartestenergy.com/info-hub/the-informer

demand-side-response-could-be-worth-8bn-to-uk-economy-report/
65 http://www.green-alliance.org.uk/resources/Smart_investment.pdf
66 Demand Side Response, The Energyst, 2016
67 http://www.openenergi.com/uk-demand-side-flexibility-mapped/
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However, several barriers hinder the wide-scale adoption of these technologies by
more companies across the UK. Many companies are confused by the complexity of
the technology, processes and structures in the DSR sector. This can, in turn, make
it challenging for businesses to evaluate commercial propositions and leads to slow
decision making.

Better regulation to enable a level playing field in still a relatively infant industry might
be a sensible way forward. The Association for Decentralised Energy is developing a
code of conduct for DSR aggregators to set common standards across the sector and
establish best practice in the industry.
A SUSTAINABLE INDUSTRIAL NATION
The ultimate goal of the industrial system must be to work with the raw materials that the
planet has the ability to offer. Any alternative approach is, by definition, not sustainable.
Many large and small manufacturers, as well as start-ups, are pursuing this ambition with
increasing seriousness. Unilever is, for example, hitting its target to send no hazardous waste
to landfill across over 230 factories three years early.
Foraging factories are an innovative example of highly sustainable manufacturing. They use
similar technologies to the waste exchange factories described above. They can identify
which raw materials are likely to become available locally and when. They then search their
order books to assess which products to make, and how to adjust the bill of materials for that
product to allow it to be made from the waste that is available. This is only possible with the
extreme flexibility that IDT automation and process control technology bring. Ecover have, for
example, been experimenting with this kind of factory in Mallorca. UK factories are conducting
similar experiments out of the public eye.
The UK is already seeing an early wave of start-up pioneers using the power of increasing
data availability to find products and materials and re-manufacture them. Sometimes these
are the original manufacturers (such as Cummins) who rely on sensors to know when their
products are under-performing in the field and then bring them back to the factory to be made
good as new. Others are start-ups like RYPE Office who bring office furniture back to original
performance using advanced technologies.
The UK creative industry is world-renowned, including many of its niche sustainable industries
such as sustainable fashion, sustainable building design, and sustainable infrastructure.
Two such examples are in business model innovation and the circular economy, where small
UK start-ups are providing advice to global industry on how to innovate their system of value
exchange and how to begin the journey to becoming a circular organisation.
Though it is very early to predict the benefits of this drive toward sustainability, IDTs are likely
to deliver further reductions in downtime, increases in added value (as fewer resources are
used across the system), plus cleaner air and cleaner energy systems. Re-manufacturing, even
supported by advanced and flexible automation, is relatively labour intensive and will increase
employment directly (by up to 300,000 jobs).
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CAN THE UK BE A LEADER IN KEY IDTs?
IDTs will have a potentially transformational impact on UK industry. But they also represent
a new and expanding industrial sector in their own right (see Figure 21).
Our review analysed five of the most important IDTs to both understand the UK's relative
position within their respective industries, and identify any issues that are preventing the
UK becoming a world leader in their development and application. The technologies we
looked at were:
Additive manufacturing,
AI, machine learning, and data analytics,
Automation and robotics,
Connectivity (5G, LPWAN, etc.) and the Industrial Internet of Things (IIoT), and
Virtual reality and Augmented Reality.
For additive manufacturing, AI and automation and robotics, a 'value at stake' analysis was
undertaken as part of the research (see Figure 22).

Capability Breakdown
Examples
Interventions
Robotics: Have historically been used for dull, dirty, and
dangerous jobs. Now are much less costly, easy to program/
train, interactive, working side-by-side with skilled labor. Benefi ts
include increased productivity, increased fl exibility, reduced labor,
reduced downtime and other operational/personnel costs.
Sensors / "Smart" Products: Sensing abilities (environmental,
vision, audible, proximity, temperature, etc.) and other automations
to enable improvements such as identifying and rejecting defects,
handling hazardous materials, working in diffi cult environments
(under water, in extreme heat or cold, in dark or dim lighting, etc.).
Additionally, sensors are being embedded into products during the
manufacturing process that collect serial number level information
as its made, that then is extended to the user experience.
Additive Manufacturing / 3D Printing: 3D printing facilitates
mass customization, unlocks new revenue streams through
on-demand production, reduces engineering and prototyping
cycles, extends support for the long tail for products or parts
that consumers buy at low volumes, etc.
Augmented Reality: In the context of manufacturing and
product design, Virtual Reality (VR) digitally simulates a product
or environment, often with the user being able to interact and
immerse themselves within it. With Augmented Reality (AR) the
digital product is projected on to the real world background,
rather than a digitally simulated one like with VR.
Organizations
have realized
signifi cant benefi ts
in operational
fl exibility,
throughput
and quality.
By implementing
3D printing (additive
manufacturing),
organizations
have successfully
reduced the weight
of parts by 30-
55%, energy use in
production by up to
90% and the cost of
specialized 3D parts
up to 30%.
The usage of
augmented reality
technology has been
shown to shorten
the repair time
by 1% on average.
ADVANCED TECHNOLOGIES
Digital enablement of advanced technologies in manufacturing from automation focused robotics and
simulation to 3D printing capabilities, with digital driving both hardware and software cost and operational/
fi nancial performance improvements.
Baxter
UAV Analytics
3D Printing Laser Sintering
of Metallic Parts
Sawyer
High Speed Sorting
Figure 21
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ADDITIVE MANUFACTURING
The application of additive manufacturing technology within UK industry can provide
a value at stake of 72.1 billion to the UK economy with additional benefits for both
the individual and society
Additive manufacturing (AM) refers to the successive adding of layers of material using generic
"3D printing" machines. It presents an opportunity to radically transform certain manufacturing
lifecycles, changing the very limits of what can be physically and economically produced. It
disrupts existing concepts of business models and supply chains, bridging the worlds of the
digital and the physical. In principle, it allows even the most complex designs to be digitally
transmitted for production at the point of demand. AM offers the potential for rapid prototyping,
radical design innovation, lower tooling costs, reduced time to market and lower production costs
and emissions particularly for custom/low-volume/high-complexity components.
AM is one of the key enablers of the Fourth Industrial Revolution. While the directly attributable
value of AM products and services is currently a modest 300 million (6 billion worldwide),
employing about 35,000 people in the UK, it is experiencing a steady CAGR of around 30 percent.
And this growth is expected to accelerate as issues of standards, raw material consistency,
IP protection and parts verification are addressed.
The UK is among the world's leaders in the research, innovation and adoption of AM technology
for high-performance applications in medicine, aerospace and other industry sectors. The
country has a world-class AM machine manufacturing capability, well-established national
centres for AM (The Manufacturing Technology Centre), university excellence in AM research,
and a relatively small but solid foundation of companies applying AM within product
DIGITAL TECHNOLOGIES COULD CONTRIBUTE 454BN (+22%) OVER THE NEXT DECADE
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
ADDITIVE
MANUFACTURING
72.1
+
4.4bn of cost savings passed on
to consumers
35% increase in customer
satisfaction
+
12.6 million tCO2e reduction in
transport emissions in 20271
7% reduction in non-fatal
injuries during manufacturing
ARTIFICIAL
INTELLIGENCE
198.7 +
10.7bn of cost savings passed
on to consumers
19% increase in job satisfaction
due to higher value activities
+
5.4 million tCO2e reduction in
20271
70% reduction in machinery
breakdown
72,600 workplace injuries
avoided
AUTOMATION AND
ROBOTICS
183.6
+
15.4bn of cost savings passed
on to consumers
13% increase in job satisfaction
due to higher value activities
+
4.8 million tCO2e reduction in
emissions in 20271
633,600 fewer cases of
musculoskeletal disorders and
127,050 workplace injuries
avoided
8% waste reduction
1) Reduction of emissions is not presented as a cumulative fi gure, rather as the reduction saving potential in 2027
Copyright @ 2017 Accenture. All rights reserved
FIGURE 20
Figure 22
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development activities for prototyping and tooling. Industry is expected to invest 600 million
over the next five years, and spend more than 30 million on AM-related research.
Yet many UK companies, especially within the SME community, lack the awareness, resources
or confidence to apply AM as a core and integral part of their manufacturing toolkits. A recent
global survey conducted by EY revealed that only 17 percent of UK companies have any
experience with AM (compared with 37 percent in Germany and 24 percent in China, which
have significant government support). Over 50 percent of Chinese and South Korean companies
expect to use AM technologies for production parts within five years.
For those UK companies that are using AM technologies, the revenue it generates only accounts
for approximately 1 percent of overall company revenue. This compares with 8.8 percent in the
USA and a 2 percent average across all countries. It is clear that, in the application of AM, the UK
is beginning to lag behind other nations. Those nations, particularly the USA, China, Germany and
Italy are seeing AM adoption and growth rates much higher than in the UK largely because they
have strategic government investment programmes backing up AM-based industrial strategies.
It is estimated that the UK has a window of less than two years to reverse this trend if it is to
avoid a serious threat to its status as a top-ten global industrial manufacturing player.
While the number of UK organisations involved in AM is growing, the picture is somewhat
disjointed. The 2012 UK Research Mapping Report found that "the manufacturing community
in the UK is highly fragmented with organisations only networking through projects rather than
through a structured network, community of interest or association".68 For the most part, UK
manufacturing companies (particularly within the SME community), view AM as a somewhat
immature technology that may offer benefits in terms of prototyping, but for which the barriers
to entry for full production applications are too high.
What is required is a more co-ordinated approach to pull through the UK's world-leading
research and innovation to improve process efficiency and material choice, to consolidate
critical know-how in design, production and testing, and to de-risk private investment in the
supply chain (materials, machinery, software, and skills).
ARTIFICIAL INTELLIGENCE
The application of AI in industry offers 198.7 billion value at stake to the UK

economy between 2017 and 2027.
The 2016 Accenture report 'Why Artificial Intelligence is the Future of Growth',

conducted with Frontier Economics, proposes that the productivity enhancing impact

of AI can add 650 billion GVA to the UK, with a productivity level 25 percent higher

than would otherwise be the case.69
AI, whether in the form of augmented intelligence, cognitive computing, or machine learning,
is set to touch every facet of our work and personal lives. And it has the power to radically
transform them for the better. The technology's ability to live up to these lofty expectations
has only recently become possible with the advent of high-performance cloud computing
and widespread connectivity. The vast amounts of data necessary to deliver value from AI
are now becoming available in many forms, not least through cost-effective data capture
devices and sensors.
68 UK Research Mapping Report 2012
69 https://www.accenture.com/lv-en/_acnmedia/PDF-33/Accenture-Why-AI-is-the-Future-of-Growth.pdf
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A significant part of AI's economic benefit will come from the combination of AI systems and
people, allowing the current workforce to focus on the parts of their job that add the most
value. Adding an AI capability also allows the better use of existing capital investments,
improving efficiency and quality as well as reducing costs.
AI is expected to change the nature of work by augmenting human skills. But, as with each
successive technological revolution, there are fears about its impact especially around
reduced employment. However, the experience of using AI to date supports the view that more
jobs (and, what's more, higher-value jobs) will be created than will be displaced (see Figure 19).
The UK has a comparative advantage in developing AI technologies, with a thriving ecosystem
of researchers, developers and investors. A CBI survey in May 2017 revealed that AI tops the
list of technologies that UK organisations plan to invest in over the next five years. But it
also highlights that, while leaders in a number of UK businesses are taking steps to realise
the benefits of AI, the slow uptake of others risks creating a divide and leaving many
companies behind.70
In speaking with UK businesses as part of our review, we found that many are confused by
the hype surrounding AI, and a lack of specific information on how the technology can solve
specific business problems. Furthermore, those who overcome these initial challenges then
find it difficult to build a business case to invest. A lack of case studies makes quantifying
ROI and de-risking projects difficult. A gap exists between those who have started to resolve
these issues and those who have not. But even the leaders appear to be implementing point
solutions rather than making AI investment part of an overall strategy. In addition, businesses
raised concerns about how predictable the outcomes from machine learning would be.
Another issue for UK companies is the need to navigate a complex ecosystem of suppliers,
customers, academic institutions, government, regulators and other stakeholders. The complexity
of this ecosystem acts as a disincentive to the adoption of AI technologies. Businesses also
cite the problem of inadequate AI skills. These limitations fall into two distinct groups. The first
concerns the skills necessary to understand, develop and deploy AI solutions. The second and
potentially larger concern is the ability of the existing workforce to work alongside AI technologies.
Finally, businesses expressed a variety of concerns about sharing and processing data.
These range from an understanding of the data an organisation processes, and its value,
through issues of protection, security and liability when sharing and processing that data,
to the interoperability standards that will facilitate sharing.
AUTOMATION AND ROBOTICS (ELECTECH)
The application of automation and robotics within UK industry provides a value at stake

of 183.6 billion to the UK economy with additional benefits for both the individual

and society.
Barclays estimates that an accelerated level of investment in robots could raise
manufacturing GVA in the UK by 21 percent over ten years.
Copenhagen Business School identified productivity improvements of 22 percent if the
UK invested in automation in line with the best in class for each industry sector.

70 http://www.cbi.org.uk/news/half-of-firms-expect-ai-to-transform-their-industry/
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ElecTech refers to the industrial application of electronics, electro-technical, and embedded
software technologies. It is a core part of the digitalisation of manufacturing, providing many
essential skills, components, and capabilities. The ElecTech sector is widely regarded as
driving some of the greatest innovation and creativity in any advanced economy (source: ZVEI).
Almost every aspect of the digitalisation of industry rests on many different ElecTech
technologies, from communications to power subsystems, and from embedded processing
for automation and control to intelligent lighting and security systems. Advanced ElecTech
computation powers everything from the largest datacentres to the smallest sensors and
servos, doing everything from day-to-day computing to accelerating AI-based machine
learning, and making every electric motor smarter and self-maintaining. Without ElecTech,
industrial digitalisation simply could not happen.
ElecTech is a major sector in the UK, employing more than a million people in over 45,000
companies. Indeed, the UK has one of the strongest intellectual property capabilities in
ElecTech in the world. It already attracts significant inward investment from companies like
Apple, Google and Amazon thanks to our strengths in ElecTech technologies and early adopters
in the automotive, aerospace and creative industries.
Many of the ElecTech technologies essential to the future of automation and robotics have
industry leaders here in the UK, including those producing silicon chips (ARM), sensors
(Renishaw), AR/VR (Imagination), AI (GraphCore), power (Dynex Semiconductor) and
communications (5GIC Surrey and CSR, now part of Qualcomm).
The UK already has world-leading research institutions in robotics, in fields as diverse as
healthcare, subsea autonomous vehicles and vacuum cleaners. Groups such as the Edinburgh
Centre for Robotics, Sheffield Robotics, Bristol Robotics Lab, and Imperial College's Hamlyn
Centre are all recognised as significant contributors and innovators in global robotics research.
Furthermore, the UK has some highly innovative robot companies. These include the Shadow
Robot Company (artificial hand robots), Peak Analysis and Automation (laboratory robots),
Engineered Arts (human-emulating interactive robots) and Tharsus (warehouse robots for
Ocado and others). Dyson is an example of a consumer goods company investing tens of
millions into robotics for household appliances. And automotive multinationals, such as Jaguar
Land Rover and Nissan, have already seized on the benefits of robots as a key part of their
automation strategies in the UK.
However, overall uptake of manufacturing automation in the UK is disturbingly slow compared
to most other developed nations. The UK has only 33 robots per 10,000 employees (compared
with 93 in the US and 170 in Germany) (source: IFR). What's more, the gap is widening. Germany
invests 6.6 times more than the UK in automation, although its manufacturing sector is only
2.7 times the UK's in size (source: ZVEI). The key reasons for this are public perception, lack of
ambition, aversity to risk, shortage of skills, and finance.
The design, deployment and support of robot-based manufacturing systems has been embraced
by most G7 countries such as Germany, France, Italy and the US, as well as powerhouses such
as China (see Made in China Appendix 2) and South Korea. They see it as a key to increasing
productivity. They recognise that automation changes the underlying economics of manufacturing,
enabling them to create high growth and better productivity, and enabling their factories to make
more competitive products whether cars, furniture, food or clothing.
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CONNECTIVITY AND THE INDUSTRIAL INTERNET OF THINGS
The IoT is predicted to generate up to $11 trillion in value for the global economy

by 2025.71
The IoT will bring 67,000 jobs to the UK by 2020.72

Adopting the IoT on an industrial level (the IIoT) could boost the UK economy by
352 billion by 2030 (Accenture).
IIoT expenditure is expected to reach around $500 billion by 2020 (from $20 billion

in 2012).
The IIoT could create $15 trillion of global GDP by 2030.73

The Industrial Internet of Things (IIoT) brings together a number of technologies to drive more
informed, faster business decisions for industrial organisations. It combines cutting-edge
machines, advanced analytics and a plethora of devices that connect with each other through
communication technologies. That connectivity allows the data collected by those devices to
be monitored, exchanged and analysed to deliver valuable insights for industrial companies.74
The IIoT allows traditionally non-digital companies to build a data footprint through sensors
and the monitoring of equipment and machinery. This data footprint then allows new business
models to develop and provides greater opportunities for the digital sector to work closer
with industry.



To make this happen, a connectivity infrastructure is needed to underpin the factories of
the future. From Low Powered Wide Area Networks (LPWAN) to next-generation 5G internet,
improved connectivity is essential in utilising the technologies that underpin the Fourth
Industrial Revolution. 5G is estimated to enable US$12.3 trillion of global economic output
by 2035.75 LPWAN will allow connectivity at a much lower cost and increased reliability when
compared to traditional mobile connectivity (3G, 4G, etc.). That will reduce the cost overheads
for manufacturing SMEs and ensure reliability for IIoT networks across geographically wide
and often hard to reach parts of factories.
Manufacturers also need to become more aware of cybersecurity strategies and increase
investment in the prevention of cyber-attacks.
The UK is home to a rapidly growing community of companies developing and commercialising
IoT component technologies, products and services. The UK government has invested significantly
in the connected technologies sector through the 32 million of funding awarded to the IoTUK
programme in the 2015 Budget. IoTUK is a national initiative designed to support IoT development
and uptake in the UK, through applied research, demonstrating the technology at scale, attracting
international investment and supporting small companies.76
71 Unlocking the Potential of the Internet of Things by James Manyika et al. http://bit.ly/2eRn6X8
72 AS Big Data Internet of Things http://bit.ly/2nr38sm
73 "The Growth Game Changer" by Mark Purdy and Ladan Davarzani, https://accntu.re/2mHhAb
74 "Everything you need to know about the Industrial Internet of Things" by GE Digital http://invent.ge/2eqfX43
75 IHS Economics / IHS Technology "The 5G economy: How 5G technology will

contribute to the global economy" 2017 http://bit.ly/2rWtnta
76 The IoTUK programme includes academic research (PETRAS), hardware accelerators (StartUp
Bootcamp and R/GA), large-scale demonstrators (CityVerve and two NHS Testbeds) and dissemination
models to increase take-up rates (Future Cities Catapult and NHS England). The Digital Catapult

provides co-ordination, SME acceleration and amplification services to the programme.
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IoT research is also vibrant in the UK, with much of it driven by universities. As part of the IoTUK
programme, the start of 2016 saw the launch of PETRAS, a new IoT research hub for the UK,77
underpinned by a 9.8 million grant from the Engineering and Physical Sciences Research
Council (EPSRC),78 and boosted by partner contributions to approximately 23 million, which
will research many of the challenges facing IoT developers including issues around ethics,
privacy, trust, reliability, acceptability and security.
The IIoT is also crucial in driving efficiencies via analytics. More than two-thirds of analytics
professionals believing industrial analytics will be fundamental to business success by 2020
and 15 percent think that it is already crucial today. Those professionals expect predictive
and prescriptive maintenance of machines (79 percent), customer/marketing related analytics
(77 percent) and analysis of product usage in the field (76 percent) to be the most important
applications of industrial analytics over the next three years.79
VIRTUAL REALITY AND AUGMENTED REALITY
Goldman Sachs Global Investment Research estimates a potential VR and AR user base

of 6 million engineers in the US, Europe and Japan.
A global market of $80bn by 2025.80
VR in the UK entertainment and media industry alone will reach a value of 801 million

by 2021, making it the fastest-growing and largest VR industry in EMEA.
Virtual reality (VR), which immerses users in a computer-generated world, and Augmented
Reality (AR), which overlays digital information onto the physical world, are already reshaping
existing ways of doing business and have the potential to increase productivity in engineering
and manufacturing. Already widely adopted by the retail and marketing sectors, manufacturing
is now driving AR's enterprise adoption.
In a recent report, PwC identified nearly 500 UK companies or institutions who have adopted
or invested in VR or AR in the past year. However, this is only the start. The UK hosts a number
of notable companies in the industrial VR/AR field, including Autodesk, Virtalis, and Eon Reality,
and it is this applied sector in which much of the future industrial value lies. For example, the
construction industry is exploiting the technology to leapfrog and modernise the whole sector
through rapid training and increased quality, efficiency and safety of workers. The Construction
Leadership Council believes that through digital technologies mainly AR and VR there is
immense potential to transform the industry.81
ImmerseUK (a UK national body launched in 2016 and supported by InnovateUK) is bringing
together the community of industry developers, researchers, government bodies and end users
to support the UK in becoming the global leader in the application of immersive technologies
including high-end visualisation, VR, AR, haptics and other sensory interfaces. This mixed
community promotes interaction between industrial sectors and incubates innovative solution
development. It also allows manufacturers to have direct access to technology start-ups which
may not currently have engineering and manufacturing users for their products.
77 http://www.petrashub.org
78 http://www.epsrc.ac.uk
79 Industrial Analytics 2016/17 by Knud Lasse Lueth et al. http://bit.ly/2li6PM1
80 Virtual & Augmented Reality: Understanding the Race for the Next Computing



Platform, Goldman Sachs Global Investment Research, 13 January 2016
81 A New Reality: Immersive Learning in Construction, October 2017
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This connection between solution providers and end users will be key to promoting the UK
as a leader in the development and use of applied visualisation.
VR and AR are already being used by manufacturers to support the development of complex
assemblies, planning for the maintenance of equipment and products, the provision of remote
expert support, as well as higher quality assurance and increased productivity. For instance,
when the UK division of the Hosokawa Micron Group looked to improve its productivity, this
innovative powder processing company decided to couple its market-leading equipment and
services to the world of Virtual and Augmented Reality, and then to further harness this to
data analytics. The result has been to transform a business whose revenue and growth had
appeared to be plateauing to one with a target operating income rarely seen in the industry.
Other users of VR and AR include companies like BAE Systems who are using technology
developed by the video games industry to build warships for the Royal Navy more cheaply and
efficiently, and, in the process, directly support the aspirations of the National Shipbuilding
Strategy.82 This defence and aerospace company has started to employ 3D VR, allowing
engineers and sailors to "walk" through life-sized computer-generated versions of the ships
they are working on.
It is in these potential scenarios, from validating design (VR), to virtually prototyping
manufacturing processes (VR), to validating assembly procedures (VR/AR) and delivering
operational support (AR) where true value will be obtained. The strategy 'fail fast, but fail
virtually' and provide a 'many to one' support through the adoption of Virtual and Augmented
Reality is where true productivity gains can be made.
82 National Shipbuilding Strategy: The Future of Naval Shipbuilding in the UK, September 2017
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PART 3
WHAT IS
STOPPING THE UK
ACHIEVING THE
IDT VISION?
6
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Part 3 What is stopping the UK achieving the IDT vision?
Our review identified three key themes that are preventing the UK becoming a leader in IDT.
These are adoption, innovation and leadership. We now consider each of these themes in turn.
ADOPTION
The UK is behind most developed countries in overall productivity (output per worker),
which is in part due to lower levels of adoption of digital and automation technology.83

This is particularly acute among SMEs.
Another potential cause of this productivity lag is an ineffective and confused

landscape of business support for IDTs, with no clear route to access help and

ambiguity about what 'good' looks like.
SMEs, in particular, perceive significant barriers to IDT adoption, such as risks around

cybersecurity, a lack of common standards allowing different technologies to connect,

and access to funding to support investment.
Businesses also face a skills shortage, particularly in digital engineering, hindered by

a fragmented skills system and a lack of systematic engagement between education

and industry.

International studies have identified that UK Industry is less prepared than many of its leading
competitors to exploit the opportunities of the Fourth Industrial Revolution. The Boston
Consulting Group found, for example, that only 9 percent of UK respondents had made large
progress, compared with 11 percent in France, 13 percent in China and 14 percent in Germany
and the variation was greater when intermediate progress was considered.84 The EU Digital
Transformation Index 2017 placed the UK 11th in an EU ranking of digital readiness, citing the
UK strengths as its entrepreneurial culture, e-leadership and access to finance, while scoring
it low for skills, infrastructure, and the integration of technologies.85
The digitalisation of industrial production requires the diffusion of key IDTs. However, many
businesses lag in adopting the technologies. For example, the adoption of cloud computing,
SCM, ERP, and radio-frequency identification (RFID) applications by firms is still much below
that of broadband networks or websites. European Commission data for 2015 shows a very low
proportion of UK companies using ERP systems to share data internally and enhance productivity.
At 17 percent of all enterprises, this is around half the EU average. The problem is concentrated
in companies with fewer than 250 employees, although large companies are still 20 percent lower
than their EU counterparts.86 Nevertheless, it is these advanced ICTs that enable the digitalisation
of industrial production. The EU Digital Intensity Index (DII), a micro-based index measuring the
availability of twelve digital technologies to businesses, places the UK 14th.87
Our review identified a number of reasons for this low level of adoption, including a lack of
awareness of IDT availability and opportunities (see Figure 24). The net impact is low levels
of investment, poor levels of productivity, and ageing capital stock.
83 BCG, Sprinting to Value in Industry 4.0, Dec 2016
84 BCG, Is UK Industry ready for the Fourth Industrial Revolution?, Jan 2017
85 Digital Transformation Scoreboard: European Commission 2017
86 http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=isoc_bde15dip&lang=en
87 For the Digital Intensity Index see the Digital Economy & Society Index (DESI), http://digital

agenda-data.eu/datasets/digital_agenda_scoreboard_key_indicators/visualizations
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When BDO and the Institute of Mechanical Engineers interviewed UK manufacturing companies
in 2016, they found similar results. Only 8 percent88 of respondents had a good understanding
of Industry 4.0 or industrial digitalisation processes, despite 59 percent of them recognising
that the Fourth Industrial Revolution will have a big impact on the sector. A third of reported
companies had invested no money in automation systems and Industry 4.0 related technology
in the preceding 24 months and a quarter had no plans to invest in this area in the next two years.
Perhaps most notably, 44 percent cited a lack of understanding as the main reason they are not
currently investing.
This failure to adopt IDT is affecting the UK's productivity. According to the Bank of England,89
around a third of UK businesses have experienced no productivity increase since 2000
and for every frontier company, there are two or three pushing down the average. This lagging
productivity is in part due to a long tail of companies that have not adopted IDT at scale.
And it is particularly acute among industrial SMEs. A recent Boston Consulting Group study
found 21 percent of UK industry had no Industry 4.0 goals, more than double the size of the
equivalent "tail" in France or Germany.90
The UK industrial structure is based on a small number of large organisations who have
the capacity and capability to provide leadership in digital adoption. However, 99.4 percent
of UK companies are SMEs, with limited capacity and capability to adopt digital. Industrial
SMEs frequently lack the information, expertise and skills, training, resources, strategy and,
moreover, the confidence to adopt new technologies. And suppliers and private consultants
can face high transaction costs in trying to diffuse digital technologies into these businesses.
The SME sector provides significant growth opportunities. There is more opportunity to address
productivity disparities between "the best and the rest".91 The McKinsey Global Institute
estimates that 55 percent of potential productivity gains in developed countries comes from
catching up to best practice, whereas 45 percent comes from pushing the frontier outwards.
This could even be more pronounced in the UK due to its relatively high proportion of SMEs.
The CBI suggests that improving growth in manufacturing subsectors could boost the economy
by as much as 30 billion by 2025, creating over 500,000 jobs across UK regions. Enhancing
the UK's domestic supply chain could also create sustainable semi-skilled and skilled
manufacturing jobs across the UK, rebalance regional disparities in earnings, and reduce
the industry's reliance on international supply chains.
The Institute for Manufacturing has identified that UK supply chains remain relatively weak.
For instance, only around 40 percent of the parts used in vehicles assembled in the UK are
sourced domestically. And, overall, only around half of manufactured parts used in the UK
are sourced domestically, compared with 90 percent in services. Low UK activity in a number
of sectors has contributed to a long-run trade deficit which, despite a remarkable increase
of service exports over the last few years, still stands at around 30 billion.
Most other developed countries have active government interventions to promote leadership
and the adoption of IDT within their industrial bases (see Figure 23). For example, Germany
has Industry 4.0, the USA have 'America Makes', China has 'Made in China 2025', France has
'Industrie du Futur', Sweden has 'Smart Industry (SE), Switzerland has 'Produktion der Zukunft',
88 BDO; INDUSTRY 4.0 REPORT June 2016
89 Haldane, A. G. (2017), Productivity puzzles, Speech given at the London School of Economics, 20 March 2017.
90 BCG, Is UK Industry ready for the Fourth Industrial Revolution?, January 2017
91 New Industrial Capabilities for New Economic Growth A Review of International Policy

Approaches to Strengthening Value Chain Capabilities, University of Cambridge
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Italy has 'Piano nazionale Industria 4.0', Spain has 'Industria Conectada 4.0', and Japan has its
Robot Strategy (RRRC, 2015). What's more, in July 2017, China outlined a development strategy
to become the world leader in AI by 2030.92
At the European level, there are Digital Innovation Hubs within Horizon 2020, where around
500 million is programmed over the period 2016 to 2020, including initiatives such as I4MS
and SAE. Incubators are being set up under the Big Data PPP, and activities such as pilot lines
in nanotechnology and advanced materials under the NMBP work programme are underway, as
well as a network of technology centres providing services to SMEs in advanced manufacturing
for clean production under the INNOSUP work programme. Other initiatives include a catalogue
of competence centres in key enabling technologies, a pan-European advanced manufacturing
support centre assisting SMEs in transforming their organisations for the factory of the future
and setting up learning networks of factory of the future companies. See Appendix 2 for an
overview of international interventions.
At national level, several EU member states have launched initiatives relating to the digital
transformation of industry, some with a policy focus, others more concerned with research and
innovation. Around ten policy-level initiatives or platforms are already active, and more are
planned. Examples include Mittelstand-Digital Competence Centres in Germany and Fieldlabs
in the Netherlands.
92 Economist, 29 July 2017, AI in China
Portugal
Industria 4.0
Netherlands
Smart Industry (NL)
Belgium
Made Different
Flanders Make (Flanders)
Marshall 4.0 (Wallonie)
EU-level initiatives
Digitising European Industry
Initiative (COM(2016)180)
Multi-region Initiatives
Vanguard
Spain
Industria Conectada 4.0
Basque Industry 4.0
France
Nouvelle France Industrielle
Industrie du Futur
Transition Numrique
La Programme des
Investissement d'Avenir
Plan Industries le-de-France
Denmark
MADE
Germany
Plattform Industrie 4.0
Mittelstand 4.0
It's OWL (Ostwestfalen-Lippe)
Allianz Industrie 4.0
(Baden-Wrttemburg)
Hungary
IPAR 4.0 Platform
Italy
Piano nazionale Industria 4,0
European initiatives
National initiatives
Regional initiatives
Sweden
Smart Industry (SE)
Czech Republic
Prmysl 4.0
Slovakia
Smart Industry (SK)
Austria
Plattform Industrie 4.0
Figure 23
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WHAT ARE THE BARRIERS TO ADOPTION?
As part of our review, we surveyed manufacturing companies and held workshops to identify
the key barriers to IDT adoption (see Figure 24). We found concerns about:
Cybersecurity,
Slow internet connection speeds,
Legacy equipment,
Limited understanding of technologies and their potential opportunities,
Loss of IP,
A lack of trusted advice,
A perception of high cost and risk of IDT deployment,
Most importantly, a lack of skills.
Many small firms often have difficulties in implementing organisational change. They usually
have limited resources, including a shortage of skilled personnel. This scarcity of technical
skills can often result in a lack of awareness about the productive potential of ICTs. A recent
study on the impact of digital change on skills and employment in Germany suggests that
the "ability to plan and organise, to act autonomously", combined with company-specific and
occupation-specific working experience, are crucial for the successful digital transformation
of businesses.93
The findings of our review reinforce results from other surveys. For example, the Lloyds Bank 2016
digital index reported that the highest barriers to adoption were the lack of skills (15 percent),
no relevance to the business (14 percent), and concerns about security (14 percent).
Other studies have found businesses citing a lack of time, resources and low priority,94 and
technology lock-ins,95 often due to the use of proprietary solutions, as well as a lack of (open)
standards. A World Economic Forum executive survey (WEF, 2015) confirms that this lack of
interoperability ranks among the top three barriers to IoT adoption (after security concerns,
but before uncertainty in the return on investment). Furthermore, there is evidence that most
data generated by sensors does not reach operational decision makers due to interoperability
issues (McKinsey Global Institute, 2015).
93 Hammermann and Stettes, 2016
94 State of Digitisation in UK Business - Strategic Labour Market Intelligence
Report David Mack-Smith, James Lewis, Mark Bradshaw - SQW
95 The Next Production Revolution Implications for Government and Business - OECD
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Skills
The greatest barrier to IDT adoption is the lack of skills. There is already an identified shortage
of digital skills in the UK economy, and the demand for these skills is projected to increase.
It has been predicted that, within 20 years, 90 percent of all jobs will require digital skills.
This means that approximately 16.5 million people in the UK are going to need to be skilled to
become 'digital workers' and 'digital makers'. Yet, there are 10.5 million people currently lacking
basic online skills, the majority of whom are aged over 55, and many of whom are working
in sectors where digitalisation will be crucial to keep the UK competitive internationally.
The pace of change unleashed by digitalisation means that around two-thirds of children
in primary school today will work in jobs which do not even exist yet. The nature of employment
is also continuing to change. The days of working for a single employer have ended. Individuals
will have a number of careers over their working lives and will need to continually reskill to
be relevant in the marketplace. There is a need to develop a culture of lifelong learning and
0
10
20
30
40
50
60
70
%Lack of timeDevelopment of new business models and processesUnclear Economic benefitLack of knowledge of non financial benefitsLack of clear vision and support/leadershipLow priorityExploitation and commericalisation strategiesCyber securityUse of data/privacyOwnership of dataLevel of riskConcerns around loss of IPInternet connection speedLegacy infrastructure & processesLack of tech skills to design new systems and implimentConcern about adopting non standard solutionsLack of innovation from existing staff to exploit newConcern over staff reactionAccess to external fundingAccess to internal fundingLack of skills to operateEquipment costsTraining costsCultural changeLack of certainty of solution workingCost of maintenanceLack of awareness of new technical solutionsFinding the right partnersLack of confidence in supplier claimsCost of consultantsLack of relevant case studiesINDUSTRIAL DIGITALISATION
Survey finding implied 7 key barriers to industrial digitalisation, with cyber security voted top barrier
Strategic
Security &
Standards
Legacy
Internal
Skills
Funding
Costs of
Adoption
Trusted Advice/
External Support
BARRIERS
Skills shortages
Limited industry 4.0
understanding
Limited access to innovation
Poor infrastructure
Perceived cost
Limited empirical evidence
Weak data security
& legislation
Figure 24
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MADE SMARTER. REVIEW 2017
reskilling, such as the Singapore "skills future program". And there is a need to improve visible
career pathways for adults, such as those in the US (Van Horne et al 2015).
While young people will acquire basic digital skills by default because of digital's pervasive
nature, to be truly employable more advanced skills are required. Digitalisation will offer real
benefits to older workers and to the sectors where there are larger concentrations of such
workers. This group must acquire basic and then more advanced digital skills specific to their
sector and nature of work in order to remain employable as technology advances. And, because
around two-thirds (65 percent) of the workforce of 2030 has already left the education system,
the UK cannot rely on the education system to satisfy industry's demand for digital skills in the
short to medium term. In an industrial sector which employs around three million workers, this
means that two million people will potentially need to be upskilled or reskilled in the workplace.
Technology can help make more efficient use of existing workforces. In construction, for example,
the World Economic Forum has mooted that innovations which are already commonplace in the
automotive sector, such as human-robot collaboration and exoskeletons, could make working in
the sector less physically demanding and thus better suited to an ageing workforce. So, although
in the longer term these sectors do need an influx of younger talent, in the immediate to medium
term the looming skills crises could be averted by using existing workers more efficiently. This
carries added importance because improvements in workforce efficiency would positively impact
the UK's productivity. And lagging productivity is a key drag on the UK's economic performance.
The skills shortage is particularly acute in industry, where there are shortages of engineers,
especially at the higher technical levels (e.g. Level 4/foundation degree equivalent). If the UK
is going to lead in the new and emerging IDTs it needs enough people with the skills to support
them, either within current businesses or as pioneers at start-ups.
For example, additive manufacturing (discussed in the preceding part of this report) is an area
in which there is potential for the UK to lead. The technology is still to be adopted on a wide
scale by industry, but it is consistently being refined, with 'print' times falling and techniques
becoming more sophisticated as more materials are brought within scope. UK industry is
investing heavily in additive manufacturing research and prototyping, but insufficient skills in
its use among the wider workforce could hamper more widespread adoption in manufacturing
processes. And it could prevent start-up enterprises and market disruptors from launching
in the UK, despite its relatively flexible approach to innovation.
Even in the face of this skills shortfall, employers continue to underinvest in skills development.
Employers in the UK spend half as much on continuing vocational training as the EU average
(Eurostat 2010). Employer investment per employee in training declined by 13.6 percent for each
employee in real terms between 2007 and 2015 (Dromey and McNeil 2017). Declining employer
investment would be concerning at the best of times, but it is all the more so at a time in which
public investment in skills for those in work is being cut. The adult skills budget was cut by
41 percent between 2010/11 and 2015/16 (Foster 2017), and the criteria for access to funding
have been tightened.
The stopstart nature of government education policy has resulted in a confusing landscape.
Different conditions are applied to available funding. The system is difficult to navigate and
there is a fragmented offer for employers and individuals alike. Policy changes, caused in
part by political change and frequent changes of Ministerial responsibility for skills, has been
identified as one key cause of this fragmentation (Institute for Government, 2017).96
96 https://www.instituteforgovernment.org.uk/publications/all-change
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There is currently no overarching body which focuses on digital engineering and represents
industrial demands and requirements. And there are, at present, no national skills standards
for digital engineering, and no National Occupational Standards (NOS) to underpin industrial
digital job roles on a UK-wide basis. There are also no Standard Occupational Codes (SOC)
for these roles, which means they are not accounted for individually in government data
banks such as the Business Register and Employment Survey (BRES). This results in a lack
of understanding of industry skills standards and the specialist training available, and leads
to under investment in skills. The existing skills system and the training provided is focused
on job requirements for today, not for the future. There is a lack of expertise within higher
education, further education and schools to support employer needs.
Cybersecurity
Without data security it will be particularly difficult to convince SMEs that digitalisation
of their businesses is the way forward. Only 22 percent of EU citizens have complete trust
in internet companies, for example. And, as noted above, 28 percent of manufacturing
organisations reported a loss of revenue due to one or more cyber-attacks in the past year
(the average lost revenue was 14 percent). According to IBM's Cyber Security Intelligence
Index, manufacturing was ranked as the third most frequently hacked industry in 2017. It is
a tempting market for cyber-attackers, with systems regarded within the sector as "weak by
design as a result of a failure to be held to compliance standards". The industry also suffers
almost 40 percent more 'security incidents' than average.97 The UK manufacturing sector is
particularly at risk. According to research from EEF, almost half (46 percent) of manufacturers
have failed to increase their cybersecurity investment in the past two years (with 56 percent of
this number being small manufacturers). What's more, 20 percent of manufacturers have not
made their employees aware of cyber-risks in company policies, as little as 56 percent say that
security is given serious attention by their board, only 36 percent have an incident response
plan in place, and just 24 percent monitor cyber-threats through business KPIs.98
Standards
Standards have been proven to drive productivity growth, as evidenced by recent research
papers.99 They promote the adoption of technologies by companies, both by resolving
interoperability issues and by supporting knowledge diffusion. Industrial digitalisation
is a relatively new area for standardisation, reflecting the increasingly complex and
interdisciplinary nature of technological systems, and, to date, the lead has been taken
by countries that have already established their own national programmes in support of
digital manufacturing (for example Industrie 4.0 in Germany100 and the Industrial Value Chain
Initiative in Japan101 ). However, there are gaps in what has been proposed, and the current
international standards activities do not reflect the priorities of UK industry.
The importance of setting global standards was described by the Government Office for
Science in their report Technology and Innovation Futures. They said "acting as a standards
setter is one of the government policy levers that can support emerging technologies by
using insights from living labs to develop UK standards setting the global agenda by
'showing, not telling'".102
97 Security Trends in the Manufacturing Industry, 2017, IBM Security https://ibm.co/2yaH2PK
98 EEF Cyber Security Survey Results 2016, http://bit.ly/2kAFr0u
99 See, for example, https://www.bsigroup.com/LocalFiles/en-GB/standards/BSI-standards

research-report-The-Economic-Contribution-of-Standards-to-the-UK-Economy
UK-EN.pdf and http://www.iioc.org/the-economic-value-of-standards/
100 http://www.plattform-i40.de/I40/Navigation/EN/Home/home.html
101 https://www.iv-i.org/en/
102 https://www.gov.uk/Government/uploads/system/uploads/attachment_data
file/584219/technology-innovation-futures-2017.pdf
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Open standards have been derived for the construction sector, including COBie and IFC, but these
are applied with varying degrees of success. Within construction, estimates of productivity gains
of between 15 and 20 percent associated with whole life costs of the project have been achieved
through modest investment in standards by the UK government (NBS 2016).
Financial incentives
SMEs are risk averse. And they see investment in innovation as a risk that might greatly affect
their financial performance and even jeopardise their survival. Digitalising business processes
will require innovation, investment in process design, investment in physical assets, software,
and technology integration. It calls for behavioural change. And the taxation system is a proven
mechanism to alter behaviour.
However, the UK's tax investment incentive system is not targeted enough. Research by Bond and
Xing has found "very robust evidence" that more generous capital allowances (for equipment in
particular) can help tip investment decisions over the line. It also found a positive link between
the 'present value' or worth of capital allowances and investment as a proportion of GDP in
G7 countries.103 Other countries, such as Germany, Poland and Italy, are now offering specific
incentives to invest in IDTs (see Appendix 2 and the Italian example below). And in France, the
government has introduced an exceptional depreciation scheme for the purchase of industrial
robots for SMEs to depreciate 140 percent of the value of their investment.
THE ITALIAN APPROACH

Industra 4.0 was a key pillar of the Italian 2017 Budget in recognition of its productivity
potential. Carlo Calenda, Italy's Minister of Economic Development, set out a goal of
"replacing half of the investment in innovation that's been lost since the start of the
[economic] crisis".

The budget provided 11 billion of government investment, comprising hyper-depreciation
(250 percent) and tax shields, the setting up of Digital Innovation Hubs with the help of
local branches of the Italian CBI (confindustria), increases in R&D tax credits, and fiscal
and economic measures to increase the competitiveness of Italian SMEs.

Results reported to date
14.7 percent growth in industrial production machine orders for the third quarter of 2017

compared to the same quarter in 2016 however domestic demand was up 68.2 percent

Pros
Non-sectorial, horizontal approach
Big media bang when it was launched the Italian industrial base is widespread and had

been waiting for something like this for some time
Likely to be combined with tax credits on training and retraining employees on Industry

4.0 related skills in the next government budget

Cons
A punctual measure, which might go into next year's budget but could remain a one off

thus truncating its potential benefits
Digital Innovation Hubs are taking a long time to set up by the time they are ready,

the measure might already be over
103 Race to the Top: developing a Corporation Tax regime to support sustainable growth CBI Policy Briefing #3
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Business support
When it comes to supporting SMEs overcome the barriers to IDT adoption, our review revealed
that they found the support landscape is confusing, geographically differentiated (there are
133 different schemes available within Cheshire alone, defined by post codes), subject to
short-term, initiative-driven change, focused on employment in detriment to efficiency, and
reliant on European funding (e.g. the ESIF operational programme 20142020) which will cease
in the near-term future. Due to a lack of UK direction, individual regional bodies have developed
their own localised strategies. For example, LCR 4.0 in the Liverpool City Region is delivering
targeted digital manufacturing support to 300 manufacturing SMEs over three years.
The quality of support programmes provided to SMEs varies throughout the regions, which
adds to the confusion. In addition, the gap created by the dissolution of the Manufacturing
Advisory Service has not been bridged within some regions.
Summary
In summary, our review identified the following blockers to IDT adoption:
The support landscape is confusing, geographically differentiated, and subject to

short-term, initiative-driven change.
Companies lack understanding of where they stand in comparison to their peers and of how

they can start their digitalisation journey. Nor do they understand if funding is available to

de-risk their investment.
The quality of advisory support provided to SMEs varies throughout the regions due to lack

of skills in IDT.
Specialised technical and market knowledge is costly and, as a result, not all businesses

have the basis for making informed technology investment decisions.
There is no recognised independent source of advice about what IDT solutions are available

and which are appropriate to adopt.
Many SMEs have a low absorptive capacity to update production processes and undertake

the development of new products.
In addition, many SMEs do not have the time, capacity or funds to partner with universities

or research and technology organisations.
SMEs are risk averse and see investment in innovation as something which could greatly

affect their financial performance and even jeopardise their survival.
Access to state-of-the-art research, engineering expertise, and equipment is not typically

readily available.
Businesses also face a skills shortage, particularly in digital engineering capability,

hindered by a fragmented skills system and a lack of systematic engagement with industry.
Some larger firms underinvest in their supply chains due to fear of helping competitors.
Larger companies are not exploiting the creativity and agility of small, research-intensive
manufacturers which could be a source of innovation.
Lack of SME involvement in innovation activities impacts the long-term competitiveness of

advanced manufacturing sectors that require continuous innovation and kick-start funding.
Technology companies find it expensive to deal with large numbers of SMEs.
Businesses lack knowledge of the potential of new technology adoption, particularly when

relevant technologies originate in other sectors.
The high level of legacy infrastructure due to a low level of investment in capital equipment,

the adoption of new technologies, and process improvements.
A lack of standards and interoperability.
Concerns over data breaches and cyber-standards.
Sharing of information resulting in a loss of IP.
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INNOVATION
The UK is a leader in research and innovation and has started to establish a favourable
supporting infrastructure to develop and commercialise technology. However, these
innovation assets are under-leveraged and not focused enough on supporting both IDT
and start-ups, meaning the UK is falling behind other nations in creating innovative new
companies and industries.
Our review found that the current industrial R&D environment is uncoordinated. As such, there
is a significant duplication of effort. The number of spin outs from universities and research
institutions into manufacturing is too low. And there is a lack of help for researchers to directly
engage with industry and inspire them to see new business opportunities. There needs to be
a better connection between manufacturers and research institutions to ensure they develop
solutions to real-world challenges.
An OECD study on the implications for policymakers in supporting the Fourth Industrial
Revolution104 identified three significant international trends. Firstly, international studies
have identified that, in addition to their core activities related to technology research, research
institutions are also increasingly carrying out a range of complementary innovation activities.
These complementary activities include: advanced skills development, access to specialised
equipment and expert advice (particularly for SMEs), the provision of test beds for new
production processes and products, and stakeholder engagement and network formation.
In addition, some institutions, in collaboration with economic development agencies, use their
technical capabilities to attract foreign direct investment and support regional development.
A positive UK example is the investment by McLaren in a new manufacturing facility on the
Sheffield technology park near to the Advanced Manufacturing Research Centre (AMRC).
Singapore's Institute of Manufacturing Research (SIMTech) is another good example of
an institution that has built on its core research function to provide a broader range of
complementary innovation functions. And in the USA, the Information Technology and Innovation
Foundation (ITIF) have proposed taking a small percentage of all federal R&D funding and
putting it towards 'technology commercialisation activity' for example, capacity building grants,
accelerators, proof of concept stages and other common pitfalls around commercialisation.
Secondly, in addition to basic research, the real benefits of IDTs come when they operate
together. And, in realisation of this fact, countries are redesigning major programmes,
institutions and initiatives to tackle increasingly complex manufacturing R&D challenges.
This includes widening the scope beyond basic technology research and placing a greater
emphasis on new research partnerships and links to pursue synergies between research
actors and engage a greater variety of manufacturing stakeholders. It also includes investing
in new innovation infrastructure to assemble the combination of tools, equipment and
facilities required to meet tomorrow's production needs.
Thirdly, production technologies, manufacturing systems, and industry sectors are all converging.
It is this convergence that is likely to drive the next production revolution. In designing research
programmes and initiatives, policymakers need to be aware that the convergence is opening
new manufacturing R&D opportunities and challenges. It is increasing the scope for innovation
in manufacturing and creating more diverse ways in which value can be captured from it.
The European Commission's research programmes addressing so-called 'multi-KETs' (multiple
key enabling technologies) are examples of explicit efforts to pursue new manufacturing R&D
opportunities driven by convergence (see further Appendix 2).
104 The next Production Revolution Implications for Government and Business OECD
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One approach adopted within the European Union to address these issues is the creation of
Digital Innovation Hubs (DIHs). Presented as part of the Digitising European Industry Strategy
(DEI)105 with a goal of providing industry access to technology and experts, these Hubs:
Enable the leveraging of assets by wider industry (including SMEs),
Increase the emphasis on commercialisation,
Widen the scope of development programmes to address complex industry problems

necessitating the integration of IDT technologies,
Build a broader innovation architecture,
Form networks across industry sectors, academia and research organisations,
Increase the spin out of start-ups,
The overall objective of this initiative is to ensure that any industry in Europe whether big or
small, wherever situated, and in whichever sector can fully benefit from digital innovations to
upgrade its products, improve its processes and adapt its business models for the digital age.
It was noted by the DEI strategy that some research institutions were providing their expertise
and access to advanced facilities to industry and that private companies (large and small)
have useful products and services for the digitalisation of processes, products and services.
It was also noted that incubators and accelerators existed to help start-up companies grow
and scale and that cluster organisations, industry associations representing individual
companies, were already playing an important role with respect to sector-level innovation.
Furthermore, investors are already providing access to finance and local authorities are aware
about the importance of innovation and are developing their smart specialisation plans.
But the view was that these initiatives have been sporadic and uncoordinated.
The Digital Innovation Hubs are different because they will bring all these actors together
within a particular region and develop a coherent and coordinated set of services to help
companies (especially small companies or enterprises from low-tech sectors) that have
difficulties with their digitalisation. They 'speak the language' of SME businesses, understand
their needs and bridge the cultural gap between them and innovators. They offer a one-stop-
shop that is more than just technology focused. They provide a holistic view of digitalisation
as a company-wide transformation process which enables companies not just to identify
technical solutions but to finance and nurture innovations to a level that they may actually
be implemented and contribute to improved competitiveness.
LEADERSHIP
Although the UK has leading-edge R&D and some world-class sectors in the application

of digitalisation, there is no clear narrative setting out what we already do well and the

significant opportunity that exists for UK industry and the country from the faster

development and adoption of industrial digital technologies.
This means our strengths are not recognised internationally, reducing potential inward

investment. And we are failing to inspire current and future workers with a vision of how

they can secure high-quality jobs in a thriving part of the economy.
We have centres of technical expertise in, for example, the Catapult network. But capability

is fragmented with no single hub coordinating each technology to provide a focus.
The rapid emergence of digital technologies has transformed some areas of consumer
services, from music and video streaming (Spotify and Netflix) to finance (challenger banks
105 Roundtable on Digitising European Industry: Working Group 1 - Digital Innovation Hubs
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and cryptocurrencies) to the shared economy (Uber and Airbnb). But UK industry has been
relatively slow in understanding the significant opportunity that it affords.
This is partly down to a lack of national leadership. A 2016 report by PwC found that the biggest
challenges for UK firms in adopting IDT remain a lack of digital culture, talent, and clear
digital operations vision. There is no national strategy or organisation that stands as a point
of contact for IDT leadership. Market information about the opportunities available through
the industrial adoption of digital technologies has been mixed and confusing. This lack of
clarity and cohesion makes it difficult for the long tail of industrial companies to recognise
the benefits of IDT adoption.
There is currently no coherent, centralised and easily accessible model for business
engagement. Nor is there a recognised source of independent advice about IDT. But creating
one would help overcome the barriers to more widespread IDT adoption. Such a resource could
provide leadership, distribute information, support the development of management skills and
coordinate commercialisation support.
This is needed because the slow adoption of ID technologies, especially among SMEs, is largely
due to a lack of information and poor management practices. According to the Engineering
Employers Federation, nearly a third (31 percent) of manufacturers or their members understand
or are familiar with the concept of the Fourth Industrial Revolution. Less than half (42 percent)
were unfamiliar, the remaining being undecided.106
In Germany, almost half the companies in the manufacturing sector (46 percent) use Industry
4.0 applications, while another 19 percent have specific plans to implement them, according
to a recent Bitkom survey of 559 industrial companies with more than 100 employees. Thus,
nearly two-thirds of German industrial companies are already active in the Industry 4.0 sector.
It is logical to assume that a common brand unifying the ecosystem helps to encourage this
level of uptake and builds trust in the technology.107
In the US, where the 'industrial internet' is a mainstream and common brand, 53 percent
of manufacturers said adopting Industry 4.0 is a priority. Respondents in cost-sensitive
industries like semiconductors, electronics, oil and gas are the most eager to move forward
80 percent of these businesses say Industry 4.0 is a priority.108
At present, there is no unifying national brand or campaign for industrial digitalisation in the
UK. There are varying overlapping initiatives to raise awareness either from trade associations
(notably EEF)109 , from regional institutions like Liverpool 4.0110 or from NDPBs such as Innovate
UK.111 This mirrors the same fragmented ecosystem that this review is also addressing.
Contrast the UK position with Germany Trade and Invest (GTI), which is responsible for driving
digitalisation by owning, developing and coordinating the Industry 4.0 brand, which is promoted
nationally and internationally.112 In fact, most developed economies have national campaigns to
actively promote the adoption of digital technologies in industry. See, for example, the description
of Made in China 2025 and America Makes in Appendix 2.
106 EEF Manufacturing Ambitions Survey 2016
107 Bitkom; Industry 4.0. June 2016
108 BCG; Sprinting to Value in Industry 4.0, Dec 2016
109 EEF: The 4th Industrial Revolution (4IR): A primer for manufacturers 2016
110 http://lcr4.uk/
111 https://innovateuk.blog.gov.uk/2017/03/28/what-does-the-fourth-industrial-revolution-4ir-mean-for-uk-business/
112 https://industrie4.0.gtai.de/INDUSTRIE40/Navigation/EN/industrie-4-0
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PART 4
HOW CAN
INDUSTRY AND
GOVERNMENT
WORK TOGETHER
TO ADDRESS
THESE BARRIERS?
7
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Part 4 - How can industry and government work together
to address these barriers?
Our review has identified the three key themes of adoption, innovation, and leadership which
are preventing the UK from achieving its vision of being a global leader in the development
and adoption of IDT by 2030.
In partnership with government, academia, research organisations, and industry, we are
proposing the following three recommendations to resolve the issues we have identified
(we are also proposing a fourth supporting recommendation which addresses enablers).
These recommendations come as a package. Together, they are intended to establish the right
conditions for the UK to become the global leader in industrial digitalisation by 2030.
This part of the report describes how our recommendations would be realised (see also Figure 25
for a depiction of the framework we envisage). Broadly, implementation would comprise:
A national Made Smarter UK Commission, underpinned by two key implementation bodies

responsible for skills and technology.
A National Adoption Programme aimed at SMEs to increase the uptake of IDT.
Regionally distributed Digital Innovation Hubs focused on technology diffusion, adoption

and commercialisation.
Focused IDT research centres with the goal of keeping the UK at the forefront of global

R&D activities in IDT.
ADOPTION AND INNOVATION.
The UK needs to adopt IDT faster, especially within
small and medium-sized companies. This can only
be achieved through the coordinated leveraging of UK
expertise and assets; a focus on solving large-scale
industry problems; and targeted support to address
barriers to adoption of which the lack of skills is the
major issue.
Recommendation 1
Create a significantly more visible and effective ecosystem
that will accelerate the innovation and diffusion of IDTs
Recommendation 2
Upskill a million industrial workers to enable digital
technologies to be deployed and successfully exploited
Enablers
Implement a series of enablers to address key barriers
to adopting IDTs
LEADERSHIP
The UK needs co-ordinated, market-focused IDT
leadership at a national level.
Recommendation 3
Inspire the UK's next industrial revolution by providing
stronger leadership, branding and messaging of the UK's
ambition to be a global pioneer in IDTs
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MADE SMARTER COMMISSION (MSUK)
A Public Private Partnership responsible for delivering the recommendations from the Industrial Digitalisation Review (IDR)
IDT Ecosystem Strategy and Support Implementation Groups (SSIG)
Delivering a more effective IDT Ecosystem responsible for Strategic Direction, Governance, Coordination and Implementation
National Adoption Programme
Especially focused on SME's Understanding the journey, rolling out diagnostic and business support, delivery into
industry base by local centres, developmentof processes and tools to help with adoptions. Development and
management of UK Digital Demonstrator Platform
Digital Innovation Hubs DIHs
Led by Catapults, Universities or Technology Institutions
Distributed Hubs & Demonstrator Maintenance
Collaborative R&D programmes, proof of concepts, prototypes, open innovation events.
Developing new digital business models.
Technology ecosystems incubator and acceleration programmes.
Maintenance of technology digital transformation demonstrator programme
Transformational Digital Demonstrator Programmes
8 x Challenge Led Demonstrators
Low cost legacy system Digitalisation, Digitally aided deign, Digital Twins, Flexible automation,
zero defect Additive Manufacturing, Distributed Manufacturing, Digital Supply Chains, Digital Driven Business Models for
Manufacturing equipment, Digital circular economy
Digital Research Centres (DRCs)
Led by Universities, Research institutions and Catapults 5 x Emerging Technology focused DRCs
to advance state of the art research, innovation and development.Technology Road-mapping, Supply chain
development, feasibility studies, R&D, Technology ecosystems linking start-ups, SME's, Corporates and Academia
IDT Skills SSIG
IDT Ecosystem SSIG
IIoT & Connected
Supply Chain DRC
Robotics &
Cobotics DRC
VR/AR
DRC
AM/ML & Data
Analytics DRC
Additive
Manufacturing
DRC
Figure 25
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MADE SMARTER. REVIEW 2017
Recommendation 1
Create a significantly more visible and effective
ecosystem that will accelerate the innovation and diffusion of IDT

Urgent action is required to unlock the opportunities of IDT and diffuse the technologies across
UK industry. This action must address two principal needs:
1. To increase the entry of new business into the market, and grow businesses which become

carriers of new technology. OECD research over recent years has highlighted the role of new

and young firms in net job creation and radical innovation (OECD).
2. To implement productivity-raising IDT in established companies. An important issue is

that small companies tend to use key technologies less frequently than larger companies.

In Europe, for example, 36 percent of surveyed companies with 50 to 249 employees use

industrial robots, compared with 74 percent of companies with 1,000 or more employees

(Fraunhofer, 2015).
Any policies in this area must avoid simply focusing on the predictable early adopters.
These tend to be multinationals, high-technology start-ups, or the small number of companies
already using technology. Instead, policies must target the larger number of 'harder to reach'
SMEs and avoid focusing on restoring lost manufacturing jobs. It must be understood that
upgrading the ability of manufacturing communities to absorb new production technologies
will take time (five to ten years, or more). That is why programmes to diffuse IDT need to be
resourced with the longer term in mind (OECD).
Recommendation 1 calls for a significantly more visible and effective ecosystem that will
accelerate the innovation and diffusion of IDTs. This can be realised in four ways:
1.1 Establish a new National Adoption Programme to support SME adoption.
1.2 Create a network of Digital Innovation Hubs to demonstrate the transformational

potential of IDTs.
1.3 Implement large-scale Digital Transformational Demonstrator programmes to address

sector-specific and cross-cutting industry challenges.
1.4 Make the UK a global leader in IDT R&D by bringing together expertise in

Digital Research Centres.
NATIONAL ADOPTION PROGRAMME
Recommendation 1.1
Invest in a new National Adoption Programme (NAP) to accelerate the development
and diffusion of IDT through focused support to SMEs in the UK regions. The programme
will be regionally owned by Local Enterprise Partnerships and delivered by accredited
regional partners. Investment will be targeted at strengthening both the capability and
capacity of regional advisory services in digital technologies. It will provide kick-start
funding for companies to leverage assets and expertise within the ecosystem and will
involve increased mentoring from industry, as well as stronger interaction with upcoming
talent within universities through focused projects and placements.
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We are recommending an ambitious new National Adoption Programme (NAP), which will
be delivered by industry and government, with a goal of increasing and accelerating the
development and adoption of IDTs by manufacturing SMEs and across supply chains within
the UK regions.
The proposed operating model would be proven through a six-month pilot project in the North
West of England prior to its rollout to other regions. There are two principal reasons for the
pilot. Firstly, it will enable action to commence quickly rather than wait for a programme to
be formulated at a national level. Secondly, it will refine and de-risk the overall programme,
and create assets (training material, processes, etc.) to facilitate wider deployment.
The goals of the NAP would be to:
Increase SME engagement by a factor of 10. This would equate to
3,000 SMEs engaged in the pilot programme (with 1,000 receiving intensive support),
33,000 SMEs engaged during the rollout (with 11,000 receiving intensive support).
Increase the number of manufacturing SMEs accessing research, innovation and

catapult centres.
Increase collaboration between university students and SMEs.
Enhance supply chain competitiveness through the application of digital technology.
Increase the number of new start-up companies.
As part of the sector deal, industry and academia will provide:
Active support to companies within their supply chains, peers and start-ups.
Support for the upskilling of supply chains in conjunction with the growth hubs.
Access to facilities and showcase events to see IDT in action.
Access to case studies and training materials.
Access to interns and student placements from universities, raising awareness

of career prospects in SMEs and raising the absorptive capacity of participating SMEs

to drive innovation.
SME mentoring by leading industrial organisations.
Leadership to manufacturing champions networks.
Leadership to peer networking.
Access to business problems and data and support for co-development with start-ups.
Support for the upskilling of existing advisory services.
Government will:

Invest in the local advisory service by:
Recruiting additional IDT advisors to provide specialist support across the region

to both SMEs and existing advisory staff (including support for upskilling);
Training/upskilling of existing advisors;
Administrative support for the scheme;
IDT awareness and engagement events for SMEs.
Fund an SME IDT adoption and innovation 'kick-start' scheme which would provide

specialist interventions to de-risk proposed investments and new product development.
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While initial investment will be required during the first three years of the programme, an exit
strategy will be developed to reduce reliance on central funding as IDT awareness increases
and the digital innovation support network becomes more visible.
The NAP would establish a common UK framework which builds on best practice initiatives
(such as Liverpool LCR 4.0) and prior learning, incorporating the strengths of previous support
interventions such as the Manufacturing Advisory Service. It will complement and reinforce
existing regional support structures, rather than adding new layers, and provide the necessary
focus on IDT. The successful transformation will involve the engagement and coordination of
a very broad stakeholder group (see the table above). Only through the collective coordination
of the energies of this group, channelled through a common transparent and easy-to-navigate
process, will the NAP's goals be achieved.
STAKEHOLDER
ROLE
Government
Enduring policy framework and funding
LEPs/Growth Hubs
Coordination, account management
Professional bodies
Trusted advisor promote, provide awareness
Accountants and banks
Trusted advisor promote, provide awareness
Industry
Leadership, mentoring/support, promotion, provision
of training, case studies, datasets
Peers
Support, experience, case studies
Academia
Graduate short-term industry programme, knowledge-
transfer programmes, delivery of projects
Digital Innovation Network
Access to demonstrators/technical experts
Be the Business
Provision and management of the digital
engagement platform
Third-party advisors/private sector
Specialist advisory services accredited by LEPs
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Why the North West of England?

The North West is one of the UK's largest regional economies. It also has the greatest
manufacturing output, producing 9 percent of the UK's total exports, with activity
in a wide range of industrial sectors such as aerospace, automotive, chemicals,
biomanufacturing and agriculture. It has a higher proportion of workers in low-paid
employment than the national average. In 2012, GVA per job in the region was 39,210
compared with 45,100 for the rest of the country. Underinvestment in the North West's
infrastructure, skills base and business support and innovation networks, has left much
of the region struggling to compete in a rapidly advancing global economy.

The region has a recognised strategy recently reinforced in the Science Innovation
Audit: "To establish a Northern Powerhouse Advanced Manufacturing Innovation
Corridor in which the widespread adoption of Industry 4.0 and the embracing of
innovation, transformational skills and management, internationalisation, coupled
to talent development and retention in the region, drives productivity growth to world-
class levels".

The region contains a range of different local authorities operating different
administrative models, which will prove the operational flexibility of the NAP.
The regional organisations involved in business support work collaboratively and
have actively supported our review and are motivated and ready to support the
pilot programme.

What's more, the region is the initial pilot area for the 'Be the Business' initiative
which is recognised as the umbrella productivity initiative in which IDT is a key
enabling capability.
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Ultamation

Ultamation, an award-winning company based in the Liverpool Science Park,
specialises in home automation solutions that are used to manage heating, lighting,
energy, security and audio/video. Ultamation offers high-quality, bespoke services
from initial concepts, through design and installation to handover of the completed
project with the client. They base their success on being able to offer their customers
something unique.

Ultamation are therefore always looking for ways to integrate new technologies.
The potential applications of augmented reality (AR) sparked excitement among the
team, for example. They started exploring an AR-based control interface which could
cover numerous applications, including smart homes and commercial meeting spaces.

The Virtual Engineering Centre (VEC) worked with Ultamation to create a prototype
which could control connected devices in a smart home setting. The interface allows
users to interact with multiple devices by holding up a smart phone or tablet to face
their appliances, or even simply interesting features around the home. The application
will recognise objects such as a TV and can trigger the relevant menu for the
controlling functions like power, volume and channel selection.

Ultamation is delighted with the work completed and has sought professional advice
for the potential patent application of their AR control interface. The prototype has
been handed over to the Ultamation development team, who have since enhanced
the application with emerging AI technologies. The company is very excited about
the potential of this AR technology, and will look at introducing it in future projects.
http://lcr4.uk/lcr4-case-studies/
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THE NAP DIGITAL JOURNEY
Figure 26 provides an overview of the 'digital journey' that we envisage the NAP delivering.
It comprises four stages: Connect, Engage, Participate, and Champion.
Connect
Promoting awareness and stimulating engagement with the SME community is critical to
IDT adoption. Our review found that a poor understanding of the opportunities, an incorrect
perception of costs and technical/security risks, as well as a lack of impartial advice and
a lack of resources were hindering adoption.
One of our key recommendations is a national campaign to increase awareness of not only
the opportunity but also the ease of adoption and availability of support. The messaging will
be clear, understandable and relevant. Awareness will be supported by promotion from trusted
advisors, such as accountants/banks, industry trade bodies/councils, and professional bodies.
IDT ADOPTION FRAMEWORK
Organisation
Complex landscape e.g. 133 legacy schemes in Cheshire
Geographically bounded 'Post code' based
Decisions not devolved targets set from the centre
Messaging is not focused on end users ' Industry 4.0'
Focus on employment rather than productivity
Advisory quality Skills are in short supply
Low Business priority
Uncertainty & risk is as important as funding
Lack of skills / awareness of Digital at all levels in firms
High % of the business are not forward looking i.e. lack of plans etc.
Cultural difference between technology companies and 'traditional'
manufacturing Industry
Barriers
Current Issues
Connect
Engage
Participate
Champion
Increase in level of engagement
Messaging needs to be relevant
Needs to be promoted by
trusted advisors banks/
accountants
To appeal to all entry points in

the firm not just owner/CEO
Need to overcome fears
business change / disruption/

loss of roles
Access needs to be consistent
and simple i.e. 1 Common
front door
Tool
- Be the Business Portal
- Benchmark tools
National approach but local feel
Simple/ relevant conversations
Respect company sensitivities
Rounded practitioners to
provide appropriate advice
Relevant Case studies
Roadmaps
Tool
- Knowledge Portal, Case
Studies, Technologies etc.
Active quality support
- Business
- Skills
- Technical
Utilise variety of tools
- Knowledge transfer network
- Manufacturing Champions

Network
- Local Skills develop't

(academic partnerships)
- Certified advisors
- Incubation centres
IDN
- Access to Specialist


Institutions / Company

facilities
Create digital role models
Create Digital advocates
Mentoring of start ups
Tools:-
- Promoting at industry events
- Providing credentials
- Supporting best practice tours
Account Management
Active management of companies through the journey
Sufficiently resourced - Need 'boots' on the ground

Sufficient Quality of advisors 'Quality rather than quantity'

Local flexibility to determine the most appropriate support package
recognising opportunity
- Resources focused on high potential scale ups
- Most appropriate support - expertise to sign post appropriately
Transformation Journey
Figure 26
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Online enquiries and guidance will leverage the 'Be the Business' digital platform to promote
awareness, identify points of contact and provide initial diagnostic tools.
Engage
Beyond promotion and awareness, additional incentivisation is required to achieve the level
of SME engagement that will lead to a meaningful impact on industrial output. Targeted kick-start
funding has been demonstrated to be an effective mechanism to motivate companies to engage.
This provides SMEs with the opportunity to partner with specialist accredited advisors (funding
between 10 and 30 days) such as a university or research institution. They can help engage, for
example, on a technology feasibility study, or the analysis of technology transfer. This de-risks
IDT adoption and new product development and provides the SME with unprecedented access
to skills and assets. For example, Ultamation (see case study above) would not have been able
to develop its innovative new AR product without leveraging the world-class facilities and
expertise available at the Virtual Engineering Centre.
Kick-start funding incentivises SMEs and academia/support organisations to come together,
and results in longer-term relationships. The benefits of the scheme are that companies know
there will be dedicated and tailored support, as well as access to world-leading technology,
and this will act to de-risk investment. Example schemes include LCR 4.0 which has actively
assisted 52 SMEs in six months, delivering a mix of productivity improvements and new
product development, and an ERDF assist programme which engaged 526 companies in the
creative and digital industries promoting technology fusion.
One of the keys to engagement will be to invest in impartial guidance and support for SMEs
on their digital journeys. The level of effort and timescales required to connect with the
large and diverse SME community should not be underestimated. However, there have been
exemplar programmes which provide the necessary learning. Wave 2 Growth Hubs (W2GH)
was a 32 million programme which funded 15 growth hubs across the UK, engaged 67,000
businesses, directly supported 5,700 businesses, created 4,100 jobs, and leveraged over
75 million in private investment.
The proposed programme will have locally agreed targets and the discretion to tailor
programmes/support levels for SMEs according to the nature of the problem being addressed
and level of opportunity and absorptive capacity of the organisation.
Participate
NAP advisors will convert engagement into participation. With support from industry, the
Digital Innovation Hubs, and research and academic partners, the NAP will have a number
of levers to pull in helping SMEs adopt IDTs. These will include:

Access to specific capabilities promoted via the Digital Innovation Hubs
(for example, specialised manufacturing equipment for prototype development
or production manufacturing).
Access to academic research assistants.
Technology demonstrators.
Access to case studies/training materials.
Access to specialist technical resources within the Digital Innovation Hubs.
Access to interns/student placements from universities, thus raising awareness

of career prospects in SMEs and raising the absorptive capacity of participating

SMEs to drive innovation.
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SME mentoring by leading industrial organisations.
A manufacturing champions network.
Peer networking.
Third-party accredited specialist suppliers.
Access to technology start-ups for co-product development.
Specific examples of SME support projects in the pilot region include The University
of Central Lancashire's Innovation Clinic which brings industry and academic expertise
together with state-of-the-art facilities and technology to provide support at all
stages of the product development process. Lancaster University's Centre for Global
Eco-Innovation (CGE) provides in-depth R&D support to help SMEs develop new
eco-innovative products, processes and services for global markets, with a strong
focus on advanced manufacturing. And the Lancashire Forum, delivered by Lancaster
Management School (LUMS), develops a network of like-minded SMEs, better equipped
to embrace innovation as a driver of productivity and growth within their businesses.
Champion
Through the successful adoption of IDTs, the NAP will create advocates for digital adoption.
This will add momentum to the programme and increase the capacity of the network to
support a greater number of SMEs.
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HOW DO OUR PROPOSALS ADDRESS THE BARRIERS TO IDT ADOPTION?
The following table sets out how our recommendations address the barriers to IDT adoption that we have identified.
BARRIER
PROPOSED SOLUTION
The support landscape is confusing, geographically differentiated,
and subject to short-term, initiative-driven change.
Companies lack understanding of where they stand in comparison to their
peers and how they can start their digitalisation journeys. Nor do they
understand if funding is available to de-risk their investment.
Harmonised single national
framework, clear signposting,
route map supported by consistent
messaging and advice.
The quality of advisory support provided to SMEs varies throughout the
regions due to lack of skills in IDT.
Specialised technical and market knowledge is costly and, as a result,
not all businesses have the basis for making informed technology
investment decisions.
There is no recognised independent source of advice about what
solutions are available, and which are appropriate to adopt.
Investment in skilled IDT advisors
and upskilling existing advisors,
supported by a network of
excellence within the innovation
network.
Many SMEs have a low absorptive capacity to update production processes
and undertake the development of new products.
SMEs do not have the time, capacity or funds to partner with universities
or research and technology organisations.
SMEs are risk averse and see investment in innovation as something which
could greatly affect their financial performance and even jeopardise
their survival.
Access to state-of-the-art research, engineering expertise, and equipment
is not typically readily available.
Access to kick-start funding,
student placement programmes,
industry mentoring and Digital
Innovation Hubs.
Businesses also face a skills shortage, particularly digital engineering
capability, hindered by a fragmented skills system and a lack of systematic
engagement with industry.
Targeted training programmes,
access to training platform,
access to expertise in Digital
Innovation Hubs.
Some larger firms underinvest in their supply chains due to fear
of helping competitors.
Larger companies are not exploiting the creativity and agility of small,
research-intensive manufacturers which could be a source of innovation.
Lack of SME involvement in innovation activities impacts the long-term
competitiveness of advanced manufacturing sectors that require continuous
innovation and kick-start funding.
Technology companies find it expensive to deal with large numbers of SMEs.
Industry commitment through the
sector deal. Challenge programme
demonstrators which encompass
supply chains.
Digital Innovation Hubs will
provide a conduit between
technology providers (start-ups)
and manufacturers (SMEs).
Companies lack knowledge of the potential of new technologies, particularly
where those technologies originate in other sectors.
Comprehensive knowledge of
cost-effective solutions, like the
$700 Raspberry Pi connection
kits being developed in Japan
(see Appendix 2 Industrial Value
Chain initiative (IVI)).
The high level of legacy infrastructure due to a low level of investment in capital
equipment, the adoption of new technologies, and process improvements.
Opportunities developed and
shared within the Innovation
Network, through IDT advisors,
supported through the online
platform.
A lack of standards and interoperability.
Concerns over data breaches and cyber-standards.
Cyber-awareness and standards
programme proven through
demonstrators.
Sharing of information resulting in a loss of IP.
Establishment of data trusts.
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Air Quality Research

Air Quality Research Ltd (AQR) cleans fluids using a sustainable, environmentally friendly
and cost-effective approach. The company develops novel, chemical-free, energy-saving
products for controlling bacteria and reducing chemical contamination, providing safe
fluids for use in the home and in industry. To clean water as effectively as possible, AQR
needs to ensure that all stages of its processes operate efficiently and correctly and all
equipment is safe and well managed.

AQR was interested in how a computational fluid dynamics (CFD) analysis could examine
issues concerning fluid flows and suggest to AQR where improvements in its own processes
could be made. But AQR lacked sufficient digital skills to undertake the CFD work.

The Virtual Engineering Centre (VEC) helped AQR investigate a number of different
designs which would optimise its cleaning process and enhance performance. Using
simulation, the VEC demonstrated the importance of digital skills and which potential
changes to product design could be made. Testing different designs through a digital
platform allowed for quick, easy and cost-effective changes to be made without
the costs and resources required for a physical prototype. In just one hour, the VEC
completed work for AQR that would have normally taken between 3 and 4 days.

AQR is conducting field trials to assess the design's performance in the disinfection of
rainwater and industrial wastewater, ensuring this is then made into safe re-useable
water in the most cost-effective and regulatory-compliant manner possible. Once all
testing has been completed, AQR will be able to confidently take their improved product
design to a supplier to manufacture and then straight to the market.

Through better testing and by minimising the product-to-field time, AQR feels confident
in bringing a more successful product to fruition. The new product can also be applied
to many other elements, and AQR is now considering how their process can clean milk
which could replace the larger equipment the dairy industry currently uses. http://lcr4.
uk/lcr4-case-studies/
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Digital innovation assets in the North-West pilot region

The Advanced Manufacturing & Automation Centre (AMAC) in Blackburn delivers
training and apprenticeships for the manufacturing and engineering industries. Edge Hill
University's 13 million tech hub, the CAVE (Computer Augmented Virtual Environment)
provides cutting-edge facilities and systems to students and businesses. The
Collaborative Technology Access Programme (cTAP) is a 11.4 million capital investment
at Lancaster University that will provide industry with managed access to state-of-the-
art technology facilities, equipment and expertise commercially unavailable elsewhere.
And the Engineering Department at Lancaster University, through its knowledge
exchange team, Lancaster Product Development Unit (LPDU), offers physical resources
and the expertise of academics, students and engineers.

The recently opened Academy of Skills and Knowledge is a 15.6 million investment by
BAE Systems at Samlesbury, providing the aerospace industry with the skills to continue
engineering and manufacturing military aircraft. The University of Central Lancashire's
(UCLan) Engineering Innovation Centre (EIC), is a 40+ million project developing
the region's capabilities in engineering, which will work with local SMEs and primes
within the advanced engineering and manufacturing sector. The proposed North West
Advanced Manufacturing Research Centre (NWAMRC) is an industry-focused centre of
excellence for innovation, product development and manufacturing skills for Industry
4.0, led by Sheffield University's AMRC, part of the High-Value Manufacturing Catapult.

The University of Manchester (UoM) School of Computer Science is among the largest
and most highly rated research schools in the UK (4th in the Research Excellence
Framework 2014), with major strengths in Big Data, artificial intelligence and novel
computer architectures.

And the UoM's Data Science Institute brings together more than 250 Big Data
researchers from across the university, with strengths in data analytics, machine
learning, statistical inference, numerical algorithms, information management, and
cybersecurity (particularly cryptography). UoM is also a lead partner in the N8 High
Performance Computing Centre which operates Polaris, one of the 250 most powerful
computers in the world.

Sci-Tech Daresbury has over 1,200 people onsite, including more than 400 scientists,
working in fields such as accelerator science, high-performance computing, simulation
and data analytics and sensors and detectors. It operates large-scale facilities used
by many UK universities and, increasingly, by industrial companies like IBM, Unilever,
Bentley Motors, and BAE Systems. It includes STFC Daresbury Laboratory, the Hartree
Centre, the Virtual Engineering Centre, the Cockcroft Institute, 3M Buckley Innovation
Centre (3M BIC), and more than 100 high-tech companies employing over 500 people
in areas such as advanced engineering, digital/ICT, biomedical and energy and
environmental technologies. These companies vary in size, from start-ups, to more
mature SMEs, to international corporates such as IBM and Lockheed Martin. About one
in six are global multinational companies.

The Hartree Centre, at Daresbury, is one of the world's most powerful supercomputing
and data analysis infrastructures, and a leader in the Big Data revolution. It is helping
UK industry gain a competitive edge by harnessing the power of Big Data, analytics,
visualisation and data-centric cognitive computing. Since 2013, it has received
172 million in government investment plus 200 million from IBM to establish a R&D
programme that will create the next generation of data-intensive systems bringing
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people and skills together with technology to support business developments. The
Centre also has a long-term partnership with Unilever to support its R&D processes.

The Virtual Engineering Centre, is an established industry-focused impact centre for
digital innovation, research and digital skills development. The Centre comprises a
multidisciplinary team of engineers, computer and artificial intelligence scientists
and industrialists supported by academics at the University of Liverpool. It provides
expertise and digital facilities to a broad range of sectors to help them develop their
digital strategies, supporting product and process development to increase global
competitiveness. Key industry partners include Bentley Motors, Aston Martin, JLR,
Airbus and AMEC Foster Wheeler, Rolls Royce, EDF, Sellafield (energy), and Hitachi Rail,
as well as a number of utility-focused organisations. The Virtual Engineering Centre is
leading the LCR4.0 project supporting over 300 SMEs in the adoption and development
of Industry 4.0 technologies, for growth and new product generation. In partnership with
the Hartree Centre, the Virtual Engineering Centre offers a unique UK facility combining
expertise and easy access to the latest transformational digital technologies, including
virtual test frameworks for collaborative innovation (e.g. BEIS digital nuclear reactor
design, high-performance computing, cognitive computing and Big Data analytics).

Sensor City is a collaboration between the University of Liverpool and Liverpool John
Moores University and is a flagship University Enterprise Zone. It enables industry and
academic partners in a range of sectors to translate their innovative sensor concepts
into commercially viable solutions. It provides technical expertise, business support and
an international platform needed to collaborate, fund and promote sensor solutions to
a global market. Positioned at the intersection of industry and academia, Sensor City
facilitates connectivity and fosters progress, helping partners capitalise on the growing
sensor revolution.

The 3M Buckley Innovation Centre (3M BIC) is a wholly owned subsidiary of the University
of Huddersfield. It is a state-of-the-art building offering a one-stop shop for businesses
that want to experience dynamic growth through its bespoke, innovation-led business
model. The 3M BIC promotes business growth and open innovation, and facilitates
business-to-academia collaboration. Technical, professional, academic, and business
support go hand in hand. SMEs get a foot in the door to the Centre's own capabilities,
as well as its main partners, the University of Huddersfield and NPL North of England,
and associated businesses, tenants, and network members.

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MADE SMARTER UK DIGITAL INNOVATION HUBS
Recommendation 1.2

Scale the support provided by UK innovation centres through a new national innovation
programme. This would bring together a network of existing distributed Digital
Innovation Hubs (DIHs) with additional investment to underpin targeted MSUK activities
and interventions to demonstrate how the industrial and manufacturing sector can be
positively transformed by IDTs. The DIHs and their spokes will be strategically selected to
best serve the challenges of local business communities. The MSUK Commission will be
responsible for the selection and governance of the MSUK innovation activities delivered
by the DIHs and local spokes to ensure maximum impact.
Through a National Innovation Programme, we will seek to create a world-leading innovation
ecosystem for IDTs in the UK which will promote disruptive technologies in an industrial
setting. We will do this through a targeted coordination and leveraging of existing resources
and assets in academia, research organisations, government laboratories (NPL), Catapults,
and industry. This will create a network of 12 connected, regionally distributed Digital
Innovation Hubs (DIHs) based on regional needs, characteristics and industrial specialisms,
which will be readily accessible by SMEs (see above for a list of the assets identified in the
North West of England). The National Innovation Programme will be coupled with the National
Adoption Programme, offering businesses a suite of support and innovation mechanisms
relevant to the current stage of their digitalisation journeys.


LEVELS OF SUPPORT
CUSTOMER PROFILE
VALUE PROPOSITION
KEY DELIVERY PARTNERS
LEVEL 1
Understanding the Journey
I don't know what this is all about, it
feels like a sales pitch from large
corporations and I don't understand
the benefi ts
I don't know what this means for me
or whether it is even relevant
EXPLAIN, DIAGNOSE, SIGNPOST
Awareness raising
Diagnostic tools
Signposting and brokerage
KICK START FUNDING
National Adoption Programme
Digital Innovation Hubs
& Local Spokes
LEVEL 2
Planning and executing my
Journey
I know what to do, but I need to
understand the area in more detail
I know what to do, but how do I justify
investment?
Even if I justify it, there is still a lot of
risk involved!
I am now in an evolutionary journey,
but now I want to be disruptive and I
don't know how
DEMONSTRATE, INTEGRATE,
DERISK, ADOPT
Live demo visits
Digital Business Models
Transformational Demonstrator
Framework
CATALYST FUNDING
Digital Innovation Hubs
LEVEL 3
Evolving the ecosystem
have a vision of what I want to do long
term but I don't know if the required
technologies are being created
I have a vision of what I want to do
long term but there is not an
ecosystem available to support it
ADVANCE, CREATE, SPIN-OUT
Technology Roadmapping
Feasibility projects
Technology ecosystem incubator and
accelerator
INCUBATION FUNDING
Digital Research Centres (DRCs)
Figure 27
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The DIHs will operate regionally, on hub and spoke models,
connecting and harnessing the existing ecosystem to ensure
that any UK business has access to expertise, either locally
or via the network depending on the business challenge.
There will be strong links between regional Hubs to facilitate
access to additional facilities. For example, a SME may
require access to industrial specialisms from another region,
fill missing competences, or collaboratively develop new
services and tools to address sectoral issues.

Technology developers and users will come together with the
DIHs to integrate, test, demonstrate and diffuse IDT. This could,
for example, be coordinated by Digital Catapult (including
its regional centres across the UK) and the High-Value
Manufacturing Catapult, with input from other members of the
Catapult network. Furthermore, the spokes will be built upon
incorporating a number of existing institutions and networks
from existing universities, manufacturing and industry
research hubs and innovation institutions.

The projects within the DIH programme will address key
challenges and opportunities identified by business. They
will develop a cohesive national capability and infrastructure
that demonstrates how the industrial and manufacturing
sector can be positively transformed by digital technologies,
while addressing long-term business drivers.
The DIH programme will be built with industrial technology
users from the current manufacturing base and innovators
from the tech sector and will be underpinned by multiple
integrated digital technologies. Its activities will include
collaborative R&D programmes (in partnership with the Digital Research Centres), proof
of concepts, prototypes, open innovation events, developing new digital business models,
technology ecosystem incubator and accelerator programmes and competitions, as well as the
maintenance and development of the Transformational Digital Demonstrator programmes (see
following pages). The DIHs will provide a meeting point for the technology and manufacturing
communities, providing real industry challenges for the tech community to address, as well
as demonstrations of the applications of IDTs, to accelerate diffusion among the industry base.
This will help companies beginning their Made Smarter journeys understand the following:
Which companies work in the application area they have identified and where can they

see the technology being applied?
Are any of these demonstrators being applied in the same industry sector they work in,

or are they from other sectors?
Is there a clear articulation of the barriers that the demonstrator had to overcome,

and of the benefits that have been derived?
What alternatives were considered and why was the final solution chosen?
From where did the company get their advice and funding?
Map of digital innovation hubs and spokes
Figure 28
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While the DIH network will connect and leverage capabilities from existing infrastructure,
it will also create new capacity and new services that will ensure an agile interface for both
technology users and developers in line with the pace of change of IDTs and the markets within
which they are being exploited. The emphasis will be on the support of start-up businesses
with funding through the catalyst programme.
In summary, the 12 regional DIHs will:
Operate on a hub-and-spoke model, with national coordination through the Hubs.

House a network of physical IDT demonstrators. The National Adoption Programme
(see previous page) and the MSUK platform (see following page) will steer businesses to
appropriate technology demonstrators where off-the-shelf solutions have been integrated
in innovative ways. These will be embedded in DIHs as interactive demonstrators, or in
industry partners as real use cases. The demonstrators will help businesses understand
how a suite of digital technologies can address their own business challenges or
opportunities. It will also identify where the solution providers are not satisfying market
demand. The identification of these gaps will drive research challenges for the Digital
Research Centres (see below).
Accelerate the pace of technology adoption in industry by defining, integrating, developing

and de-risking novel digital technologies for businesses. This mechanism will be funded

through catalyst project funding available to manufacturing SMEs to support the testing

and de-risking of their digitalisation action plans with delivery and innovation partners.
Support the development, management and engagement of 8 Transformational Digital

Demonstrator programmes.
Provide a meeting point, offering SMEs or start-up technology businesses the chance to

create demonstrators and a platform to share their solutions with the wider manufacturing

community. 'Pit stops' will be held, where manufacturing businesses can present their

challenges to technology businesses who will develop innovative solutions.
Establish a web platform to signpost innovation and demonstrators that will connect to

the MSUK leadership campaign. Build and curate virtual demonstrator content enabling

businesses to explore facets of IDT applications online.
Map emerging technology start-ups and scale-ups for inclusion in the web platform.
Offer deep-dive live demos and workshops, providing a deep-dive into a specific area,

including a live demonstration of a relevant solution, face-to-face in-depth conversations
with experts, and the opportunity to scope the project of the participant's choice. These will

be developed with the DRCs.
Support digital business models which can be used to build baseline models of

current production systems and to evaluate potential future scenarios, including the

implementation of future digital solutions. These models have the capability of making

an impact assessment of the KPIs and of calculating ROI for a particular implementation.

As a result, SMEs will be able to better justify their investment in their digitalisation journeys.
Support projects such as the AI4ME (Artificial Intelligence for Manufacturing and

Engineering programme), an initiative led by CFMS Ltd. AI4ME brings together a multi-

sector grouping of OEMs with industrial challenges to be addressed by the AI community.

The OEMs' committed funding will be matched by the National Innovation Programme

to contract AI start-ups and SMEs to develop solutions for these critical sectors. AI4ME

offers a unique vehicle to develop the AI supply chain and raise collective awareness
within UK industry.
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DIGITAL INNOVATION HUBS - DEMONSTRATE / DERISK / ADOPT
What providers and organisations can help me digtialising?
What have my peers and others in my sectors done and what benefits did they gain?
How can I exploit emergent technology to address business challenges and create new business opportunities?
Where can I see it in action?
Where can I get support to reduce the risl in development and implementation of new digital solutions?
Where can I explore the risks and opportunities associated with cyber security and interoperability?
Understand
Signpost
Explore
Derisk
Single entry point to system
irrespective of location, size
or sector
Access online app to navigate
relevant demonstrators and
providers; sector, size,
technology, geography.
Virtual demonstrators on line
Physical demonstrators
distributed nationally.
Access relevant industry use
cases
Access technology
demonstrators with a range
of applications
See the technology in action in
real world applications
For mature market ready
technology signpost to
approved providers
Support in navigating complex
market place and pick suitable
providers
Use vouchers to launch projects
Mentoring for integration
projects
Interactive technology
demonstrators
Integration of multiple

technologies to solve sector
relevant challenges
Assess technologies at range
of price points; full factory to
single machine analysis.
Work with engineering teams
to understand best fit for your
business
Demonstrate ROI
Bring digital tech businesses
together with manufacturing
businesses
Signpost to DTNs for specifc

technology development
Safe environment to integrate
and test technology
Test relevant solutions in
neutral space using existing
assets
Scale up solutions to be

factory ready
Financial support for
projects- banks
Incubators for technology
start ups
Create demonstrators for
emergent technology from
DTNs
Access to training and skills
support
Account Management
Barriers to adoption :
Recognition of opportunity and ROI as a barrier
Risk of integrating and adopting emergent technology
Risk of poor interoperability and cyber security
Active management of companies through the journey
Standardised national response and experience irrespective of entry point
Signposting tailored for company need based on diagnostic and DRL assessment
Start with business need and seek technology solutions
Figure 29
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DIGITAL TRANSFORMATIONAL DEMONSTRATOR PROGRAMMES
Recommendation 1.3

Implement a programme of large-scale Digital Transformational Demonstrators,
co-funded by industry, aimed at both sector-specific and cross-cutting industry
challenges and focused on delivering tangible results in both productivity and
sustainability. These Demonstrators will be regionally organised and will, together
with the National Adoption Programme, provide a key accelerator for the diffusion
of IDTs, especially within SMEs.
Through consultation with industry and analysis of value chains, a series of strategic cross-
sector opportunities for business transformation have been identified. Eight Transformational
Demonstrator programmes will therefore target the key barriers and enablers associated with
these opportunities. These programmes will use IDTs to build a system of innovative solutions
and platforms around real-world scenarios, to demonstrate what is possible in each area.
They will also create mechanisms to drive adoption across the UK and will develop paths for
accelerated exploitation.
The Demonstrators will be housed within the regional DIHs (see previous page) and will
help businesses understand how IDTs can address today's business challenges within the
factory environment. The programme will demonstrate how sectors and supply chains can be
transformed, and value generated in new ways:

Demonstrating the digitalisation of legacy systems (data collection, data analytics
and value quantification).

Using digital for future propositions (to develop new products or services) with use
cases that companies can use to generate their own business cases.

Driving horizontal integration (the digital thread from design to manufacture to in service
to end of life) and vertical integration (from data to actionable insight) to unlock productivity.
The Demonstrators will be industry led, using the challenges of key UK manufacturing sectors
to demonstrate the transformative opportunities that can be unleashed by IDTs.
The consultation undertaken during our review identified those challenges as being:
Digitalisation of legacy systems for different industrial scenarios, including data collection,

data analytics and value quantification.
Enabling smart factories powered by AI to achieve right-first-time quality, and optimising

operational efficiency through data acquisition, storage, analysis, interpretation, and action.
Driving horizontal integration through supply chains, including enabling and securing the

digital thread, driving collaboration but also protecting commercial interests.
Reducing time to market, streamlining and connecting the design and manufacturing

processes and enabling design capability through 'digital twin' architectures.
Flexible operations to enable the agile adoption of higher product variability or

customisation models.
Advanced automation and digitalisation of the food manufacturing sector to demonstrate

reduced waste, increased productivity, and transition to a high-skilled workforce.
Servitisation to demonstrate how the digital thread of data, from design to manufacture

to in-service use, can create new insights and support new ways of generating value from

products and IP. The Demonstrator will explore servitisation of assets ranging in value and
will include production equipment, with special emphasis on through-life engineering.
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Enabling circular economy cycles through data flows, enhancing the sustainability of
manufacturing value chains, and reducing their impact on non-renewable resources.
A Demonstrator will be developed for each of these eight areas. The result will be a portfolio
of national capabilities, infrastructure and assets that can act as a 'sandpit' for the future
adoption of technology and further innovation. Connectivity, interoperability, security,
intelligence and autonomy will run across each of the Demonstrators. And each will follow the
same structure, with a phase of definition and partner engagement, a phase of development
and a phase of industrial transfer, testing, adoption and exploitation.
The Demonstrators will address industry challenges that will be clearly defined in the
Industrial Strategy Challenge Fund (ISCF). These could be sector cross-cutting, such as
"how do we use IDTs to double productivity in manufacturing processes at the same time
as halving the environmental impact?". Or they could be sector-specific, such as, for the
food and drink sector, "how do we halve the amount of waste and increase productivity by
30 percent through increasing the level of automation, while creating more jobs than we
displace?" (see further below).
These key industry issues will be addressed by using data as a valuable asset and enabling
better connected supply chains, advanced automation (for example, in the food sector),
interoperability standards and cybersecurity. A series of business-led feasibility projects
will be executed around each of the Demonstrators, enabling a 'plug and play' approach with
businesses and the innovation community to evolve the live demonstrators and test and de-risk
technology solutions that can be directly transferred into industry. At the same time, feasibility
projects will create a better environment for involving start-ups and scale-ups, accelerating the
commercialisation of relevant technology and setting clear paths for exploitation.
Food and Drink Demonstrator

To demonstrate, via sub-sectors of the food and drink industry, the key digital technologies that have the potential to
transform the food supply chain. The challenge will demonstrate step-changes in business productivity, reduce food
waste, and show how digital technology can develop new business models for the food industry.

The project will:
1. Develop and demonstrate novel/advanced robotic technologies applicable to the food industry, especially soft
robotics which offer new routes to solve many industry issues.
2. Deploy and integrate multiple digital technologies to deliver improvements in resource efficiency and real-time
optimisation of process plant operations, including the challenge of operating legacy/mixed technology assets.
3. Develop a digital solution to meet increasing demands for traceability and standards through a complex value
chain. Current systems tend to have low digital connectivity which brings inefficiency, costs, and can be a barrier
to entry for new entrants.
4. Improved supply chain management which better aligns demand and supply to remove over-production and waste.
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Other sector impacts:
Novel advanced robotics demonstrations will address challenges relating to availability of low-skilled labour and poor
labour productivity for adjacent manufacturing sectors including: Textiles, General engineering, Aerospace.

Demonstration of connectivity of legacy equipment will enable productivity and quality gains to be realised without
wholescale capital investment, driving benefits for multiple sectors including: Textiles, General engineering,
construction.

Data traceability and access to data analytics to track logistics and democratise supply chains will also drive agility,
productivity, quality and new market opportunities in the following sectors: Automotive, Pharmaceuticals, Textiles.
GOAL
TECHNOLOGY
SPECIFIC SECTOR CHALLENGES
Food manufacture
1. 25% > Productivity - labour
and resource efficiency (including
emissions reduction)
2. High-value Employment
3. Safer working environment
4. Technology uptake
Robotics and automation
IoT
AI and machine earning
Simulation/digital twinning/
optimisation
Non-structured environment
High product variability
Food grade environment
Technology affordability
Legacy assets
Health and safety
Upskilling
Process optimisation
minimise resources
Food traceability
1. Reduced food incidents
2. Product quality
3. Increased competition
Cloud
Data analytics
Blockchain
IoT
Smart packaging
Compliance
Inefficiencies paperwork
Fraud
Reduced barriers to entry
Self-life visibility
Quality increase
Waste and emissions
1. Over-production
2. Matching supply and demand
Cloud
Data analytics, AI
Blockchain
IoT
Efficient fulfilment through
a complex supply chain
Price instability
Optimised logistics
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A NATIONAL IDT RESEARCH AND DEVELOPMENT PROGRAMME
Recommendation 1.4

Drive forward the UK's global IDT research and development leadership by bringing
together the country's expertise in networks of Digital Research Centres (DRCs)
in, initially, five technology areas: AI, machine learning and data analytics; additive
manufacturing; robotics and automation; VR and AR; and the IIoT and connectivity
(5G, LPWAN etc.). Each DRC will be charged with advancing state-of-the-art research
and innovation for industrial digitalisation in its field. The network of DRCs will build
on excellence and infrastructure in the existing UK science and innovation base, and
work with the tech developer community to drive UK leadership in the technologies that
underpin industrial digitalisation. Strategic direction and coordination will be provided
by the Made Smarter UK Commission.
A network of Digital Research Centres
A national research and development programme will be committed to keeping the UK at
the forefront of global R&D activities in IDTs. It will bring together the UK's IDT expertise by
creating networks of specialist Digital Research Centres (DRCs), each focused on a particular
technology. These DRCs would accelerate the development of their respective technologies to
fulfil market demand. It is in this space that transformative developments would be achieved,
both in technological solutions and in the development of new business models.
This new R&D ecosystem will emphasise industry challenges, and will initially focus on five
technology families, although we recognise this arrangement will need to evolve in line with
advances in the technology:
1. AI, machine learning and data analytics;
2. Additive manufacturing;
3. Robotics and automation;
4. VR and AR and visualisation; and
5. The IIoT and connectivity (5G, LPWAN etc.)
Each DRC will be charged with advancing state-of-the-art research and innovation for
industrial digitalisation in its field. The DRCs will build on excellence in the existing UK
science and innovation base and will work with the Digital Innovation Hubs (see above)
through collaborative R&D with the tech developer community to drive UK leadership in the
technologies that underpin industrial digitalisation. A number of candidate organisations
have been identified (see below).
The goals of the DRCs will be:
To significantly increase the number of spin-outs from universities and research institutions.

To create a more joined up and targeted research agenda that ensures the leading UK research
institutions collaborate, avoid duplication of effort, and align with the needs of industry.

To position the UK at the forefront of global IDT R&D, and continuously innovate while
feeding this innovation back into industry.
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To enable leading technology developers in key areas to build a strong position for UK IDTs.
To accelerate the capabilities of the UK's world-class science base into industry.
To advance the state of the art in the manufacturing application of core IDTs.
The DRC networks will be co-ordinated by the SSIG (reporting into the MSUK Commission),
which will:
Coordinate R & D across multiple universities and research centres (including the
High-Value Manufacturing Catapult centres).
Allocate funding on key projects and programmes.
Organise collaborative events and workshops across universities, industry and

relevant manufacturing organisations.
The DRCs' activities
The DRCs will each drive and deliver the research agenda within their technology domain,
and will also undertake the following activities:
Technology road-mapping. Each R&D area will build on the work of the EPSRC Network
Plus Connected Everything, with priorities determined through an expert steering group.
The areas likely to be targeted include: security, reliability/trustworthiness, sensors and
networking, advanced simulation and visualisation, and the capture of current manual
skills. The road-mapping activity will include the definition of long-term industrial challenges
and the definition and management of a research pipeline accordingly.
Supply chain development. Supply chain mapping will be conducted across the five
technology areas to identify gaps in UK supply chains, growth opportunities for UK businesses,
and the elements of the value chain that can anchor most value in the UK. Particular support
will be provided to businesses developing technology platforms or integration solutions. These
businesses could carve out a new ecosystem in the UK of 4IR system integrators where the
value add is embedded in control systems, software, and integration rather than in hardware.
Feasibility studies. Also in line with the activities currently driven by EPSRC Network Plus,
funding will be provided for feasibility studies to accelerate the execution of the research
pipeline defined by the DRCs.
Research and innovation programmes. An Innovate UK competition will be created to advance
the state of the art and accelerate research pull-through. Businesses developing technology
solutions will seek funding and collaboration through these programmes. Next-generation
technology demonstrators will be harvested as outputs of the research and innovation projects
run with the DRCs. This will refresh the offering of the Digital Innovation Hubs as the state
of the art is advanced. Technology demonstration will be a stipulation of innovation funding
awards to industry and DIHs.
Technology ecosystem incubator and accelerator. When solutions are unavailable, either in
a technical or a financial sense, engagement with the digital innovation community comes into
play through direct industry pull. Within these areas, the DRCs will encourage and promote
cross innovation and collaboration between industry, universities, start-ups and scale-ups to
spark innovation and solve real world problems directly with challenge owners. This activity
will also foster the creation of new spin-offs and start-ups, creating a safe environment for
experimentation and initial development as well as supporting the development of success
stories that can kick-start successful commercialisation. It is at this level that the greatest
risk (and greatest potential gain) would be encountered. Therefore, funding routes for this
level of activity would not only be through national support programmes, but also through
investors (either business angels or banks) with incentives to promote UK 'stickiness'.
An Incubation Funding scheme will enable tech developers and start-ups to prototype, test,
and explore applications for new technology offerings. Funding will be made available to
support incubation projects with businesses working closely with the Digital Innovation Hubs.
The DRCs' technology scope
The five technology themes identified by our review are the pillars from which industrial
digitalisation in the UK will be delivered. Each DRC will cover one of the five themes.
The following table describes the challenge and scope of each in more detail.
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Description
Challenge
Scope
Artificial Intelligence & Machine learning
AI systems are capable of accelerating, enhancing
and scaling human expertise by enabling greater
understanding of data, by making considered
arguments and recommendations and by 'learning'
over time. In manufacturing and industry it can be
utilised for predictive analytics (e.g. predicting when
equipment / tools may need maintenance), analysing
and optimising processes through data collected
across the supply chain and production lines
including enabling a closer relationship with the
consumer.
One main challenge for AI concerns the design of
learning algorithms that can work with extremely
large data sets that come from a wide variety of
sources in a wide variety of formats. In order to
effectively benefit industry there needs to be readily
available and labelled data sets for AI/ML researchers
and innovative technology companies to utilise to
train their algorithms to be more accurate and useful
to the end user.
There needs to be development of different
algorithm structures which are scalable, which can
'learn' and which can use collaborative techniques
on a number of input methodologies and file types.
The AI/ML network will look to facilitate access to
manufacturing data sets via challenge owners,
providing data test beds for AI/ML researchers
and innovators to utilise to train their algorithms
for the future and develop new business models
and opportunities.
Robotics and Automated Systems
Robotic and automation systems are capable
of mimicking and enhancing the abilities of humans
to provide greater levels of throughput, repeatability
and productivity. Systems that include advanced
cognition, perception and human robot collaboration
allowing complex manufacturing tasks to be carried
out more productively than humans alone.
The principal challenge for Robotics and
Manufacturing is to ensure that robotics are more
widely adopted by developing technologies &
implementation processes that our simpler, more
cost effective and provide higher levels of autonomy
and coloration with other machines and humans
whilst developing the UK skills base in these areas.
The network will enable the development of low
cost, advanced perception, cognition, autonomy
and collaborative technologies (cobots).
Visualisation / Immersive Technologies
Advanced Visualisation enables the effective
communication of data, concepts and ideas to
enable greater productivity, reduce risk, improve
quality and optimise production. This can include
CAD design through to the adoption of immersive
technologies (Virtual, Augmented & Mixed Reality)
for digital twins, training and virtual prototyping.
In advanced visualisation, the biggest challenges are
interoperability between, and within, hardware and
software platforms and the amount of manual
intervention required to deploy content effectively
while being scalable. There is also a need for
standardisation. Furthermore, connectivity to
enable VR/AR devices, along with the effective
collection of data from across the factory floor is
essential in creating beneficial and accurate virtual
environments for activities such as training and
digital twins.
There needs to be support for the development of
either standards or smart interfaces to enable
seamless interoperability while at the same time
enabling automated publishing of content that is fit
for purpose. The network will focus on enabling test
beds for immersive technologies, promoting
opportunities for challenge owners to provide data
to help build future use cases and opportunities to
connect immersive technology researchers and
innovators to manufacturers to test new business
models and use cases of the technology across the
supply chain.
The Industrial Internet of Things and Connectivity
The Industrial Internet of Things (IIoT) can be used in
the form of sensors on equipment across the supply
chain to provide real-time data that can be utilised
to a wide variety of technologies across
manufacturing, from machine learning to digital
twins and visualisation / informatics for more
effective analytics. In addition, connectivity
infrastructure as a whole including 5G and
Low Powered Wide Area Networks, along with
interoperability can enable the development of
capabilities on the factory floor while reducing
overheads and optimising processes. Distributed
Ledger Technologies (Blockchain) can also be
utilised to promote broader opportunities for more
localised and personalised manufacturing.
The Internet of Things, 5G & Next Generation
Internet, Low Powered Wide Area Networks and
Cyber Security sit as the underpinning technologies
of Industrial Digitalisation. Data intensive
technologies such as VR/AR, AI/ML etc. will require
suitable connectivity technologies to provide the
means for time-critical cost efficient data collection
from IoT across manufacturing environments and
the supply chain, while effective security will be
crucial to mitigate against risks. The challenge will
be to ensure manufacturers have this infrastructure
in place to utilise IDT across the board for the future.
With partnerships and collaborative exercises such
as Pit Stops and competitions across the public
& private sectors and academia, Industry led
challenge test beds in LPWAN and 5G (taking into
consideration security challenges) and the
dissemination of grant funding opportunities from
the ICF, Innovate UK and the EPSRC the
Connected DRC will help build the capability for
leading edge innovators and researchers to test
their technologies and ideas in a real world industry
setting and solve challenges / explore new
opportunities across the supply chain (from
interoperability, IIoT, autonomous vehicles,
Distributed Autonomous Manufacturing and ).
Additive Manufacturing
Additive Manufacturing (AM) also known as
3D printing is where are objects are created laying
one layer on top of the other until a 3D object is
created. The technology has so far mostly been used
for rapid prototyping and rapid tooling but is now
being used to manufacture end use parts. It is
transforming the way some of the UK's best known
companies manufacture their products and has the
potential to put the UK at the forefront of global
manufacturing.
AM is an essential ingredient for globally
competitive HVM and is a strong driver for
accelerating digital manufacturing (Industry 4.0)
into all levels of the supply chain. In the last 5 years it
has become a serious contender for mainstream
manufacturing, with application potential in all
major industrial sectors. The world's largest
flight-tested aerospace AM part was made recently
at the MTC Catapult Centre for Rolls-Royce; this is
the 1.5 metre front bearing housing ring vane for the
Airbus A380 engine. Mainstream automotive
companies are planning to exploit how the novel
designs and material properties offered by AM can
simplify assembly, improve productivity and improve
speed to market.
The DRC will offer a coordinated AM research
programme (including an Innovation and
Knowledge Centre), as well as a Catalyst (Research
and Innovation) programme, a programme of CR&D
calls tailored to strategic priorities, Phase 2
investment in National Centre for Additive
Manufacturing (hub & spokes), the definition of AM
skills, support for the development of the Expert UK
AM User Group, and will establish and run a
national help/contact point for businesses who are
new to AM.
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Potential candidates for Digital Research Centres

Artificial Intelligence, Machine Learning, Data Analytics DRC
Turing Institute, University College London, University of Cambridge, Imperial College
London, University of Sheffield, University of Southampton, University of Birmingham,
Loughborough University, University of Manchester, University of Bristol, University of
Warwick, University of Oxford, Heriot- Watt University, University of Surrey, University
of York, University of Edinburgh, Newcastle University, Hartree Centre, University of
Strathclyde, NPL.

IIoT and Connectivity DRC (5G, IoT, Cybersecurity)
University of Warwick, University of Oxford, Lancaster University, University College
London, Imperial College London, Cardiff University, University of Edinburgh, University
of Bristol, University of Surrey, University of Southampton, IoT UK.

Robotics and Automated Systems DRC
Cranfield University, Middlesex University, Heriot-Watt University, Imperial College
London, Kings College London, London South Bank University, Loughborough University,
Middlesex University, Newcastle University, Sheffield Hallam University, RAS Network,
University of Bristol, The Advanced Manufacturing Research Centre, The Manufacturing
Technology Centre, The Advanced Forming Research Centre.

AR, VR, and Visualisation DRC
Sunderland University, Newcastle University, South Bank University, University of Bath,
Bath Spa University, Cambridge University, Sussex University, Ulster University, Queens
University Belfast, Northumbria, Ravensbourne University, York University, Bristol
University, University College London, Queen Mary, Sheffield University, Edinburgh
Napier University, Southampton University, The Advanced Manufacturing Research
Centre, The Manufacturing Technology Centre, Warwick Manufacturing Group, Design
Engineering & Test Centre, Immerse UK.

Additive Manufacturing DRC
Bournemouth University, University of Edinburgh, The University of Nottingham,
The Manufacturing Technology Centre, The University of Sheffield, University of
Loughborough, The University of Strathclyde.
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HOW WILL A BUSINESS MAKE USE THE NEW IDT ECOSYSTEM?
Figures 30 and 31 show the digital journeys that we envisage businesses undertaking in the
new ecosystem, whether they are an industrial SME that wants to investigate whether IDT
can address its particular business problem, or an innovator that wants to further develop/
commercialise its ideas and products.
Has no knowledge of
Industrial Digitalisation
and/or does not understand
the benefits
Have started to develop an
innovation strategy but need
to justify return on investment,
mitigate risk and start
disrupting
Have a particular challenge
but currently the
solution is still in the R&D
stage / needs more
advanced research
National Web Platform & Digital Readiness Level Diagnostics
National Adoption Programme
Entry Points:
LEP's, Signposting via the
national web platform or more
in depth diagnostic tools,
Access via accredited centres,
including Catapults,
Universities & Science Parks.
Next Steps:
Once through diagnostics and
understand adoption journey
will be signposted to relevant
digital innovation hubs and
challenge-led
transformational
demonstrator programmes
National R&D Programme
Delivered by Digital
Research Centres
Entry Points:
Signposted by the
National Adaption Programme
or national web platform
or more in depth diagnostic
tools, Digital Innovation Hubs if
the challenge requires more R&D
Next Steps:
Once R&D has developed
something interesting it will
be signposted to relevant
challenge-led demonstrators,
if no relevant demonstrators.
Transformational Digital
Demonstrator Programmes
National Innovation
Programme
Delivered by Digital Innovation
Hubs and local spokes
Entry Points:
Local Spokes, National
Adoption Programme,
Signposting via the national
web platform or more in depth
diagnostic tools, Post advanced
research to include in
Demonstrator Programme
Next Steps:
Signposted to specific
challenge-led demonstrators,
if no relavent demonstrators
signposted to DRCs
COLLABORATIVE
R&D
INDUSTRIAL SME ADAPTION & INNOVATION JOURNEY
Figure 30
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MADE SMARTER. REVIEW 2017
IDT INNOVATOR DISRUPTION JOURNEY
Is a company with IDT adoption
consultancy services who want
to work more with industrial
SMEs to help them to innovate.
Is an IDT innovator (Start-up,
scale-up, SME or Corporate)
who wants to work more with
industrial companies looking
to innovate.
Is a company or academic
institution and are looking to
understand the real world
challenges being faced by
companies and how will
their research be valid in
a commercial setting.
MSUK Innovation Ecosystem
Assessment & Inclusion in a National Industrial Digitalisation Database
National Adoption Programme
Entry Points:
Open Calls and Procurement
process. Signposting via SSIGs
to LEPs, Access via accredited
centres, including Catapults,
Universities & Science Parks.
Facilitated workshops
and access to Industrial SMEs.
National R&D Programme
Delivered by Digital
Research Centres
Entry Points:
Assessment by DRCs
to help advise
on IDT commercial
visibility and real world
application.
Transformational Digital
Demonstrator Programmes
National Innovation
Programme
Delivered by Digital
Innovation Hubs
Entry Points:
Local Spokes, open calls,
competitions, open innovation
events, deep dive live demos
Discovery, outreach and
signposting via SSIGs, DIHs,
and DRCs, Incubation and
Acceleration Activities
Assessment for inclusion in
Demonstrator Programme
Ensure balance between
different sizes of IDT
COLLABORATIVE
R&D
Figure 31
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MADE SMARTER. REVIEW 2017
Recommendation 2
Upskill a million industrial workers to enable digital technologies
to be deployed and successfully exploited
A lack of digital skills has been identified as the most significant barrier preventing the UK
achieving its goal of being a world leader in IDT. The immediate priority is thus for industry and
government to work together to increase the level of IDT skills in the existing workforce. This
will be achieved through:
Increasing investment and uptake in skills acquisition.
Better identifying future skills requirements.
Improving the provision of and access to quality training to support those future skills.
Creating an agile skills development system able to respond to rapidly changing
market needs.
Creating a culture of lifelong learning and more visible career pathways for adults.
Our review has set an ambitious goal to reskill and upskill a million workers over the next five
years. Its focus, although not exclusively, will be on SME workers (who represent a third of
industrial sector employees) through the better coordination of IDT-related skills initiatives and
institutions. As such, we are proposing a number of recommendations which both recognise the
new technical and professional education system currently in development and are built wherever
possible on existing organisational infrastructure and capabilities, in particular the following:
The Institute of Coding
The upcoming Institutes of Technology
The National College Programme
The National Re-Training scheme
Apprenticeship programmes
The wider further and higher education system
Other bodies and programmes with local and sometimes national capabilities
For example, a full apprenticeship programme may not always be suitable for upskilling
workers in emerging technologies. However, apprenticeships have been made a skills
policy priority by government and the apprenticeship brand is one that carries currency
with employers in industry. Therefore, Modular Apprenticeships, with modules covering
new technologies and soft skills, may be more appropriate. These would add up to a full
apprenticeship, including the award of a full apprenticeship certificate, following the end-point
assessment of learners to establish their competence. Modules on emerging technologies
could also be developed which could plug into existing apprenticeship standards this is
already happening in Scotland and this example should be monitored by the UK government
and other devolved governments for its effectiveness.
"To stand in the way of automation and industrial digitisation may make King Canute
smile, but would be a singular disservice to employees as other competing economies
are already highly active in this area. Instead we need to retain existing employees'
skills and experience whilst augmenting with relevant industrial digitisation
knowledge. Without a central co-ordinating body for skills and some targeted
retraining and reskilling incentives, many of our supply-chain SME will inevitably be
left behind this would be to the detriment of the larger supply-networks in which
they operate and to the economy as a whole."
Andrew Churchill, Managing Director, JJ Churchill Ltd
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A NATIONAL SKILLS STRATEGY AND IMPLEMENTATION GROUP
Recommendation 2.1

Create a single national Skills Strategy and Implementation Group (SSIG) under the
governance of the Made Smarter UK Commission (MSUK). This will act as a focal point
for the engagement of industry and provide a forum for identifying industry's future skills
requirements, synchronising and focusing existing initiatives across established bodies and
stakeholders, and ensuring quality and consistency through a kite-marking mechanism.
We propose a central coordinating body for industrial digital skills, in the form of a Made
Smarter Skills Strategy and Implementation Group (SSIG), to promote good practice and
innovation in skills development through an open partnership of employers and their
representatives (e.g. professional institutions), universities, private training providers, experts
in online learning delivery, and professional bodies. The SSIG would also work in collaboration
with regional and local agencies (e.g. Local Enterprise Partnerships, Skills Development
Scotland, etc.).
"Promoting partnerships between employers, universities, private training providers
and professional bodies (whatever the dialogue) is bound to be productive, and
setting and maintaining standards for quality of training is essential for movement
of qualified people across companies and industries."
Eric Michels, HR Business Partner, SEE

The SSIG would focus on maximising the opportunities offered by reskilling existing workers
and would coordinate the numerous organisations making up the education ecosystem. Its key
activities would include:
Providing the mechanism for the early identification of emerging skills requirements and

feeding these into the education/skills system.
Working with industry and training providers to ensure the dynamic development of training

to address current and future needs.
Ensuring quality and relevance for users through an industry-led kite-marking programme.
Mapping and guiding users to the resources available by simplifying the engagement

process.
Signposting existing capabilities, e.g. apprenticeships, the Institute of Coding, Institutes

of Technology, national colleges, and employer-provided capabilities.
Sharing best practice through the coordination of stakeholders and contributors.
"CloudNC is an artificial intelligence company focused on bringing autonomy
to the machining industry. We are delighted to see that the Made Smarter Review
has resulted in these excellent and practical skills intervention suggestions.
Implementation will be an essential first step in retaining competitiveness in
manufacturing over the coming decades. We endorse them fully."
Theo Saville, Chief Executive Officer of CloudNC



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MADE SMARTER. REVIEW 2017
As IDTs will have an impact on the skills mix and profile of each part of the United Kingdom,
it is imperative that there is a UK-wide, national response. That response must ensure that
individuals and employers in all corners of the UK are able to take on the skills needed to make
the most of the opportunities opened up by Industry 4.0.
The SSIG will therefore work with the different regions and nations within the UK, focusing
attention on the particular skills, and the particular levels of skills, that local employer
demand requires within local labour markets. It will ensure equality of access to good-quality
training resources and national sharing of best practice through the online platform (see
Recommendation 2.2 on the following page) and will enable individuals and employers to
acquire the right skills irrespective of geographical boundaries or borders.
Regional labour market data and intelligence, gathered and collated by the SSIG, will be used
to ensure that local approaches to the skills challenges presented by industrial digitalisation
are properly coordinated. The SSIG will work with Local Enterprise Partnerships (LEPs) to
ensure their skills strategies are directed at the right skills priorities at the right levels. It
is envisaged that material at all requisite skill levels, from GCSE/Standard Grade Level up
to Master level, will be made available through the online platform, with individuals and
employers then signposted to the training they need by LEPs and by other local stakeholders.
The Skills Matrix
A Skills Matrix for industrial digitalisation, produced by SEMTA and its members in the course
of the development of this report, provides an accurate snapshot of current and known future
skills needs (see below). However, the inherently unknowable nature of how an industrial
revolution will develop, and its impact on the skills profiles of those working in industry, means
that reviewing and refining the Skills Matrix will be crucial. This role should also be overseen
by the central coordinating body.

The Skills Matrix was compiled from interviews with and survey responses from a number of
organisations, including Airbus, Atkins, EEF, JLR, and Toyota. It reflects the skills identified by
those employers as being required in an age of industrial digitalisation at each level. However,
it should be noted that under each technical level not every skill identified will be needed by
every individual, and that particular combinations of skills will be required depending on the
role, level and employer organisation. Some of these technical skills already exist within the
workforce. Others will be new skills that will need to be developed. The Skills Matrix is by no
means a definitive view on skills but is intended to stimulate further debate and discussion in
this area. It can be used in many ways, including identifying employee reskilling and upskilling
opportunities and recruitment requirements.
The Matrix has been divided into three sections:
Mature skills that are widely used in many organisations
New skills that are currently used in a limited way or in a few organisations
Emerging skills that will be required for future industrial digitalisation.
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MADE SMARTER. REVIEW 2017
MATURE SKILLS ALREADY EXIST AND USED
LEVEL 1
LEVEL 2
Semi skilled
Intermediate
Apprenticeship
LEVEL 3
NC/ND
(Engineering
Technician)
Advanced
Apprenticeship
LEVEL 4
HNC/HND/FD
(Incorporated
Engineer)
Higher
Apprenticeship
LEVEL 6
Bachelor's degree
(Incorporated
Engineer)
Degree
Apprenticeship
LEVEL 7
Master's degree
(Chartered
Engineer)
Programming software
Mechatronics
Processing of data
Material and production skills
Process skills
Electrical engineering/systems
Electronics
Maintenance, servicing, and further
development of the system (robotics)
Mechanical and plant engineering
Product design
PLC Programming
Specify, install and setup control
systems hardware
Value Stream Mapping and LEAN
principles
CHART PAGE 122
CHART 1
TECHNICAL SKILLS
(not all will be needed at each level)
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MADE SMARTER. REVIEW 2017
SKILLS CURRENTLY USED IN A LIMITED WAY
LEVEL 1
LEVEL 2
Semi skilled
LEVEL 3
NC/ND
(Engineering
Technician)
LEVEL 4
HNC/HND/FD
(Incorporated
Engineer)
LEVEL 6
Bachelor's degree
(Incorporated
Engineer)
LEVEL 7
Master's degree
(Chartered
Engineer)
Computer network skills
Data science
Rapid prototyping CAD software, 3D
printing, advanced injection moulding
Robotics software and
programming skills and engineering
ability
Data interpretation/mining plus
making use of Big Data and
infomatics
Optimisation, monitoring and
controlling of processes
Industrial networks control systems
(HMIs, SCADA etc)
Proportional hydraulics (PLC
controlled)
Systems Engineering
Data management/leadership
CHART PAGE 123
CHART 2
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MADE SMARTER. REVIEW 2017
CHART PAGE 124
CHART 3
NEW/EMERGING SKILLS NEED FOR FUTURE
LEVEL 1
LEVEL 2
Semi skilled
LEVEL 3
NC/ND
(Engineering
Technician)
LEVEL 4
HNC/HND/FD
(Incorporated
Engineer)
LEVEL 6
Bachelor's degree
(Incorporated
Engineer)
LEVEL 7
Master's degree
(Chartered
Engineer)
Computer security software skills
Artifi cial intelligence
Using virtual and augmented reality
Humanmachine interaction
(HMI) skills
Predictive analytics
Automation technology
Microsystems technology
Appreciation of digital technologies
Intelligent application of digital
technologies
Digital leadership
Digital creativity (creation of product
digital twins, creation of production
line digital shadows)
Interface management/leadership
GENERIC SKILLS
Complex problem solving, critical thinking, creativity, people management, change management, coordinating with others,
emotional intelligence, judgement and decision making, service orientation, negotiation, cognitive fl exibility (Source: WEF)
Sense-making, social intelligence, novel and adaptive thinking, cross cultural competence, new media literacy,
transdisciplinarity, design mindset, cognitive load management, virtual collaboration (Source: Future of Work 2020,
Institute for the Future)
Customer relationship management crucial if benefi ts in vertical integration are to be involved. Creation of new business
models at a more senior level
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MADE SMARTER. REVIEW 2017



GENERAL DIGITAL SKILLS
(Source: Eight Digital Skills we must teach our children, WEF)
Freedom of speechIntellectual property rightsCo
mp
ut
ati
on
al
th
ink
ing
Con
ten
t cr
eati
on
Critical thin
king
Online collaboration
Online communication
Digital footprints
Social & emotional awarenessEmotional awareness/regulationEmpathyMobile securityInternet securityPassword protectionCo
nta
ct
ris
ks
Con
ten
t ris
ks
Behavior
al risks
Community participation
Digital health
Screen time
Digital entrepreneurDigital co-creatorDigital citizenPrivacyDig
ital
Ide
ntity
Digital UseDigital Rights
Digital LiteracyDigital CommunicationDigital E
moti
ona
l Int
elli
gen
ce
Digital Security
Digital StrategyFigure 32
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MADE SMARTER. REVIEW 2017
AN ONLINE DIGITAL PLATFORM FOR LEARNING
Recommendation 2.2

Establish a modern digital delivery platform, providing scalable, relevant, timely, and
easily 'digestible' content for upskilling and reskilling. This would enable all companies,
but particularly SMEs, to play their part in the Fourth Industrial Revolution, with
incentives and networks in place to drive adoption.
We propose an online 21st century digital learning platform to improve access to quality IDT
training. With a goal of achieving at least 200,000 completed user certifications each year to
2022, this would lead to at least one million of the three million workers currently employed
in industry being upskilled in new and emerging digital technologies to meet industrial need.
The platform will adopt or adapt an individual platform (or a set of platforms), such as
Futurelearn or the IET online platform, to provide an accessible, customised and relevant
set of online modules which could be used as part of a learning pathway to reskill and
upskill workers.
The platform will be accessible on a UK-wide basis to employers of all shapes and sizes. It will
be populated from industry-provided and certified competence- and capability-based content
which will be freely shared with the education and skills system as required. Content will be
regularly updated and targeted at the skills in most demand in the most relevant sectors. It
will provide short-form, modular resources, that are industry supported and quality assured
through a kite-mark. The platform could be used as a standalone resource or in blended
form in environments such as diffusion centres, further education colleges, higher education
institutions, university technical colleges and schools. The training provided would contribute
to qualifications, accreditations and, potentially, apprenticeships. What's more, the uptake of
the platform's content would act as a demand signal to the rest of the education system about
the nature of current and potential future skills requirements.
"Airbus is already working on the competencies and opportunities digitalisation
will bring to our business and the ecosystem we operate within. This initiative
will definitely help us, but more importantly our supply chain, with the skills
needed to address the challenge of Industry 4.0. It is vital that we not only nurture
these skills for the next generation but that this initiative succeeds to ensure the
competitiveness of the UK."
Mark Stewart, General Manager and HR Director, Airbus
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Why an online platform?
The provision of online learning is the most cost-effective way to scale the provision of
reskilling resources. And the rate of change of IDT demands dynamic, user-driven, regularly
updated content at pace something which an online platform can deliver.
Recent policy developments in skills innovation have tended to focus on institutions with
geographical bases, such as University Technical Colleges, National Colleges and the new
Institutes of Technology. These will continue to have great value. However, a wave of nationally
transformative technological change, in the shape of Industry 4.0, requires a nationally
accessible platform to supplement and compliment these physical bases.
The capability and uptake of online learning, either standalone or blended with physical facilities,
is increasing at pace. The 201617 Learning Benchmark Report from Towards Maturity highlights
an increase in the use of learning technologies, with e-learning and live online learning seeing
the highest rise (88 percent and 89 percent respectively). Furthermore, it predicts that in the next
two years there will be even more of a shift away from face-to-face training, citing, for example, a
rise in the use of virtual classrooms from 39 percent to 69 percent.
The rapid nature of technological change means that access to the training needed to harness
new digital technologies must be similarly rapid. The national nature of the skills challenge
presented by the adoption of digital technologies presents a golden opportunity to develop an
effective mechanism for spreading new skills quickly throughout industry. This need for speed
means that the most sensible delivery mechanism is online.
Collating training resources online has a number of other advantages. It provides for truly UK-
wide access on equal terms across regions and nations; it offers an easy way for those seeking
training to search through what is available and find the training which best suits their needs;
and it makes the kite-marking and quality assurance process, along with usage monitoring for
the central coordinating body, simpler and quicker.
Using a digital online platform to access to kite-marked resources would ensure the cost of
operation could be kept low through the elimination of a need for an additional bricks-and-
mortar presence and for staff to deliver training. Online access would ensure that individuals
using the platform could study at the right pace for them and their employers. It would provide
an easy way for employers and individuals to check progress, to identify any difficulties in
study, and to work to address them. For those lacking in the digital skills needed to access
online training, employers would be signposted to physical locations where their workers could
complete the free basic digital skills training that will be offered by government.
The digital diffusion of training in new digital technologies would eliminate geographical
disparities in access, an issue which has been evident in the operation of the National Colleges
programme. It would ensure that leaders and managers in industry are aware of where to
signpost workers and where they themselves can access training in new technologies (this is
an issue of critical importance given that just 28 percent of industrial leaders have a 'very good'
awareness of what Industry 4.0 entails (Oracle, 2016)). Barriers to access for smaller employers
and individuals would also be eliminated any individual with an internet connection would
be able to use the online platform and have instant access to learning resources provided by
industry and kite-marked by the central coordinating body.


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It is envisaged that, as the platform develops and awareness of it increases, learning
undertaken through it could be integrated with other forms of study to produce a blended
learning approach. Training providers could integrate modules and short-form courses
accessed through the platform into their own course offerings. Materials could also be used as
part of an immersive learning approach or, in future, integrated into apprenticeship and T-Level
programmes. The completion of online learning through the platform could then be accepted
as evidence of an individual's progress. In the case of apprenticeships, such self-study could
count towards the 20 percent off-the-job training requirement, a step which would also ease
industrial employer concerns about the financial viability of using apprenticeships to upskill
existing workers.
The platform could also be used to ensure knowledge of new technologies is absorbed by those
working for institutions such as colleges, Institutes of Technology, schools, and private training
providers. With training accessed through the platform all bearing a Made Smart kite-mark,
trainers would have full confidence that the knowledge they are absorbing is both relevant
to industry and up to date. In doing so, the online platform will be key to ensuring that the
sustainability strategy can be successful.
"The development of our engineers is business critical to Jaguar Land Rover,
ensuring continued innovation and technical excellence in the delivery of premium
cars and all-terrain vehicles. The Technical Accreditation Scheme is our innovative
and progressive approach to skills growth, making the most of the excellence of our
university partners in delivering cutting edge education."

Jo Lopes, Head of Technical Excellence, Jaguar Land Rover
It is important to recognise that existing platforms (such as FutureLearn and the IET) should
be used for this provision. It is also important to note that we already have commitment
from several companies (Cisco, Accenture, ATOS etc) to provide content and support for this
platform, such that the content is kept current and owned/curated by the appropriate industry
experts. The content is likely to be short form, rapidly iterated, user rated and highly current. It
will continuously evolve as the needs of industry emerge.
It is vital that the data derived from this platform about demand for courses, their uptake, and
success, as well as their content and quality, is continuously monitored and used as a demand
signal not only for the further development of the platform but also made available to higher
and further education and schools as a strong signal of the skills and job types needed for the
next generation. It is also envisaged that the modular content itself will be made available to
those institutions as applicable to minimise their overhead and to ensure currency.



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INCENTIVES TO RETRAIN AND RESKILL
Recommendation 2.3

Establish an incentivised programme, co-funded by industry and government, to
improve digital skills capabilities. Under the guidance of the SSIG and using the digital
delivery platform, this would take the form of personal training and reskilling allowances
targeted at:
Individuals whose jobs are being displaced by automation
Workers whose skillsets need to evolve to next-generation capabilities (e.g. the use

of additive manufacturing technology or AI)
Providing leading skills in all organisations (e.g. the digital engineer of the future)
We are proposing that retraining/reskilling is incentivised to address the weak demand from
employers (currently half the EU average), to encourage organisations to train workers in the
next generation of IDT skills, and to engender a culture of continuous workforce development
and reskilling.
Although the costs of training will not be onerous, for a smaller employer or for an individual,
they could nonetheless act as a disincentive - especially when it is considered that those most
urgently in need of reskilling are those earning lower wages and therefore least likely to have
the disposable income needed to invest in their own skills.
We are therefore proposing that the training costs for using the online platform (see above) are
shared between the employer and government. The costs of the employer's contribution could
be offset through a skills equivalent of the R&D tax credits for money spent on reskilling and
upskilling, and the government could explore flexibility in the use of the Apprenticeship Levy,
including apprenticeship vouchers which are unspent within 24 months by those employers
which pay the levy.
The programme would be targeted at SMEs and those workers whose jobs are most likely to be
affected by technology, particularly lower-skilled jobs involving repetitive tasks that are more
vulnerable to automation. Workers at lower skill levels are also relatively less likely to have the
wherewithal to seek out and access training for new skills. In industry, many of those workers
have been actively put off formal learning by their experience of academic education.
Initially, training will focus on the following areas of priority identified by this review, and will be
available at Level 3, Level 4-6 and Level 7:
1. Cybersecurity,
2. AI and machine learning,
3. The IoT and data analytics,
4. Additive manufacturing,
5. Robotics and automation.
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MADE SMARTER. REVIEW 2017
For example, cybersecurity skills are essential in ensuring that digitalised industrial
workplaces are able to operate without being compromised by internal and external threats
to their online systems. Smart factories face many of the same challenges as other systems
connected to the internet, including cyber-espionage, hacking and malware, in addition to
wider issues around supply chain security and the security of the IoT. The research shows
that the number of cybersecurity roles advertised in the UK was the third highest globally. As
a result, employer demand exceeded candidate interest by more than three times, according
to Indeed, resulting in the biggest skills gap of any country in the world, bar Israel. The Indeed
survey shows that Britain's cybersecurity skills gap has grown by 5 percent in two years, a tally
exceeded only by Brazil and Canada.113
Data analytics are an integral part of smart manufacturing and thus a hallmark of Industry 4.0.
Big Data is set to become increasingly important to UK industry as more of the physical labour
involved in the manufacturing process is undertaken by machines and the role of humans
shifts towards analysis of the process. An accurate and considered interpretation of the data
produced by intelligent systems in smart factories is crucial in ensuring that they operate
efficiently and that issues in the manufacturing process are identified and resolved.
"Cybersecurity, Artificial Intelligence, Additive Manufacturing and Data Analytics are
growth areas for skills in all industries and skills shortages across the UK are well
documented. Given the scale of the challenge, all companies, large and small, need
support from government, particularly at the higher and advanced levels."

Eric Michels, HR Business Partner, SEE
Training would be delivered, in part, using the online platform we recommend (see above). This
would also provide an effective means by which to demonstrate that the allowance was being
spent appropriately. However, the allowance could also be used to fund other forms of training
in emerging technologies where deemed appropriate (for example, continuous professional
development certified short courses, or courses carried out at further education institutions
or private training providers). Kite-marking these courses and organisations will ensure that
training allowances are used to the greatest effect.
113 http://www.independent.co.uk/news/business/news/cyber-security-skills-gap
widen-supply-demand-expertise-uk-companies-it-a7529986.html
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MADE SMARTER. REVIEW 2017
Recommendation 3
Inspire the UK's next industrial revolution with stronger leadership
and branding of the Country's ambition to be a global pioneer in IDTs.
A MAJOR NATIONAL BRAND CAMPAIGN TO RAISE AWARENESS OF IDTS
Recommendation 3.1

Establish a major national brand campaign, delivered by both government and industry,
to significantly increase awareness of how new digital technologies can transform
industry. Delivered within a wider support framework, the campaign would promote
the adoption of digital technologies (especially among SMEs), address negative
preconceptions that IDT is expensive and risky, and inspire current and future workers
with a vision of how they can secure high-quality jobs in a thriving part of the economy.
We are proposing a major national brand campaign Made Smarter to significantly
increase awareness of industrial digitalisation and how new technologies can transform the
productivity of the manufacturing and production sector. This would also promote the growth
of a new wave of technology businesses across the UK. The campaign would be industry
led and delivered by the Made Smarter Commission (see below). Its objective is therefore to
transform perceptions and, in turn, generate real behavioural change in the marketplace. It
would thus aim to:
Increase the number of manufacturing SMEs accessing support from Growth Hubs.
Increase the number of manufacturing SMEs using research, innovation and

catapult centres.
Increase the adoption of digital technologies, especially among smaller enterprises.
Raise the profile of UK manufacturing and engineering.
Raise awareness of the UK brand and approach with international investors

and collaborators.
We have designed the blueprint for a campaign and brand to go live as early as January 2018.
See overleaf for example concepts currently undergoing market testing.
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MADE SMARTER. REVIEW 2017
ITS TIME FOR
AN INDUSTRIAL
REVOLUTION
OF YOUR OWN.
3D PRINTING FOR
FLEXIBLE PRODUCTION.
YOUR INDUSTRIAL
REVOLUTION
COULD BE...
FIND OUT ABOUT INCENTIVES
AND SUPPORT AVAILABLE FOR
INDUSTRIAL DIGITALISATION.
yourindustrialrevolution.uk
NB Campaign imagery and content is provisional and shown for illustration purposes only.
125
MADE SMARTER. REVIEW 2017
Through our consultation with more than 200 companies, we have identified a fundamental
lack of awareness and understanding about digital technologies across the industrial and
manufacturing sectors in the UK. This is borne out by research such as the BDO report
summarised in the previous section. The MSR leadership team believes that the scattered
support network for manufacturing, combined with a lack of a coherent national brand for
UK digitalisation, has contributed to market confusion and poor adoption rates, particularly
among the SME base.
Thus, in the context of industrial digitalisation, the UK is currently witnessing market failure
through the lack of a national technology brand and campaign. Industry has the propensity
to only invest in brands of its own, where a product or solution is being marketed for its own
interest. Indeed, industry will typically only invest in a new brand that will promote its own
marketing objectives or perhaps that of similar companies. A lack of technological neutrality
means industry has not self-organised to market a national strategic digital adoption strategy.
Individually this makes sense business must use its own resources to market its own
products successfully to make a return. But collectively it misses the bigger picture that
creating a national brand that drives exports, inward investment and greater uptake of new
technologies, leads to greater gains in the long term. This is why governments across the world
have intervened in their own markets to create national technology brands. The UK has done
this before more broadly, notably with the Great Campaign which created 10,000 new jobs and
secured incremental economic revenues of 2.7 billion for the UK, comprising:
1.77 billion from international and domestic tourism;
720 million from trade and foreign direct investment; and
228 million from international education.114
114 Civil Service Quarterly, Cabinet Office 2017
SWITCHING
PRODUCTION IN
30 MINUTES NOT
THREE DAYS.
MY
INDUSTRIAL
REVOLUTION
IS...
Is manufacturing a slow turnaround
business? Not any longer for Gary Faulkner,
CEO of security system manufacturer
Faulkner Alarms in Portsmouth.
We have deployed robotics and automation
to make a far wider range of products on our
three production lines. Eighty-eight instead
of 14, in fact. And changing templates now
takes 30 minutes instead of two days,
allowing us to quickly fulfil big last
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These are exciting times for industry.
Find out how new technology could work
for you.
FIND OUT ABOUT INCENTIVES
AND SUPPORT AVAILABLE FOR
INDUSTRIAL DIGITALISATION.
yourindustrialrevolution.uk
126
MADE SMARTER. REVIEW 2017
How will the campaign be delivered and by whom?
The goals of this review are closely linked with the aims of the Productivity Leadership Group
(PLG), a business campaign aimed at improving the UK's enduring productivity problems by
making measurement more easily accessible and establishing best practice.
Our recommendations in this review form part of the PLG's aspiration for business to be at the
forefront of improving the UK's productivity. Evidence demonstrates that increasing the use
of digital technologies in industry would make an important contribution to that aspiration.
The PLG will therefore work in close collaboration with the Made Smarter UK Commission (see
below) in the planning and execution of this marketing campaign, as part of the PLG's wider 'Be
the Business' movement which was launched in June 2017. The campaign would ultimately be
the face and brand for the Made Smarter UK Commission, which would be accountable for its
delivery.
A NATIONAL MADE SMARTER UK COMMISSION TO MAKE THE UK A WORLD LEADER IN IDT
Recommendation 3.2

Establish a national body the Made Smarter UK (MSUK) Commission comprising
representatives from industry, government, academia and leading research and
innovation organisations, responsible for developing the UK as a leader in IDTs. With an
industrial chair and a Ministerial co-chair, this publicprivate partnership will provide
a market-focused view on IDT priorities, ensuring their faster innovation, adoption
and diffusion to drive maximum value to the UK economy. The MSUK Commission will
establish and govern a more visible and better organised ecosystem that will deliver
business transformation through innovation (see also Recommendation 1).

Recommendation 3.3

Set up interim Strategy and Support Implementation Groups (SSIGs) to be responsible
for the delivery of this report's recommendations. These would comprise representatives
from industry, government and academia, and would be accountable to the MSUK
Commission.
With funding from both industry and government, we will establish an exciting and more
coherent IDT ecosystem, built on the foundations of the existing infrastructure, initiatives,
institutions and networks that make up the UK's innovation community.
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MADE SMARTER. REVIEW 2017
The Made Smarter UK Commission (MSUK) will be a national body dedicated to developing the
UK as a leader in IDTs. It will be a publicprivate partnership between industry, government,
academia and leading research and innovation organisations, providing a market-focused
view on IDT priorities, ensuring their faster innovation and adoption to drive maximum value
to the UK economy. The MSUK Leadership Board will take oversight, strategic direction and
responsibility for the delivery of the recommendations in this report, and sustaining activity
over many years. It will establish and govern a more visible and better organised ecosystem by
aligning industry, government and other stakeholder views on IDT, which will deliver business
transformation through innovation.
The MSUK ecosystem will be structured around a Governance and Leadership Board, two
Strategy and Support Implementation Groups (SSIGs) and three national programmes:
1. National Adoption Programme
2. National Innovation Programme
3. National Research and Development Programme
The two SSIGs will be responsible for the delivery of our key recommendations relating to skills
and ecosystem delivery. They will consist of two small teams responsible for coordination,
communication, implementation and tracking of KPIs across the ecosystem to maximise
value and impact. The SSIGs will effectively bring together all the below dimensions into
one coherent whole, promoting collaboration across the MSUK initiative and helping to
communicate activities of the MSUK ecosystem externally:
1. IDT Ecosystem SSIG - Responsible for the governance, strategic direction, coordination,

and implementation of the evolving ecosystem that will support the faster innovation and

adoption of IDTs.
2. IDT Skills SSIG - Responsible for the governance, strategic direction, coordination, and

implementation of the skills recommendations that will upskill a million employees in the

field of digital engineering.
The goal of the MSUK Commission would be to break down the barriers we identify
in Part 3 of this report:
The slow adoption of IDT technologies, especially among SMEs, due to a lack of information

and poor management practices. According to BDO and the Institute of Mechanical


Engineers, only 8 percent of manufacturing companies interviewed in 2016 understand

industry 4.0 or digitalisation. 44 percent cited a lack of understanding as the main reason

they are not currently investing.
The lack of a coherent, centralised and easily accessible model for business engagement

or recognised source for independent advice in the field of IDT. Such a resource would

provide leadership, distribute information, support the development of management skills

and coordinate support for commercialisation.
A lack of leadership a 2016 PwC report found the biggest challenge for UK firms in

adopting IDT remains a lack of digital culture, talent, and clear digital operations vision.

There is no national strategy and organisation that stands as a point of contact for IDT

leadership. The lack of national leadership was recognised in Germany in their 2016 Digital

Strategy 2025 which proposed the creation of a Digital Agency (see Appendix 2).
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MADE SMARTER. REVIEW 2017
Support recommendation Implement a series of enablers to address
key barriers to adoption of IDTs
ENABLER: STANDARDS
Recommendation 4.1

Implement a Standards Development Programme (including cyber-awareness and
best practices) for emerging digital industries to promote the greater interoperability of
IDTs. The creation of standards has been demonstrated as an effective way to promote
adoption, by providing greater confidence and assurance. This programme would be led
by BSI working with industry, research communities, government bodies and regulators to
address both generic and sector-specific standards. The resulting standards would then
be promoted internationally through BSI's membership of CEN, CENELEC, ISO, and IEC.
Our review identified a need to create clear standards for the adoption of digital technologies
by UK industries and supply chains. This will maximise the impact of the demonstrators and
adoption programmes we recommend by enabling the diffusion of knowledge across industry.
It will also de-risk investment in digital technologies and lead to the development of global
standards in areas of UK strengths.
The programme would be led by BSI working with industry and other parties acting in
Communities of Interest (CoIs) to address both generic and sector-specific standards.
The work programme would consist of standards development, implementation, and
internationalisation. BSI, in partnership with NPL, will create an agile standards development
programme that enables good practice to be deployed in demonstrators and adoption
programmes. The resulting standards will be made available by BSI, and promoted
internationally through its membership of CEN, CENELEC, ISO, and IEC.
The programme should be co-funded by government and industry. Industry will participate in
workshops, sharing best practice and developing use cases. Each CoI will produce a standards
roadmap setting out priorities and a work programme, and then enter a delivery phase where
the outputs are produced. Additionally, the CoIs will work with the demonstrators and adoption
activities to pilot the standards and feed knowledge back into the standards programme.
Industry support, in the form of time commitment from companies as well as shared expertise
and knowledge, will be provided.
This activity will be managed by senior experts who will set the digital industrial standards
strategy, working within the governance of the Make Smarter UK Commission. Members will
come from a range of industry sectors, as well as the research community, government bodies
and regulators.
The priority standards already identified include:
Guide to the use of data in manufacturing supply chains.
Interoperability standards: to accelerate and strengthen the digital connection

of UK manufacturing supply chains.

Guide to establishing a framework for collaborative relationships in supply chains.
Collaborative product design standards: to identify and capture best practice in

digital design within industry.

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MADE SMARTER. REVIEW 2017
Specification for security-minded management of digital manufacturing processes

(addressing Cyber Security issues).
Guide to establishing the precision and accuracy of connected sensor measurements
in a network.
Governance, security, and assurance of data standards to address concerns with

cybersecurity and provide confidence in data used to demonstrate product safety and

performance assurance derived from digital models including virtual certification.

Vocabulary for the design and delivery of through-life engineering services.
Service innovation standards: to establish good practice that will help manufacturing

companies implement novel service offerings.
The creation of standards drives productivity growth, as evidenced by recent research papers.115
Industrial digitalisation is a relatively new area for standardisation, reflecting the increasingly
complex and interdisciplinary nature of technological systems, and to date the lead has been
taken by countries that have already established their own national programmes in support of
digital manufacturing (for example, Industrie 4.0 in Germany116 and the Industrial Value Chain
Initiative in Japan117 ). However, there are gaps in what has been proposed, and the current
international standards activities do not reflect the priorities of UK industry.
The importance of setting global standards is described in the Government Office for Science
in their report Technology and Innovation Futures. They said, "acting as a standards setter is
one of the government policy levers that can support emerging technologies by using "insights
from living labs to develop UK standards setting the global agenda by 'showing, not telling'".118
Our proposed programme focuses on opportunities for the UK to lead the creation of standards
in areas of strength for the UK manufacturing sector, such as service innovation and use of
digital information in the design process.119 The creation of international standards in areas of
UK strength will help UK companies exploit competitive advantage in international markets, as
described in a recent paper by Gregory Tassey of the University of Washington:
"The realization of competitive advantage will only be achieved if (1) individual economies
identify and invest in industries within the broader global supply chain where they can achieve
comparative advantage, (2) a technical infrastructure, largely based on standards, is developed
and implemented to ensure efficient product portfolio development, production, and
commercialization for each economy's selected strategy, and (3) the standards infrastructure
is uniform across all economies involved in the global supply chain."120
BSI, as the UK member of the European and international standards bodies CEN, CENELEC,
ISO and IEC, has a strong track record of getting UK standards recognised as international
115 See, for example, https://www.bsigroup.com/LocalFiles/en-GB/standards/BSI-standards

research-report-The-Economic-Contribution-of-Standards-to-the-UK-Economy
UK-EN.pdf and http://www.iioc.org/the-economic-value-of-standards/
116 http://www.plattform-i40.de/I40/Navigation/EN/Home/home.html
117 https://www.iv-i.org/en/
118 https://www.gov.uk/Government/uploads/system/uploads/attachment_data
file/584219/technology-innovation-futures-2017.pdf
119 BSI (2017). Acceleration of digital innovation by UK manufacturing supply chains. The role of standards.
120 Tassey, G. (2017). The Roles and Impacts of Technical Standards on Economic Growth

and Implications for Innovation Policy, Annals of Science and Technology Policy: Vol. 1,
No. 3, pp. 215316. Available from: http://dx.doi.org/10.1561/110.00000003
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MADE SMARTER. REVIEW 2017
standards. Globally recognised standards such as ISO 9001 (quality management), ISO
14001 (environmental management) and ISO 27001 (information security) all started as BSI
standards. Recently, BSI has taken an international lead in innovative technologies such as
smart cities and Building Information Modelling (BIM), where the UK standards have been
adopted across the world and contributed to the UK's international reputation for expertise in
these areas.
Furthermore, the National Physical Laboratory (NPL) is the UK's National Measurement
Institute, and is a world-leading centre of excellence in developing and applying the most
accurate measurement standards, science and technology available.
Standards enable the adoption of technologies, both by resolving interoperability issues and by
supporting knowledge diffusion:
Interoperability: Open, vendor-neutral standards allow the development of plug-and-play

capabilities that reduce the time taken to integrate new technologies, products, data and

systems. They also help reduce the risk of technology lock-in, thereby encouraging


investment and de-risking the adoption of new technologies.
Knowledge diffusion: standards can support technology transfer by establishing a common

vocabulary, and common methods of characterisation and testing,

performance specifications, processes. This allows the market to coalesce around a shared

expectation of what good looks like. This is described in a paper published by the Institute

for Manufacturing at Cambridge University:
"The case studies [in additive manufacturing, smart grids and synthetic biology] also suggest
that standards not only support information and knowledge diffusion, but also help mediate
between innovation activities and between actors. The standards in the case studies not only
help structure and communicate necessary information, but also facilitate its generation
(for example, testing in additive manufacturing) and structure how it is communicated both
'forward' to downstream and 'back' to upstream innovation activities (for example, how to
describe system elements in synthetic biology). This supports standards as a mechanism for
aligning and coordinating innovation activities."121
Only by having clear standards will the current uncertainty be removed. The goal is to remove
the critical barriers of interoperability as part of the wider objective to increase the adoption
of IDTs in the UK.
ENABLER: FINANCIAL INCENTIVES
Recommendation 4.2

Implement targeted financial incentives to promote the development and adoption
of IDT. This would include:
Enhanced capital allowances in the first year of IDT investments,
Broadening the R&D Tax Credit system to include IDT,
An increase in the write-down allowance for specific technologies, and
Working with the British Business Bank to develop policies or programmes to

encourage the adoption of IDT and facilitate the financing of suitably qualified

projects as appropriate.
121 Featherston, C., Ho, J-Y, Brvignon-Dodin, L., O'Sullivan, E. (2016). Mediating and catalysing innovation:

A framework for anticipating the standardisation needs of emerging technologies, Technovation 48-49,

pp. 2540. Available from: http://www.sciencedirect.com/science/article/pii/S0166497215000772
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MADE SMARTER. REVIEW 2017
As part of our coherent set of policy interventions we propose new financial incentives to
clearly signpost to companies the importance of adopting digital technologies and address
SMEs' risk concerns about their scale and available resources.
Access to finance (in the form of loans) may not be as critical a barrier to IDT adoption as the
challenges faced by companies in understanding the new technology, developing the skills
required, and having easy access to significant demonstrators of the technology or support
from advisors. However, as an element of an industrial strategy to encourage companies
on their digital journeys, having an 'access to finance' element has been proven to have a
positive effect.
A tax policy in itself, however, is not sufficient to overcome the significant barriers to adoption
that have been identified. But it becomes relevant once the initial barriers to adoption have
been overcome and an organisation is ready to invest.
The CEO at GKN created a central investment fund for the purchase of cobots to
encourage adoption across the business. Internal operating units could request a cobot
based on a simple justification. The investment did not sit on the business units balance
sheet. The uptake has been very strong and while some projects inevitably failed, the
net effect has been positive. The company now has a greater understanding of the
technology and it is delivering benefits through the application in areas that were never
initially considered.
The recognition by the government of the special nature of IDT and its importance for future
national prosperity is an important message that it can give through the tax system:
1. Investment and tax
Increased depreciation allowance for IDT: special recognition should be given to the different
nature and depreciation rates of IDT. It is therefore proposed to increase the writing down
allowance for specific technology.

We recommend a study to identify the optimum level. The current level is 18 percent,
however it could be as high as 40 percent.
Enhanced capital allowance for first year of investment in IDT: there should be a First Year
Allowance or Enhanced Capital Allowance for defined technologies similar to that used for
certain categories of energy-saving equipment. This would give a specific benefit to companies
investing in IDT at an early stage in the project. Research by Bond and Xing has found "very
robust evidence" that more generous capital allowances for equipment in particular can help
to tip investment decisions over the line and that there is a positive link between the 'present
value' or worth of capital allowances and investment as a proportion of GDP in G7 countries.122
We recommend that there should be a business-led team to define the technologies that
would qualify and that this could be part of the strategic role of the Digital Technology
Commission.


122 Race to the Top: developing a Corporation Tax regime to support sustainable growth CBI Policy Briefing #3
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MADE SMARTER. REVIEW 2017
2. Direct support/grants/loans
Widen the scope of the successful R&D Tax Credit system to include IDT integration: R&D Tax
Credits are recognised as an effective mechanism for providing direct support to companies
undertaking R&D.
The scope of these R&D Tax Credits should be widened to include IDT that is innovative and
new for a specific organisation, even if the technology has been applied elsewhere. This may
require more work on definition, marketing and promotion targeted at IDT to gain the traction
required and may not require any fundamental changes in policy.

3. Develop financial support/advice for IDT through the British Business Bank
There should be recognition of the special importance of IDT and that the British Business
Bank should be engaged to have policies or programmes designed to encourage the adoption
of IDT and facilitate the financing of suitably qualified projects as appropriate.

4. Introduction of a SME Kick-Start Funding scheme to support IDT adoption
Targeted kick-start funding schemes have been demonstrated as an effective mechanism to
motivate companies to engage. They offer SMEs a small financial incentive (10-30 days) for
partnering with a university or research institution for R&D assistance, a technology feasibility
study, the analysis of technology transfer, etc. This incentivises SMEs and academia/support
organisations to come together and results in longer-term relationships. The benefit of the
Kick-Start Funding scheme is that companies know there will be dedicated and tailored
support and it will act to de-risk investment. This scheme is to be closely coordinated with the
Digital Innovation Hubs and the National Adoption Programme described earlier.


ENABLER: ACCESS TO DATA
4.3 Recommendation

We strongly endorse the recommendations of the AI review which proposes that
government and industry should deliver a programme to develop data trusts proven
and trusted frameworks and agreements and to ensure exchanges are secure and
mutually beneficial.
A reluctance to share data within the manufacturing context was identified as a significant
inhibitor to the exploitation of IDT. We strongly support the recommendations from the Artificial
Intelligence review which would see government promoting greater access to data. This
includes:

Supporting industry in a programme to establish data trusts proven and trusted
frameworks and agreements and to ensure exchanges are secure and mutually beneficial.

Government encouraging the publication of information in machine-readable formats,
and increased access to information by re-examining the ability to access wider materials
that are currently protected by copyright, where the application of AI and/or data analytics
learning would not be in breach of copyright.
As part of the sector deal, the Made Smarter SSIG (see above) will work with the AI review
to further define the actions required to establish data trusts, and gain access to publicly
available information (or anonymised data) where it could be used in the public good.
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APPENDIX ONE
DIGITAL
POINTS OF VIEW
BY INDUSTRY
SECTOR
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MADE SMARTER. REVIEW 2017
Realising Digital Opportunities
for Aerospace
Aerospace Technology Institute
AEROSPACE
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MADE SMARTER. REVIEW 2017
Aerospace
SECTOR DESCRIPTION AND NATIONAL OPPORTUNITY
The UK is a global leader in aerospace with the second largest presence worldwide. The sector
is a major contributor to the UK economy with a turnover last year of 55bn165 , supporting over
250,000 high-value jobs with a productivity level at almost double the national average166.
It enjoys a projected ~90 percent growth in sales over the next 20 years, and full order books.
The forecast market for civil aerospace globally over the next 20 years is predicted at
US$6.3 trillion, equivalent to 35,000 new aircraft. A further US$1.9 trillion is forecast in
through-life support.
Aerospace is a mature, highly regulated sector. It has high barriers to entry, but disruptive new
entrants are nevertheless entering the sector. Current capability in the UK is wide-ranging
technologically and regionally, largely clustered around OEM and tier one suppliers. Much of
the UK's capability however rests on successful investments in technology made in the 1970s
and 80s.
SECTOR CHALLENGE AND OPPORTUNITY FOR DIGITALISATION
Digital technology presents transformational opportunities for products and processes, from
concept to disposal. It will also be essential in helping the UK improve its productivity and
capability to the extent necessary to maintain its competitive position as the second largest
aerospace sector in the world.
165 https://www.adsgroup.org.uk/wp-content/uploads/sites/21/2017/06/ADS-Annual-Facts-2017.pdf
166 ATI Analysis of ONS data
Output per worker (000s)UK PRODUCTIVITY BY SECTOR
Source: ATI Analysis of ONS (2013-14)
Whole economy
Manufacturing
Automotive
Chem & Pharma
Aerospace
Construction
0.0
20
40
60
80
100
120
Services
Realising Digital
Opportunities for Aerospace
Aerospace Technology Institute

136
MADE SMARTER. REVIEW 2017
Sector trends published by the Office of National Statistics (ONS) highlight a divergence
between UK aerospace turnover and gross value added (GVA). Between 2002 and 2015,
turnover grew by over 5 percent per year, while value added remained almost flat (albeit with
some significant fluctuations during the period). This trend implies that, against a steady
increase in aircraft and engine orders, the UK is capturing a lower share of product value.
One explanation for this is an increase in overseas sourcing, perhaps due to capacity, price
or quality issues, as identified in a recent UK aerospace supply chain study carried out by the
Department for Business, Energy and Industrial Strategy (BEIS)167.
To remain competitive, the UK needs to establish clear leadership on advancing the digital
agenda, support innovation, and increase adoption.
A national effort to increase digital capability across the supply chain would radically enhance
the competitiveness of UK aerospace companies and wider industry.
Key areas should include developing a digital workforce, the exploitation of a fully integrated
information environment, the development and exploitation of digital assets to enable
business model transformation, and maximising productivity.
167 bis-16-310-aerospace-supply-chain-study
0
5
10
15
20
25
30
35
(bn)
UK AEROSPACE ECONOMIC ACTIVITY ( BN)
Source: ATI Analysis of ONS data
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Turnover
Value added
0
5
10
15
20
25
30
35
(bn)

SPACE ECONOMIC ACTIVITY ( BN)
Source: ATI Analysis of ONS data
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Turnover
Value added
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MADE SMARTER. REVIEW 2017
Digital technologies can enable radically new business models and platforms, such as electric-
powered urban air mobility. These new offerings will depend on a "system of systems" approach
to manage safely the complex interactions of air vehicles within urban environments and
airspace. In turn, this will demand high speed digital connectivity, fully autonomous vehicle
architectures and complex airspace management.
More needs to be done to secure the future of UK aerospace, as investment has lagged that
of other major aerospace nations, particularly in digital infrastructure (e.g. 5G networks
and utility services such as HPC), and high-value design capabilities (the combination of
competencies required to conceptualise, define, integrate and test whole aircraft and their
complex systems).
Leadership and Ambition
Aerospace provides a great platform to demonstrate how digital developments challenge
multi-tier supply chains across the entire life cycle of product and process. For example, the
sector is presently targeting ambitious challenges such as cycle time reductions of 25-35
percent and productivity improvements across the product life cycle of 30-50 percent.
Innovation, Creation and Implementation
Aerospace can provide excellent examples of the radical potential of emerging
digital technologies:

End-to-end integration improving productivity through capturing and exploiting data

Enhancing the capability of supply chains through connectivity

Digitising legacy systems

Providing the possibility of virtual certification

Developing propositions for new products and services

Using artificial intelligence to support decision-making, design, fabrication and operation

of future aircraft, including urban air mobility platforms.
BUSINESS IMPACT
DIGITAL CAPABILITY
Data Sharing
Regulations
Intellectual
property
Mind-set
Security of data
Skills
Certification
Quality of data
Infrastructure
SECTOR SERVITISATION
Growing the enterprise offering within existing markets or new market
categories, moving from the provision of a product to the provision of a
complete service offering, built on a customer-centric approach.
DIGITALLY-ENABLED DISRUPTION
A new enterprise business model built on a
foundation of digital capability that can
inherently react to changing customer
demand, with agility and enhanced
decision making. Influencing existing
business models and creating
new markets.
INTEGRATED SUPPLY CHAIN
Improving the efficiency of an enterprise
and/or its products across all business
functions and throughout the product or
service lifecycle, including within its
vertical supply chain.
DIGITAL TRUST
Confidence in security, connectivity
and collaboration. Managing risk,
assets & ensuring resilience.
DIGITAL MINDSET
Enabling a digitally agile organisation considerations
for demographic challenges, integrated approach
supporting rapid innovation.
TECHNOLOGY
Enabling capability to deliver business
expectations. Disruptive technologies
deliver business impact.
DATA & ANALYTICS
Realising the value of data and identifying trends,
challenging current state.
AEROSPACE DIGITAL OPPORTUNITIESA DIGITAL FRAMEWORK FOR AEROSPACE
DIGITALCAPABILITY SETMARKET
BARRIERS
IntergratedSupply chain
Sector
Serv
itisation
Digitally-enabledDisruption
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Adoption at pace
Aerospace is not new to digital technologies. An aircraft is a cyber-physical system, its
performance predominantly automatically controlled and optimised by software. Digital
technologies are widely used in design (e.g. model-based definition) and in manufacturing
(e.g. robotics). Key emerging technologies such as additive manufacturing have been qualified
for flight status, but with limited deployment. Benchmarking existing capability against an
objective view of what could be achieved is fundamental to wider adoption.
Recent Accenture analysis [http://industrialdigitalisation.org.uk/industrial-digitalisation-
review-benefits-analysis/] predicts that the application of digital transformation across the
product life cycle could generate an additional 17bn in added value to the sector over a ten
year period. This represents a 20 percent increase in value add to the sector.
One potentially dramatic development would be to prove the concept of virtual certification
of aircraft. This would directly impact time to market, improve product awareness and provide
the UK with a leading role in the future digital aerospace sector. It would drive the development
of a raft of cutting-edge capabilities such as compliant model-based systems engineering,
and validating mechanisms for digital twin technologies; it would set the requirements for
future design, manufacturing and through-life validation, and inspire the development of new
products and services across the supply chain.
The complexity of wide-scale adoption of digital transformation should not be underestimated,
however. It will fundamentally change many sectors. It will ensure faster product development
and more dynamic business models, enable a more integrated supply chain (or extended
enterprise) characterised by data sharing and a collaborative product development
environment. For UK aerospace, adoption will pose a dramatic challenge to the incumbent
supply chain.
BARRIERS TO DIGITALISATION
The aerospace sector has high technological and regulatory barriers to entry. These factors,
along with the pace of aircraft development, are often cited as restricting change and impeding
the application of digital technology.
A recent ATI survey found that most within the sector identify IP protection, data sharing and
cyber security as the biggest barriers to transformation. However, those outside the sector
"looking in" cited culture to be the biggest barrier. Some of the responses received
are examined below.
Data Sharing, Intellectual property and Interoperability
Certification standards require masses of data to be collected during the life of a component
or whole aircraft. Current commercial constraints limit access to data, in turn restricting its
applicability and value. Today, a very small proportion of data collected is analysed; companies
are reluctant to share, concerned by the lack of controls and standards in place to protect their
interests, such as embedded intellectual property. Demonstrating the benefits of sharing data
could significantly help support engagement and standardise commercial data sharing across
the supply chain.
Standardisation and interoperability of data represents a fundamental barrier to productivity
and wide scale adoption of digital transformation. The interoperability of legacy systems
generates additional work, increases risk and stifles innovation. For example, in product
design, translating model files between various CAD tools required for detailed design (such
as CFD, FE analysis, and DFMA tools), may introduce inaccuracies, restricting the fidelity of
the analysis. This inhibits multi-disciplinary design optimisation, is not conducive to iterative
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design, and limits the ability to certify products virtually. Improving this would lower the
high cost of certification and improve productivity significantly, including that of supply
chain companies which currently support the multitude of software versions required
by their customers.
Governance & Standards
There is a lack of awareness of the approaches required to integrate data across the supply
chain. Some standards exist for specific challenges (such as STEP translation and digital
certificates). A novel approach is required. Industry working groups are looking to establish the
standards needed to support the adoption of digital technology, identifying gaps and adapting
existing standards.
Demonstrating the elements involved in creating a digital communication framework (or
"digital thread") to bring together separate manufacturing processes across a supply chain,
would illustrate the benefits of data sharing and the standards necessary to create a robust
system, encouraging wider adoption. It would also help identify and evaluate the potential
data handling terms for future contracts, also facilitating adoption.
Security
The advent of a connected world increases the need to safeguard intellectual property.
Cyber security is an international multi-sector challenge that aerospace should not consider
in isolation. The financial sector is the established leader in this field, and has pioneered block
chain technology as one of the most secure methods of cyber protection, ensuring that the
provenance and privacy of assets (finance, data, IP, ownership, etc.) are upheld.
Technology
Science
Market
Regulation
Emerging technologies
Application
technologies
Process application
Industrialisation of key
academic research
Customer Demand
Changing business
models
Services
Changing impacts:
Environmental
Social
Economics
Impact
Impact
Impact points
Production
Requirements
Operation
Disposal
The stars represent the opportunity
to influence decisions and where there
is existing weaknesses in the process
ConceptDefinitionPreliminaryDesignDetail DesignDesign for XTest & RefineIndustrialisationEngineering
Data impact points in a conventional design process (HVD)
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Additive manufacturing (AM), enabled through digital technology, can demonstrate some of the
challenges around how data is created, registered and delivered to a third party that could be
in another country. For aerospace, AM represents some significant challenges: ensuring that
product design has not been tampered with during delivery and translation, and confirming
that data is retained only for the duration of the process and subsequently destroyed to
prevent fraudulent duplication. Once manufactured, the validation of the product requires
verification prior to integration potentially for flight.
Culture
Aerospace consists of very few companies at the top level, providing little opportunity for the
supply chain to change its business model. The lack of data transparency and opportunity to
change is largely driven by not quantifying the value of the data collected. Airlines are also
beginning to recognise this. Many are changing the commercial terms for purchasing or leasing
aircraft, recognising the opportunity to sell data to the most appropriate source where the
biggest return can be realised. There is a lack of skills and knowledge to generate value and
insight from data. Digital capabilities alone will not provide the solution; exploiting new digital
technologies is predicated on an understanding of the physics that supports the engineering
solutions. A multi-disciplinary approach is essential.
Within the supply chain there is a lack of commercial consistency. Lower tier companies are
bidding for build-to-print configurations on one to two year contracts. This often means that
significant changes to productivity through digital technology cannot be realised as finance
can be difficult to justify.
Digital adoption does not need to be expensive; digital requirements can be quantified through
familiar verification and validation models. The value of data needs to be demonstrated;
businesses need to understand how existing capabilities in design and manufacturing could
be adapted (e.g. through digitising legacy systems) against a known budget, so that the
business case for adoption can be realised.
ACTIONS TO ENABLE DIGITALISATION
The UK's industrial digitalisation agenda needs to be ambitious and look beyond a short-term
horizon. Through the analysis carried out in this study, the following key themes have been
identified to provide direct impact and value to aerospace and its supply chain.
Delivering a Digital Workforce
Future competitiveness will be rooted in digital skills and knowhow, and the culture required
to succeed in a digital world. It is therefore essential to map out the transition needed from
today's workforce to that of tomorrow. Aerospace will need to adopt state-of-the-art cross-
sectoral approaches to underpin its core engineering skills. The high-skilled, high-value
jobs of tomorrow will require the understanding of, and ability to operate across, numerous
disciplines. This will redefine the domain of engineering, and enable manufacturing to
be carried out in autonomous and robotic factories, slashing cycle times and driving up
productivity.
Digitalisation also offers a huge opportunity to encourage diversity as roles are not restricted
by the traditional roles such as engineering and IT performed today. The future workforce will
possess a broad core understanding, supplemented by expertise in emerging themes such as
visualisation, big data and HPC in evaluating scenarios, and cognitive systems to maximise
design, manufacturing and through-life performance.
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Exploiting a fully integrated information environment
Leveraging shared information can enable the extended enterprise concept to advance in the
UK, improving productivity in the supply chain. The benefits of this approach include: dynamic
scheduling, improved product quality through high fidelity measurement, and enhanced
prognostics. Seamless integration of data can reduce non-value-added tasks, remove
barriers to entry, enable innovation in a safe environment, and enable multi-partner product
development through, for example, creating a fully collaborative digital twin shared by supply
chain partners.
A fully integrated information environment requires a consistent national approach. Certainty
in design data exchange, non-repudiation, governance and validation of strategic partnerships
are all key considerations.
Exploiting Digital Assets and Enabling Business Model Transformation
Quantifying the value of digital capability in a collaborative environment, measuring the real
value of data and demonstrating the possibilities available will make an immediate impact
on the adoption of digital technology. Demonstration programmes should illustrate tangible
intervention at an appropriate scale, from minor, inexpensive sensors that enhance awareness,
through to a fully integrated supply chain that supports the factory of tomorrow. Each example
should validate the level of investment required and quantify the benefits of adoption.
In addition to promoting adoption by the supply chain, this approach would support a more
collaborative and competitive landscape, and offer the opportunity to explore how exploiting
data can lead to new business models.
Companies need to begin their digital journey with practical steps; adapting legacy systems
to the digital world is therefore a priority.
Maximising Productivity
End-to-end integration, interoperability and processes that support a future vision are
required to realise the opportunities presented by digital technology.
For aerospace, virtual product and process certification provides a focal point. Vast
productivity improvements can be achieved through a holistic, analysis-driven culture that
utilises data from all areas of the product and process life cycle. Achieving this will support
a right-first-time approach, a more efficient and productive use of resources, reduced costs,
improved quality and a more integrated and competitive supply chain.



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Building an agile, productive and
sustainable manufacturing supply
chain that will enable UK automotive
sector to lead the world in next
generation personal transportation
AUTOMOTIVE
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Automotive
SECTOR DESCRIPTION AND NATIONAL OPPORTUNITY
The UK automotive sector has enjoyed unprecedented success in recent years.
Car manufacturing is now at its highest level since 2005, exports are stronger than ever
and the UK can boast an increasingly competitive supply chain, with cars built in Britain
now having over 22% more UK content than they did six years ago.
The automotive industry is a vital part of the UK economy. In 2015 it accounted for more
than 71.6 billion turnover and 18.9 billion value added. With some 169,000 people
employed directly in manufacturing and 814,000 in over 2,000 companies across the wider
automotive industry.168
The UK produced 1.7 million cars and commercial vehicles and almost 2.4 million engines
in 2015, the highest production level since the recession in 2007. The output level is expected
to reach 2.0 million vehicles by 2021169. The UK remains the second largest vehicle market
and fourth largest vehicle manufacturer in the EU. It is also the second largest premium
vehicle manufacturer after Germany.4
However, currently the automotive sector is experiencing a period of unprecedented change.
Driven by global megatrends such as CO2 reduction, air quality improvement and exacting
safety requirements, vehicles are becoming increasingly electrified, autonomous and
connected. This disruptive transformation is happening rapidly and in itself represents a
significant opportunity for companies that are flexible and can develop new products and
business models quickly e.g. servitisation. In turn, many of the developments provide the
foundations for integration into the wider challenge of personal mobility. Digitalisation
is the prime enabler.
Innovation in product and manufacturing technology is a cornerstone of the automotive sector.
Since the invention of the first assembly line, the automotive sector has proven itself to be
excellent at industrialising and adopting new process and product technologies. The sector is
characterised as global and extremely competitive. As a consequence, there is an unwavering
focus on cost, pace and efficiency. In product development this has driven the rapid
development and widespread adoption of digital tools for design, modelling and simulation;
iterative optimisation now happens virtually, followed by the minimum number of physical
verification tests. In manufacturing it has led to the implementation of highly automated
processes. Overall this has enabled the sector to become very productive. In contrast with the
UK cross-sector position or even manufacturing as a whole, the UK automotive sector is the
most productive in Europe*. In 2015, the automotive sector achieved a real GVA per job figure
of 111,900 (twice the national average). This leadership position brings with it the challenge
of remaining one step ahead, especially in light of BREXIT.
The technologies associated with the 3rd Industrial Revolution (e.g. electronics, IT and
automation) are ubiquitous across the automotive sector (especially OEMs and tier 1s), and are
utilised from research and development through to manufacturing and beyond, creating a solid
foundation for the adoption of the next wave of connected, digital technologies. Consequently,
the automotive sector is well positioned to become a vanguard in regard to the implementation
of digitalisation throughout the supply chain, subsequently sharing the learning to accelerate
and de-risk adoption across the UK. Specifically, the main opportunity for growth and
productivity gains, as well as helping to make the UK capable and attractive for re-shoring,
168 http://www.automotivecouncil.co.uk/wp-content/uploads/



sites/13/2015/11/1511-Automotive-Council-UKIC-Report.pdf
169 http://researchbriefings.files.parliament.uk/documents/SN06152/SN06152.pdf
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lies with the digitalisation of Small or Medium Sized businesses (those employing 0-249)
people that make up 99% businesses in the UK*.1
SECTOR CHALLENGE AND OPPORTUNITY FOR DIGITALISATION
The global automotive industry is faced with growing customer demand for shorter lead times
and high degrees of personalisation, leading to increased manufacturing complexity and
greater pressure to establish smart, responsive supply chains; things have come a long way
since Henry Ford said "You can have any colour you want, as long as it's black".
For decades, there has been major competition in the global supply chain from businesses
in countries with low labour costs which has led to significant hollowing out of the UK supply
chains. In the UK, although the proportion of local content has grown significantly, the UK
automotive sector currently runs a trade deficit of around 18bn. The UK cannot win this
"race to the bottom" and needs to find alternative ways to add value; digitalisation presents
an excellent opportunity. That said, it is possible to increase the proportion of local content
through the rigorous application of "right-shoring" techniques. There are five levers that can
address this:
1. Continue to close the gap between UK sales (2.7m) and UK production (1.7m) the trend

to 2m production is a critical success factor
2. Continue to support/promote the premium/luxury/niche sector to provide more value

in the cars we build and export versus the value of imports
3. Support the development of new technology supply chains in conjunction with the

Technology working group this is a major initiative being led by the APC with support

from AIO and HVMC
4. Continue to support the growth of UK local content, at all levels in the supply chain, to

displace parts imports, through both domestic organic growth and FDI through the AIO
5. Continue to support the development of capability for the UK supply chain to successfully

increase exports

The key opportunities for digitalisation are based on the activities and technologies shown
in the table below:
Digitalisation activities
Key technologies
Collect, store and transmit data
Sensors and tracking (e.g. RFID)
Communications interface & standards (enabling cyber physical digital transfer)
Cloud based storage and service models
5G
Analyse data
Predictive Analytics
PLM Software
Interact with data
Virtual reality
Mobile/Tablet/Watch
Visualisation tools (e.g. Tableau)
Crowdsourcing (e.g. sentiment analysis)
Produce digitally
Additive manufacturing techniques (e.g. 3D printing)
Advanced Robotics (e.g. collaborative robots & cyber physical systems)
MES software
Protect data
Cybersecurity & digital trust
Blockchain
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Specifically, they can be summarised as:
Complexity and connectivity
The technologies underpinning industrial digitalisation will enable the automotive sector to
add numerous features and functionality into the product, whilst simplifying the powertrain
and increasing visibility in the supply chains that will deliver next generation vehicles.
Data will have greater value if shared through supply chains, but this will raise challenges
around security and ownership of data. To derive value from the data derived from greater
connectivity context and data processing will be required to generate actionable insight.
Such examples will be necessary to demonstrate the return on investment of technology and
to articulate the business opportunity to encourage businesses connect across supply chains.
The notion of assigning value to data and making this tradable may help to drive market
behaviour and appropriate business contracts. One advantage of greater connectivity would be
within the business; digitalisation of cross functional teams from design and manufacturing.
Transformation Fit for Purpose
To deliver business transformation in the automotive sector we must remain impact
focused, not technology driven. We seek the business and sector challenges where digital
manufacturing technology can address the business needs and open up new opportunities.
This means selecting fit for purpose technology to meet the need which may not always
be the most advanced solution. The state of the art should be advanced in parallel.
There is a need to lead and educate the community on what of what technology is available
and how to apply it. This includes providing the skills to the user manufacturing community
and imparting knowledge to business leaders. Sharing best practice within the automotive
sector and from without will help to identify opportunities and catalyse investment.
Where have solutions been found for similar problems? There may be a role for OEMs
to lead their supply chains as well as peer to peer learning.
Whilst there are well established technology providers in the market with existing corporate
relationships there is a need to connect the digital technology community and start ups to the
automotive industry. This is where much of the opportunity will be realised. The technology
could be classified by the business challenge it addresses; e.g. data visualisation and AR/VR
for decision support and guidance, digital twin for process execution, control and improvement.
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The projected business and economic impact can be summarised as follows:
Cost of poor
quality reduction
5-12%
Forecasting accuracy
improvement up to
80%
Reduction in
time to market
15-25%
Reduction in plant
maintenance costs
15-25%
Productivity
increase
3-5%
Reduction
in machine
downtime
20-30%
Annual total
economic benefit
by 2035
8.6billion
Cumulative total
economic benefit
by 2035
74billion
to suppliers
2.6billion
and relates
to the wider
economy
1.7billion
Increase in productivity of
technical disciplines such
as production planning
30-50%
Inventory
reduction
12-20%
of which relates to vehicle
manufacturers
4.3billion
PROJECTED BUSINESS AND ECONOMIC IMPACT
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BARRIERS TO DIGITALISATION
Many vehicle manufacturers, while recognising the importance of digitalisation, had
only initiated a series of pilots so far. Some suppliers, notably SMEs have not started any
significant digital pilots. Manufacturers and suppliers both forecast substantial benefits
from digitalisation including productivity gains, shorter lead times more personalised
vehicles and enhanced services for customers. A key barrier to implementation was found
to be a lack of knowledge and the necessary skills to design and execute a company-wide
digital strategy. Another key barrier is the trust needed between supplier and manufacturer
to share data electronically. SMEs identified funding for investment as a concern.
Skills
Becoming/remaining an intelligent customer.
- Awareness levels are low and clarifying the mechanisms to drive digitalisation.
- Decision making on investment and technology selection is complex and uninformed.
- Lack of human resources strategies for digitalisation.
Recruiting the right people.
- Attraction of fresh digital talent and engagement in horizontal innovation;
- Dynamic evolution of job roles, skills and expertise due to rapid technological change;
- Digital skills needed for both skilled and unskilled labour;
- Job role changes to exploit human potential in creative / value added activities.
Changing working styles and culture.
- Flexible working.
Supply Chain, production and assembly
How can we best configure our supply chain assessing the digital maturity of suppliers,

identifying weak links and using technology to improve supply chain capability?
How do we get better visibility within our supply chain, making it more dynamic by sharing

data securely and improving compatibility?
How can we optimise logistics through real-time insights using technologies such

as tracking?
Within the Factory
What technologies will have the biggest impact on productivity, agility and people's jobs?
How can I quickly reduce the time to rectification and the amount of firefighting?
How do I break down the organisational silos?
How do I best configure cross-functional teams e.g. to improve connectivity between design

and manufacturing to create additional efficiencies?
How can I automate process execution with the associated verification and analysis?
How do I embed and maintain a digital thread throughout the product lifecycle?
Automotive Specific Opportunities
How do we achieve the integration and interoperability of legacy equipment, reducing the

complexity of the process and avoiding point solutions?
How do we create the internal ecosystems for technology development?
How can we reduce the risks and make it easier to access and plug in external technologies

from SMEs?
How can we gamify production to bring competitive engagement of workforce?
How do we unearth new business opportunities through exploring application of affordable

digital technologies?
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What would the digital thread for through life ownership of autonomous vehicles be

configured and managed? How is data ownership attributed? How do we guarantee the

provenance of the data?
How can we safely test and verify new technologies within the factory without risking

production? How do we create configurable, representative 'sandpit' environments to trial

technologies away from the factory?
ACTIONS TO ENABLE DIGITALISATION
The UK automotive sector is in a leading position and consequently is well positioned to realise
the comprehensive adoption of digital technologies. As a result it presents a tremendous
opportunity as THE place to demonstrate digitalisation to the wider UK industry.
The recommendations can be grouped into four priority areas:
Demonstrators
Show what's possible and share experiences by creating a community of practice based

on a comprehensive network of open-access digital demonstrators, supported by

implementation case studies, which are relevant to organisations at any stage in the

digitalisation journey, have a clear business case and measureable and validated

business impacts.
Accelerate the adoption of digital technologies through open-access 'sandpit'

environment(s), enabling organisations to trial new technologies, perform test

implementations, overcome integration challenges, train staff, amongst others,
without fear of negatively impacting series production.
Wholescale Supply Chain Implementation
Establish the ground truth of the current state of adoption of digital technologies through

the roll-out of a diagnostic tool for assessment of the digital maturity of companies in the

supply chain and nationally of the manufacturing sector.
Following an assessment of digital maturity, accelerate business impact by signposting

organisations to additional resources/support and assist them in the creation of a tailored

roadmap and action plan.
Ensure that a future connected supply chain is resilient and secure by advancing

the knowledge and awareness of cyber security through SME vouchers for cyber audits.
Skills
Ensure that digital skills training is available to support the UK labour force, both

re/up-skilling the existing workforce and embedding the requisite skills in people

entering the labour market.
Broaden awareness and foster opportunities for new business and contract models

that are frequently enabled by digitalisation.
Standards
Facilitate or create standards for interoperability
Define best practice approaches to cyber security for companies in the
manufacturing sector
The opportunities identified above align well with the findings of previous work carried out
by Automotive Council, SMMT etc and could be delivered by utilising the existing network of
expertise such as the Digital Catapult, High Value Manufacturing Catapult, CESAM or others.
This would help to prevent duplication and also presents an opportunity to leverage current
infrastructure for test beds and demonstrators by improving the connectivity between them.
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Transforming the UK construction
industry by ensuring digitalisation
at scale to realise productivity
increase, creation of highly skilled
jobs and increased UK export
opportunities
CONSTRUCTION
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Construction
SECTOR DESCRIPTION AND NATIONAL OPPORTUNITY
High quality social and economic infrastructure is vital for economic growth and improved
quality of citizens' lives (ICE 2016). An inadequate supply of infrastructure has caused the UK's
global economic competitiveness to erode to 7th in the world, with inadequate infrastructure
the second most problematic factor (WEF, 2016). For the UK, the construction industry
contributes 6.5% (103Bn) of economic output with 6.2% of total employment for 2.1m people.
It also represents 20% of the total workforce of SMEs across all sectors (BEIS, 2015).
Globally, 98% of infrastructure projects are over budget or delayed, with an average of
80% over budget and at least 20 months late. Construction's productivity is also lagging
global productivity by over 30%. If constructions productivity is improved to average global
productivity, it would pay for 50% of the total demand of infrastructure (McKinsey, 2015).
These statistics show that the construction industry plays a unique role in the global economy
and cannot be compared easily to other industrial sectors. There have been many UK industry
reports spanning 70 years that highlight the dysfunction of construction; from Simon (1944)
to Latham, (1994) Egan, (1998) Wolstenholme (2009) and Farmer (2016).
SECTOR CHALLENGE AND OPPORTUNITY FOR DIGITALISATION
Key issues that have hampered the sector include low investment in innovation and
skills, and lack of aggregated demand generating scale, making technology adoption difficult.
It is estimated that 1 invested in construction delivers 2.84 in direct (wage income and
profit), indirect (increased productivity in the product and service supply chain) and induced
(employment, household income) impact. It is also estimated that 92p of every 1 is retained
in the UK, and delivers a return of 56p to the Exchequer (therefore, estimated net investment
is 44p).
Looking forward, the industry may experience a 50% reduction in employment as new
technologies are implemented (BIM2050, 2015). There may also be disruption in the structure
of traditional professional disciplines, from linear, siloed career paths, towards a 'T-shaped'
portfolio professional career path (dotBuiltE, 2017). However, in context of technical skills,
there is a labour supply gap in construction (CITB 2016). This may be exacerbated by the UK
exiting the European Union.
The scale of the opportunity is in both the unique nature of construction (its size and vital role
in the economy) and its potential to be a high value digital industry that is the foundation of
a digital economy. Digitalisation will enable the sector to deliver services cheaper, faster and
smarter (Construction 2025, 2013).
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BARRIERS TO DIGITALISATION
These potential areas for digital disruption in construction require support from the following
underpinning cultural and educational aspects to enable this step change in the construction
industry to occur.
Digital Skills and Education
We have already mentioned the shift of traditional professional disciplines from siloed career
paths to 'portfolio professional' career paths. This means the education of professionals
will need to become more vocational and be supported by digital learning platforms.
The traditional skills of the sector will need to be augmented, with areas such as material
science, data analytics and information management becoming key.
The industry needs its institutions to embrace the future of their professions and ensure
their certification of courses (such as degrees) are brought up to date to capture the need
of the modern professional. We also need institutions to manage their bodies of knowledge
to support the standardisation of methods and procedures to support progressive firms
to continue to support the systemisation of services into digital service models. (shown in
image above, adapted from Susskind 2015).
Incentives for Collaborative Working
There are no established commercial structures or vehicles to incentivise collaboration
in construction. The existing contracting framework requires trust between parties and
an altruistic approach to information generation and exchange. In many cases, suppliers
are expected to generate information to the advantage of others with no real recourse
for remuneration for that value generation.
The standards for BIM such as PAS1192-2&3 provide a framework for construction buyers
and suppliers to specify the information needed between project stakeholders. They provide
the ability for construction buyers to specify a digital asset that can be contracted against.
However, the use of these standards is not commonplace in the market and are incorrectly
perceived as an additional cost to delivery and operations.
EXTERNAL FACTORS
MARKET
STRUCTURE
CONTRACTS &
REGULATIONS
DIGITALLY EMPOWERED
CONSUMERS
PRIORITY AREAS
Open Standards and Innovation
Advanced Manufacturing/Material and Sensors
Digital Based Decisions and Computational Design
Cyber Resilience and Connected Infrastructure
ENABLERS
Digital Skills and Education
Incentives for Collaborative Working
Acceleration of Digital Adoption and Speed to Market
CHART 47
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Acceleration of Digital Adoption
The speed that research is commercialised is accelerating through the 'triple-helix'
partnerships of academia, start-ups and industry (Nature, 2016). This model of open
innovation has become functional in many sectors, but construction is yet to fully embrace
partnerships with academia in terms of digital services and business model innovation.
As an industry, we need to ensure that this industrial cycle is not as damaging to the
environment as previous cycles. Positive disruption (Nature 2011) includes the environment
in the economic means of production. The previous cycles of industrialisation have seen great
financial gain at the cost of the environment in terms of pollution, and linear consumption of
raw materials that have failed to be recycled appropriately.
ACTIONS TO ENABLE DIGITALISATION
To address these external factors in the context of the construction industry, this report
focuses on four priority areas for industry and government with a view to potential sector
deal creation.
Open Standards and Innovation
Applying British Standards is worth 8.2bn to the UK economy. Furthermore, 28% of annual
growth in GDP, 34% in productivity gains and 6bn of exports is attributed to applying
standards (Cebr, 2015).
The application of standards is a key driver in delivering digital information platforms in
the construction sector, also referred to as a 'single source of truth'. To integrate the flow of
information through the design, building and operation of the built environment, standards
need to be developed and applied on a market level to achieve the benefits seen in sectors
such as automotive and aerospace design.
Standards for Building Information Modelling and The Smart Cities Framework are being
integrated under the Digital Built Britain Programme (a UK Government initiative) to generate
a market capacity for a digital construction sector.
Open data standards have been derived for the construction sector, including COBie and
IFC, but these are applied with varying degrees of success. Estimates of productivity gains
of between 15-20% associated with whole-life cost of the project have been achieved with
modest investment in standards by the UK Government (NBS, 2016). The investment into
Digital Built Britain will yield positive outcomes for construction firms and enable the
market capacity for digital information.
Open innovation enables larger companies to restructure their research and development to
collaborate with start-ups and universities to develop new technology. This method of R&D
can reduce costs by as much as 50% (Grove, 2008).
Advanced Manufacturing, Sensing and Monitoring
Advancements in technology can introduce a step-change in the construction industry's
ability to plan and monitor works. Currently, significant cost and risk are associated with
unknown ground and site conditions which can impact project costs by 20% (European
Commission, 2017), and roughly 40% of the UK construction market relates to maintenance
and refurbishment.
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Through use of advanced scanning technologies, including drone mounted LIDAR, DIC and
ground-penetrating radar, better decisions can be made early in the design process to mitigate
risk. Similarly, the introduction of smart IoT sensors and advanced composite materials (such
as self-healing concrete and polymer matrix composite materials) will lead to a new
approach to maintenance and refurbishment, driving down cost and improving efficiency
across the sector.
Additive manufacturing, and 'flying factories' (a mobile method of manufacturing outside of
a fixed factory), could enable high precision manufacturing to occur on site and minimise the
need to transport bulky prefabricated building parts. Flying factories (and similar) reduce
the fixed-cost associated with large off-site manufacturing plants.
Digital Based Decisions and Automated Design
With almost infinite computing power and data storage coupled with the rapid expansion of
network bandwidth, better decision making can be enabled in construction through integration
of big data sources, and automation of traditionally expensive, time-consuming design activities.
Through the application of technologies such as machine learning and distributed ledger
technology (DLT) to the traditionally analogue design process, mass efficiencies can be
realised. Parametric tools can allow for rapid testing of design solutions against site
constraints and requirements, helping to ensure that the built environment satisfies the client
brief and becomes more user-centric. By reducing the burden of later stage design changes,
overall cost fluctuation can be reduced, helping to achieve greater programme and cost
certainty than previously realisable.
The application of DLT (the technology behind Bitcoin) can enable the financial incentivisation
of collaborative working. Currently, the construction industry is required to be almost altruistic
in its information production and sharing. The commodification of construction information
via DLTs could transform the market of professional services. More simply, DLTs can be used to
turn traditional paper contracts into automated computer code that can distribute payment
automatically when work is complete. This also has a strong potential to 'rewire' the market.
Traditional Business Models
Consolidation of the Market
New Market Capacity & Business Models
Digital Adoption
Craft of
a discipline
Standardisation
of Methods & Procedures
Systemisation
of services
Standards
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Cyber Resilience and Connected Infrastructure
Increased connectivity in infrastructure creates opportunities to cut costs of operations and
reduce the response time to major incidents as information can be collected in an instant,
and the most efficient solution for the entire system derived. Realising 'system of system'
interdependencies in the built environment through connected infrastructure can help to
improve the value of current built stock, as well as maximise the impact of newly constructed
interventions.
The recent attack on the UK's National Health Service by hackers using a 'cyber weapon' called
WannaCry (FT, 2017), demonstrated the disruption that is caused by poorly managed digital
infrastructure. Connected infrastructure can be targeted by similar cyber weapons and there
is a vast difference in consequences between impacting patient records and train signalling
systems. The impact of cyber security breaches on large infrastructure systems could be vast,
therefore incorporation of such defence technology into new infrastructure is essential.
REFERENCES
1. Built Environment 2050, BIM2050, Construction Industry Council, 2014
2. Business Population Estimates for the UK 2015, Department of Business, Innovation

and Skills, 2015
3. Construction 2025, UK Government, 2013
4. Construction Industry: Statistics & Policy, House of Commons Library, 2015
5. Career progression in the construction industry, CITB, 2016
6. Grove, M. (2008). OPEN INNOVATION 2.0. The Open Source Business Resource
7.
ICE Autumn Statement Submission, ICE, 2016
8.
Instrumental City: The View from Hudson Yards, Places Journal, 2016
9. NBS Report, The National Building Specification, 2016
10. Portfolio Professionals in the digitised Built Environment, dotBuiltEnviornment,

Reading University, 2017
11. Positive disruption, Nature, 2011
12. Technology transfer: The leap to industry, Nature 2016
13. The Construction Productivity Imperative, McKinsey, 2015
14. The Economic Contribution of Standards to the UK Economy, Centre for Economics

and Business Research, 2015
15. The Future of Employment: How Susceptible are Jobs to Computerisation?

Frey & Osbourne, Oxford University, 2013
16. The Future of The Professions: how technology will transform the work of human experts,

R Susskind and D Susskind, Oxford University Press, 2015
17. The Global Competitiveness Report, World Economic Forum (WEF), 2016
18. The UK Collaboratorium for Research on Infrastructure and Cities (UKCRIC),

University College London, 2017
19. Understanding and Monitoring the Cost-Determining Factors of Infrastructure

Projects, European Commission, 2017
20. What is WannaCry and how can it be stopped?, Financial Times, May 2017

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Digitalisation will secure the future
of food supply chains
FOOD & DRINK
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Food and Drink
SECTOR DESCRIPTION AND NATIONAL OPPORTUNITY
In the UK the Food Chain generates food and drink sales of over 200billion per annum.
Globally the industry is worth over $8trillion and growing at 6% per annum, or nearly
$500billion per annum in increased sales as a combination of more people and as consumers
'trade up' to convenience, added value products and food service as wealth increases - the UK
is a World leader in adding value, traceability and provenance in the food chain.
Food and drink processing is the largest manufacturing sector in the UK, contributing over
28.2billion to the UK economy and employing 420,000 people.170 The wider food chain,
from farm to fork, generates GVA of 108billion, with 3.9m employees (DEFRA 2017) in a
truly international industry, with 20billion of exports in 2016. From 2006-'15 the UK food
chain increased GVA by 30%, exports by 72%, branded food exports by 100% and food chain
employment grew by 5% (DEFRA 2017).
The return on investment from Industrial Digitalisation (ID) in the UK food chain includes five
main economic opportunities:
Improved UK food chain productivity - the increase in UK core food chain productivity

through adoption of ID enabling the sector to replace imports, leading to sector growth;
More competitive UK food exports - the increase in UK core food chain productivity through

adoption of ID enabling the sector to grow exports, leading to sector growth;
Increased adoption of UK ID technology by the UK food chain - the development of high

value UK supply chain technology suppliers servicing the UK market for ID in the food chain;
Increased exports of UK ID technology by the global food chain - the development of

high value UK technology jobs to service the growth in demand for ID in the food chain

internationally;
Significant reductions in supply chain food waste, improved traceability and food safety

through the application of ID technology.
SECTOR CHALLENGE AND OPPORTUNITY FOR DIGITALISATION
With a limited land mass and virtually no unused land (DEFRA 2017), the potential to deliver
GVA growth in UK agriculture is modest. Similarly, GVA growth at the 'consumer end' of the UK
food chain, i.e. food retail and catering, is modest due to a relatively stable market driven by
population size (steady but slow growth) and consumer spending per capita (increasing but
only slowly). However, the UK has a substantial trade deficit in food, despite a big increase
in exports in the last decade, with imports currently (DEFRA 2017 data for 2016) worth more
than double (42.6billion) UK food exports (20.1billion). Digitisation to improve UK food chain
competitiveness could both help to replace imports and increase exports.
The larger opportunity for growth in the food chain lies in focusing on food processing,
marketing and distribution, ' the core food chain', connecting primary production on farms
(in UK and globally) with consumer facing companies (retail and food service) in the UK
and export markets. This sub sector of the food chain has a GVA of 38.7billion per annum
(28.2billion in food processing, 10.5billion in food and drink wholesaling, DEFRA 2017)
and employs 614,000 staff.
170 US Department of Agriculture (USDA) Economic Research Service (2013), Global Food Industry
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MADE SMARTER. REVIEW 2017
In addition, the food supply chain accounts for 28% of all global GHG emissions, but
nevertheless up to 30% (8.4MT, WRAP 2017) of food is wasted each year. Food poisoning,
including over 200,000 incidents from Campylobacter alone, creates misery for many, high
costs to the NHS and significant losses in working time. Digitisation to connect the supply
chain, match supply and demand, optimise resources and provide immutable traceability
has the potential to transform the sector.
The UK needs to develop, manufacture and distribute more food and drink to meet growing
demand in UK and export markets. The UK is only about 2.5% of the global food market by
value and therefore the potential export market for food chain products and technology is
approximately 40 times the size of the UK market. Clearly UK producers would be expected
to have a much higher market share of the UK than the global market, but the potential for
exports is large and growing for both food products and the technology used to produce them.
The UK has globally leading UK food and digital capability. There is potential to grow the
UK food technology sector (in part by replacing imports of food processing equipment and
systems) to exploit the growing global market for food technology. Digital technology allows
improved production efficiency (e.g. robotics and automation, Industry 4.0 connectivity),
connection of the whole supply chain to improve traceability (e.g. internet of things, block
chain, cloud data architectures, data analytics), more efficient and rapid supply chains
(e.g. artificial intelligence enabling just in time delivery, IoT monitoring, real time system
optimisation, highly connected planning software), improved feedback from retailers,
consumers and food service (e.g. automatic supply and demand forecasting systems),
improved consumer trend monitoring to assist NPD (e.g. POS data analytics, social
media analytics).
All these industrial digitalisation (ID) technology areas offer the potential for substantial gains
in UK food chain productivity and the development of ID technologies which are exportable.
In some technology areas the UK is already a global leader e.g. food and refrigeration
monitoring systems via IoT, food safety and traceability systems, with the potential to unite
UK food sector expertise with UK IoT and block chain expertise to create globally leading
disruptive technologies. In other technologies, e.g. food processing and robotics, the UK
currently lags behind some competitors e.g. ABB and Siemens are in the German market, but
both companies are strong in the UK and support the IDR focus on the food chain, offering
the potential to rapidly improve UK food chain productivity through knowledge transfer at the
same time as using the UK's sophisticated food sector to drive future technology development.
Specifically the food processing sector is facing a perfect storm in which its reliance, for
at least the last 20 years, on cheap and available labour supplies, is being challenged by a
restriction on labour supply (due to Brexit), rapid above inflation rises in labour cost (driven
by the National Living Wage) at the same time as robotic system functionality increases and
costs fall. In certain sectors (e.g. fresh produce packing, sandwich manufacturing), up to 90%
of the line workforce can be migrant "low skilled" workers.
Businesses which rise to this challenge will grow and improve their labour productivity quickly,
be able to exploit new market opportunities and grow exports. Digital technologies are at the
heart of being able to exploit this opportunity which is multi-faceted and growing rapidly.
BARRIERS TO DIGITALISATION
A food sector event held in Lincoln in June 2017 to feed into the IDR, identified 9 key themes
across the food industry where investment from government and industry could unlock
productivity growth
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MADE SMARTER. REVIEW 2017
Skills/Talent: Upskilling and retraining the existing workforce
Regulatory/Policy: Development of a supportive policy framework to enable digitalisation
which protecting cyber security and data protection.
Legacy Integration / Interoperability: Flexible system develop that enables integration of

digital technologies (including robotics) into legacy production lines. Generic and wide scale

issues with interoperability of systems.
Technology (Disruptive): Significant opportunities for transformational and disruptive digital

technologies within the food supply chain digital ecosystem, such as IoT, blockchain, digital

twins and data storage, analytics. Develop a series of demonstrators to showcase and

support the development of the technology.
Confidence/Awareness: The need for demonstration projects to help end users and

developers gain confidence in new technologies. This includes demonstration of industrial

robotics applied to the food chain, industry 4.0 connectivity illustrations and novel digital

technologies.
Connected Digital Supply Chains: The need to develop the infra structure and a digital

ecosystem that can be used across the full extent of the food chain (from farm to consumer).

This includes new technologies such as IoT and blockchain that can be applied to connect

entire supply chains.
Funding & Procurement: The need for government support to de-risk innovation projects

by SME's, flexible funding mechanisms, tax regime to support investment and financial

support.
Culture and Leadership: The food industry does not have a great perception for career

development, and the industry lacks coherent leadership. The development and promotion

of modern digital technologies may help change perceptions. The industry requires a unified

and coherent leadership council to promote digital technology development.
Data Security: There are wide range concerns with regard to data ownership, privacy and

cyber security. Cyber security concerns are seen as a barrier for SME development and the

government needs to develop a clear policy for data ownership and access.

ACTIONS TO ENABLE DIGITALISATION
The recommendations from the food industry consultation event were;
Establish Industrial Digital Training Institutes
- Industry / Public / HEI
- At all levels, especially professional re training
Demonstrators and Innovation Funding
- Industrial Robotics, Industry 4.0 etc. Rolling programs at centre of excellence and

to support early adopters in industry (manage risk).
- IoT, Blockchain, Analytics, Traceability systems, Artificial intelligence
Interoperability, Digital Architecture and Security
- Standards for interoperability, legacy integration
- Establish a digital architecture to support the food chain (aka Smart Cities; Data storage,

IoT systems, Sensors, Analytics)
- Support of data security / ownership policy and approach for SME's
Leadership
- Industry is large, complex and leadership diffuse, need to change perceptions

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Creating a sustainable future
OFFSHORE
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Offshore Wind
SECTOR DESCRIPTION AND NATIONAL OPPORTUNITY
The UK economic opportunity in offshore renewable energy is robust and growing. Over
15bn has been invested in commercial offshore wind projects in the UK to date and a further
15-20bn is in the pipeline. Further cost reductions will lead to deployment of thousands
more offshore wind turbines by 2030, allowing UK companies to help deliver value to the UK
economy of 4.4bn per year . The cost of electricity from offshore wind has fallen 32% in only
four years, surpassing 2020 cost reduction targets and putting the goal of being the cheapest,
large-scale clean energy source within reach and now sits alongside nuclear as the UK's
clearest route to decarbonisation. A truly global market is emerging through strong growth
in Europe, North America and Asia. Offshore renewables align strongly with the aims of the
government's technology-driven industrial strategy and are especially important for coastal,
economically-challenged areas, creating new business opportunities from Cornwall
to Caithness, and Hull to Milford Haven.
Developing the right balance of specialist skills will be essential to continue the area's strong
presence at the forefront of innovation. The sector has a strong record in both formal education
and private training capabilities and there are strong relationships between Universities
and Colleges and businesses. However, there is a shortage of skilled engineers. The skills
required within the sector are similar to those existing within other sectors such as general
manufacturing and the offshore oil and gas sector. The sector has a strong tradition of
delivering engineering skills at all levels from apprenticeships to post graduates and this forms
part of the industrial base of the UK. The jobs potential created by offshore wind is significant,
with the industry set to support up to 60,000 direct and indirect jobs in the UK by 2032, making
a compelling case for ensuring the right skills are developed today for the needs of tomorrow.
Although great progress has been made, the offshore wind sector is at a relatively immature
state of development (compared to automotive and aerospace, for example). Consequently,
integration and standardisation remains relatively under-developed in a number of aspects
from low commoditisation of equipment, through health and safety criteria to training and
skills. Supporting collaborative activity within the sector and bridging between business,
academia and NGOs/GOs will help sector wide innovations to emerge, facilitate maturation,
reduce risk, help bring down costs further and augment the reputation of the UK as a world
leader in offshore wind.
SECTOR CHALLENGE AND OPPORTUNITY FOR DIGITALISATION
The progress of the offshore wind market from early demonstrators, through cost reduction
and performance improvement, to the current phase of maturing supply chains and
consolidation of project developers and OEMs, is significant and it is now set to move into
a new phase of global market expansion.
The market prospects in Europe for offshore wind in particular are currently robust, and
prospects in North America and Asia are emerging rapidly. In the UK, BEIS is moving ahead
with its ambition to provide contracts for up to 10GW of additional offshore wind in the 2020s.
Recent scenarios from the Committee on Climate Change171 forecast a UK installed base of
20-29 GW of offshore wind in 2030. Projects announced in the Netherlands, Denmark and
Germany during 2016 indicate a continued rapid fall in the Levelised Cost of Energy (LCOE)
and the recent UK auctions have extended this even further.
171 1 https://www.theccc.org.uk/wp-content/uploads/2015/10/Power-sector-scenarios-for-the-fifth-carbon-budget.pdf
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MADE SMARTER. REVIEW 2017
The UK sector faces the challenge of continuing this trajectory in terms of field deployment
in the face of skills shortages, the need to industrialize new technology (such as floating
foundations) and the tensions over UK content in UK fields in the context of government
subsidies. The maturity of the offshore wind industry is evidenced by the EU wide supply
chains for major capital components that are now well established which in some key high
value components (such as Nacelles) lie entirely outside the UK. In some balance of plant
components (such as Cables), the UK has strong manufacturers that are now winning orders
in the emerging markets of the US and Asia. The growth of UK manufacturing would be helped
by more stability in market demand through evolving a more stable government intervention
method than the current auction methodology. The UK has a strong position in engineering and
installation services for offshore wind and excellent capability in operations and maintenance
both aspects offer significant opportunity for export led growth.
There are significant opportunities for the Offshore Wind sector in industrial digitalization
that include:
Big data techniques allied to more extensive use of sensor technologies (both embedded

and via drones) that can reduce the cost of electricity by reducing operations and
maintenance costs. These techniques have strong export potential.
Advanced digital simulation at the engineering stage could enhance UK content in offshore
wind projects and create valuable export opportunities for UK consultancy companies.

This opportunity is particularly strong in foundation design. Although great progress has

been made, soil-foundation interaction is still not completely understood and more research

is needed to improve simulations and their validation against test data gathered at

real-world scale. Floating foundation design is a key export opportunity and also requires

significant innovation.
The creation of a digital database of environmental data would reduce risk for wind farm

operators and reduce the cost of electricity. At the moment, there is no comprehensive

store of data relating to geological surveys, marine and bird data, wind reserves and other

important factors.
The integration of wind energy into the wider electrical grid is becoming an area of concern

particularly the potential for grid instability and guarantee of supply obligations. Active
management of the grid using digital forecasting is already very sophisticated but there

is widespread belief that there are opportunities for innovations around available power

estimation, localised wind prediction and market trend modelling (at high time granularity)

amongst others.
There is long term potential in the use of specialized robotics to undertake maintenance

on hard to reach assets such as turbine blades. This might first develop as robots that

can crawl along assets and undertake imaging or other sensing operations (to look for initial

stages of cracks for instance) but in time could extend to undertaking actual maintenance

(such as injecting repair resins). This is clearly someway in the future at present but given

the rapid development of robotics in recent years is worth of consideration. Even further

ahead, the development of so-called cobots (collaborating robots that can work alongside

humans) might first emerge as dive assistants (for underwater work such robots do in fact

exist at a research stage) and then for more general duties. Such technology would reduce

the number of humans required for hazardous field deployments.
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BARRIERS TO DIGITALISATION
A number of barriers to digitalisation where identified as part of this review:
Greater stability of project approval (auction mechanism) would enable UK companies

to invest more in innovative digital approaches
The skills development of the work-force is an issue across the whole sector. A greater

familiarity and awareness of the benefits of digitalisation is needed particularly

through examples of good practice within the sector so that the applicability can be

clearly demonstrated.
There is a need for more cross-sector cooperation where relevant digital technologies from

sectors such as aerospace and nuclear can be re-engineered for the offshore wind sector.
There is a lack of specific innovation programs via bodies such as InnovateUK that are

focussed on the offshore wind sector and its needs (in contrast to some other sectors that

have had targeted support).

ACTIONS TO ENABLE DIGITALISATION
The UK offshore wind sector has significant opportunities for export growth that could be
enabled by the adoption of digital technologies. A number of actions would accelerate the
realization of those opportunities:
A more coordinated approach to the development of industrial digitalization in the offshore
wind sector should be developed fostering links between industry, relevant catapults (ORE

and Digital) and academic groups. This should be supported through the Industry Strategy
There are a number of UK SMEs who are developing industrial digitalisation approaches

for new products in this sector such SMEs need more support via mechanisms such as

InnovateUK.
The development of a digital skills in the offshore wind sector could be accelerated

through enhanced support via education and training providers at the main industry hubs

(for example at Hull) where there are significant concentrations of activity.
Initiatives such as the Offshore Wind Innovation Hub, Academic Research Hubs and the

Supergen programme should be given an even stronger mandate to set the industry-

academia agenda in order to ensure best value for money for public and private research

and innovation funding and to connect new technologies to the sector.
The testing at scale of offshore renewable energy technology is a crucial under-pinning

factor in innovation and commercialisation of new technologies and services and this must

continue to be supported. This will be equally true for industrial digitalisation and testing

in the field under real world conditions is crucial. This could be facilitated through

appropriately sited centres that can help diffuse innovations.
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Digitalisation for patient centric
outcome based healthcare
PHARMACEUTICAL
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Pharmaceutical
SECTOR DESCRIPTION AND NATIONAL OPPORTUNITY
The UK's medicines industry is one of our leading manufacturing sectors, with exports worth
25.8bn in 2016. UK data shows the Gross Value Add (GVA) per head for pharmaceutical
manufacture was double the GVA of any other manufacturing sector.172 Industrial competitive
pressures worldwide coupled with changes in patient expectations provide real business
challenges in terms of the competitiveness of this sector in the UK.
The UK is in a global race to attract investment and compete with other economies across
the world in order to sustain its vibrant innovative research community and advanced
manufacturing expertise. The pharmaceutical sector is one of the UK's most valuable assets
and has a projected total global value of $1.2 trillion in 2016. The pharmaceutical sector
delivers a significant contribution to the UK economy and to the population as a whole.173
11.5 million invested in the UK per day on research and development
25% of all expenditure on R&D in UK businesses is by the pharmaceutical industry
107,000 people employed directly by bio-pharmaceutical companies in the UK
Each employee contributing 149,000 to GDP per year
An eighth of the world's most popular prescription medicines were developed in the UK
In addition to the economic contributions the industry plays a critical role in improving the
wellbeing of the UK population and reducing the cost of healthcare.
SECTOR CHALLENGE AND OPPORTUNITY FOR DIGITALISATION
The pharmaceutical sector will require up-skilling and retraining of its workforce in new
manufacturing techniques and digital disciplines. We must reposition the UK's capability
in pharmaceutical, harnessing the opportunities offered by digital transformations for new
product development, manufacturing and integrated supply chains. Using existing expertise,
the UK can exploit newer paradigms, translating emerging technologies into new products
and manufacturing processes. Alongside a progressive tax regime such as the Patent Box,
this could attract pharmaceutical manufacturing to the UK.
Historically, the translation of early innovation development into actual scaled-up medicine
production physically in the UK has not been so successful. Examples of lost opportunities
include:
The UK is a leader in scientific research for biological drugs, however the translation of the

research and Active Pharmaceutical Ingredient (API) manufacturing capability has been

off-shored to the Far East over the last 10-15 years manufacturers being drawn to lower

cost locations, but at the expense of consistent quality/compliance and supply chain

security. Two persistent problems for API manufacturing in these locations have been high

staff turnover and satisfying the requirements of global regulators for supply back to major
markets (i.e. USA, Europe). Disruptive manufacturing technologies are providing a means of

reshoring from low cost countries.
In the UK, we manufacture very few packaging components that are needed for all medicine

packs. This results in medicines manufactured in the UK being exported to other markets

for final packaging into "patient ready" formats.
172 http://www.abpi.org.uk/media-centre/newsreleases/2017/Pages/PwC-analysis-highlights-economic-footprint-of-

UK-Life-Sciences.aspx
173 Delivering Value to the UK. The contribution of the pharmaceutical industry to patients, the NHS and the economy".

API 2014.
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MADE SMARTER. REVIEW 2017
Outcomes for drug development and their manufacture has largely moved to the USA,

Japan, Singapore, Switzerland and Ireland.
This makes UK less self-sufficient, more vulnerable to supply shortages and the UK
ultimately is losing high value jobs and manufacturing know-how and skills. Additional
opportunities include:
Regulatory Environment: The medicines manufacturing area is heavily regulated. Whilst
major regulatory agencies are encouraging the uptake of advanced manufacturing

processes in many parts of the world, registration and approval of advanced processing
methods is not an option. Given the global nature of the Pharmaceutical market the lack

of a harmonised process for registration and approval is a barrier to adoption but regulatory

engagement with the proposed capability build could be a great opportunity for the UK.
Ground-breaking new ways of developing manufacturing processes based on digital

design techniques and mathematical process models require new skills to be acquired by

process and product development scientists. This workforce is highly skilled in the areas

of Synthetic Chemistry, Analytical Chemistry and Formulation Sciences but lacks the

quantitative modelling skills required to exploit these new technologies.
A major challenge is the lack of sufficient expertise and skills within the Pharmaceutical

Industry in emerging digital technologies. This is a key driver in the need for intervention

to catalyse the proposed changes.
Although medicines manufacturing processes could be improved through adoption of

digital techniques, the cost of conversion of current commercial processes both in terms

of capital costs and the costs of change (development and regulatory) present an obstacle }

to implementing these improvements. Opportunities to collaborate and co-fund R&D in this

area would help to alleviate this.

There is a sea change happening however. The UK Pharmaceutical Industry is now at a
pivotal point. These global challenges offer opportunities to regain the UK's position as the
leading country for medicines development and manufacturing, with a focus on not only new
molecules but also the novel associated manufacturing technologies to better meet the needs
of patients. There is also the opportunity to improve and re-engineer existing manufacturing
processes using innovative emerging technologies, tools and techniques to reconfigure the
whole end-to-end supply chain. This will integrate various parallel 'game changers' such as
digital manufacturing, agile manufacturing, artificial intelligence, smart packaging, big data,
analytics, process automation and advanced diagnostics and treatments.
Going forward, digital technology will continue to be a powerful tool in creating medicines.
It will continue to shape and influence not just how medicine is discovered, developed and
made but also how patients are diagnosed and treated. The digital landscape will feature
more and more 'closed-loop' approaches, where systems will learn and predict with
increased accuracy.











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PHARMACEUTICAL INDUSTRY: DIGITALLY ENABLED SUPPLY CHAIN
RAW
MATERIALS
FEEDSTOCK
PRODUCT
MANUFACTURE
FORMULATION
& TABLETING
SMART
PACKAGING
SUPPLY CHAIN
LOGISTICS
HEALTHCARE
PROVIDERS
& PATIENTS
RECYCLE
& RECOVERY
1. Bio
2. Non-bio
3. Batch
4. Continuous
5. Sustainable
1. API
2. Excipients
3. Batch
4. Continuous
1. Control
Productivity
2. Digital
3. Batch
4. Continuous
1. Process
design
2. Personalised
3. Batch
4. Continuous
1. Personalised
2. Location
3. Condition
4. Control
1. Condition
2. Location
3. Control
4. Quality
5. Warehouse
1. Compliance
2. Diagnostics
& monitoring
apps
3. Novel
devices
4. Combined
device
& drug
1. Circular
Economy
2. Resource
Effi ciency
3. Reuse
ENABLING TECHNOLOGIES
BIG DATA
CLOUD SYSTEMS, CYBER SECURITY AND DATA ANALYTICS
Integrated New Medicine and Process Development using
Predictive Modelling and Simulation Tools
Integrated (Digital) Design, Trials and Approval e.g. Addopt
Integrated Supply Chain e.g. Remedies
Learning and Improving from the Combination of Manufacturing,
Supply Chain and Effectiveness of Treatment
Industry 4.0
Internet of Things
Artifi cial
Intelligence
Smart Plant
Equipment
High
Throughput
Testing
Sensor
Networks
Flexible
Manufacturing
Advanced Instream
Process Control
Autonomous
Operations
RFID/NFC Tags
Emerging
Electronics
VR. Simulation and
Modelling Tools
Robotics & Drones
New Drug
Delivery Tech
Advanced
Mobile
Diagnostics
Wireless
Connectivity
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MADE SMARTER. REVIEW 2017

BARRIERS TO DIGITALISATION
Key challenges and opportunities to address digital adoption include:
The need to accelerate new medicine development using predictive simulation and
modelling tools: The use of advanced digital design techniques such as high throughput

testing, robotics, artificial intelligence and big data techniques (integrating structured and

unstructured data and subsequent advanced analytics) can help to eliminate non-viable

drug candidate formulations early on by better predicting properties and performance of

the target molecule and its formulation for drug delivery (e.g. compaction, coatings,

morphology, stability). This will streamline the overall product development process


reducing time-to-market and associated risks and costs.
The need to accelerate scale up, design and modelling of new manufacturing processes:

The age of the blockbuster medicine is coming to an end. This is giving rise to the adoption

of more agile manufacturing processes within the pharmaceutical industry, such as small-

scale production facilities located close to the point of





use, autonomous batch and continuous processes with instream quality control, scalable

processes, distributed manufacturing and additive manufacturing. Furthermore, adoption

of advanced digital technologies for process and plant design will enable rapid translation

of new lab based processes to commercial production facilities.
The need to boost productivity of manufacturing plants using automation, removal of

paper through digitalisation, big data, virtual reality and predictive process

control: The use of digitally enabled processing techniques and plant equipment (Industrial

IoT connected to cloud-based software systems) that can monitor, predict and control in

real-time will ultimately facilitate increased knowledge generation, robustness and lead to

deployment of autonomous production systems for pharmaceutical manufacturing

processes. Data captured can be used for simulating future plant performance, preventing

plant failures and aiding operational decision making. Digital tools like virtual augmented

reality can be used in upskilling and training the existing and future workforces; this will

help to create a high-skills economy for the future.
Smart packaging, logistics and optimised supply chains: Effective tracking of

pharmaceutical products throughout the supply chain is critical. Close collaboration is

needed with the pharmaceutical community (along with logistics providers and customers)

to standardise where feasible, and also to continue to drive innovative supply chain


solutions to ensure medicine supply is optimised through minimising inventory. This is

often a hidden cost and management of this is critical, as shelf life can be short for some

components and finished goods. It is also important to establish clear and accurate

demand signals. Further, the use of low cost sensors, smart packaging, smart labels, near-

field communication tags, RFID tags, printable electronics components and cloud-based

software systems can be used to digitally track an individual pack from the manufacturer

through to use by the healthcare professionals and patients. This integrated approach can

both help to ensure pack quality during transportation and patient compliance. In addition,

drone technology can complement existing distribution methods particularly with regard to

supplying pharmaceuticals to remote locations.
Novel diagnostics devices and treatments incorporating digital connectivity with healthcare

providers and patients: The internet-of-things (IoT) is giving rise to a smart healthcare

ecosystem. The potential for digital technology to help measure, maintain and improve

health and wellbeing through preventative approaches and supported health management

is considerable and represents a massive opportunity for pharmaceutical industry. The

devices developed are evolving rapidly into more complex tools; connected clinical devices

are now starting to being used in trials to collect more and more data. A core functionality is

gaining acceptance and opening up new possibilities:
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Devices are increasing in capability and the data they generate is more extensive.

E-mobile and portable point-of-care medical diagnostic devices are driving the

requirement for innovation in diagnostics technology.

Data analysis is getting smarter and more informative with appropriate enabled

interventions.

Data is ultimately being personalised and can enhance patient centricity.

Longer term studies, where various end points are monitored over time, are generating

data that can help the Pharma industry to gain a real-life understanding of how patient's

lives are improved.

Enhancing 'real life' post launch evidence based analysis.
ACTIONS TO ENABLE DIGITALISATION
Digital Factory: Digitally enabled medicine manufacturing for improved productivity
and efficiency
New medicines manufacturing is at an inflection point in terms of investment required to
respond to the changing environment. Key challenges to produce small molecule medicines
and biopharmaceuticals more effectively include:
Adoption of state-of-the-art digital simulation and modelling tools to accurately

characterise and predict the physical properties and manufacturability of target molecules.
Replacing existing technologies and processes with new approaches, to shift the current

process and product design paradigm away from the "make and test" to a more predictive

digital framework to enable a more radical 'right first time' approach.
Improving performance of large scale production plants by enhancing the knowledge

of current processes and transforming them into more efficient processes, which could

be batch or continuous, with the use of state-of-the-art digital control, algorithms and

data analytics.
New infrastructure and skills are also required if the pharmaceutical industry is to embrace
this new paradigm for the digital design of drug product and manufacturing processes.
To overcome this barrier, the pharmaceutical industry must undergo a step-change in the
adoption of state-of-the-art digital simulation-based tools and workflows.
The proposed capability build is closely aligned to the UK Government's industrial strategy,
specifically supporting the Strategy for Life Sciences backed by the Office of Life Sciences.
It will:
Support the UK as an international hub for developing and manufacturing medicines to
meet the global demand for novel products.
Ensure the UK continues to be an attractive place for medicines manufacturing investment,

increasing the UK's share of a growing global market.
Through the adoption of novel new technologies this will facilitate on-shoring and reshoring

of production of medicine, reversing current trends due to cost effective production enabled

by improved and integrated processing and packaging equipment
The adoption of digital technology in existing and new production facilities will result in

significant manufacturing productivity improvements, anticipated to be of the order of

30% - 35% by 2030.
The development of an automated and autonomous UK based clinical packing capability
will radically reduce lead-times by 45% -55% and enable the application of an adaptive

supply chain model for better fulfilment and responsiveness to orders. This can be achieved

by using advanced sensors and devices which will capture real time data to enable

informed decisions.
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The importance of having integrated manufacturing capability for both clinical

and commercial supply in future pharma manufacturing is key. Digital tools will drive
manufacturing efficiencies and enable more effective scale up capability and technology

transfer. Batches will be smaller (especially as we move to more personalised medicines)

so the need for flexible production will be the opportunity for the UK to lead in this area.
Enhance the UK's Knowledge Economy by unlocking real value, supporting balanced growth

and developing a highly skilled and competitive workforce through:

Harnessing long-standing academic investment in UK science and recent enhancements

in E-infrastructure to develop a globally-unique knowledge domain.

Providing outputs that enable the UK pharmaceutical sector to make a step-change

in the way medicinal products are designed, developed and manufactured.

Increasing the significant contribution that the UK pharmaceutical community has

already made to Britain's collective scientific knowledge.
Smart Supply Chain: For clinical and commercial supply of medicines
Pharmaceutical manufacturers must have a supply chain (SC) that provides complete control
and scalability to ensure end-end quality and production efficiencies. Key challenges include:
Effective tracking and condition monitoring of packaged medicines through the supply

chain in collaboration with logistic and healthcare providers for end-to-end quality

assurance. A particular focus is needed for cold chain supply as this will become more

commonplace as complex medicines increasingly enter the supply chain.
Standardisation and innovative supply chain solutions are needed to ensure medicine

supply is optimised through minimising inventory (often a hidden cost and management

of this is more critical as shelf life can be short for certain medications) as is having clear

and accurate demand signals.
Adoption of printed electronics coupled with advances in data management for the

imminent implementation of serialisation in alignment with the new pharmaceutical

regulation and for the provision of electronic product information and e-leaflets for

healthcare providers and patients.
The creation of excellent capability in UK Pharma packaging and devices would lead
to a number of benefits:
Improved adherence will reduce medicines waste (potentially saving 10-15B) and

improve outcomes.174
Better inventory management (avoiding stock outs and write-offs).
Pack material optimisation will reduce cost of goods (this could be extended to

other industries).
Projects such as electronic leaflets will add value whilst reducing waste and improving

patient safety.
The development of appropriate apps should lead to an improvement in knowledge about
medicines, aid adherence and enhance safety reporting - providing benefits to patients,

brands and regulators.
174 https://www.england.nhs.uk/wp-content/uploads/2015/06/pharmaceutical-waste-reduction.pdf
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Connected Medicine: From clinical trial to post launch 'real world' use
The challenge Pharmaceutical companies currently do not have access to anonymised
patient data. Current access is limited to patient groups and surveys. For Pharmaceutical
companies to develop medicines of value at continuing competitive cost obtaining
patient insight feedback could lead to great innovation. Access to patient data will help
to manufacturer to shorten medicine development time and save development costs.
Smart diagnostic devices will help manage chronic diseases (e.g. respiratory, diabetics
in first instance) through better diagnosis and more targeted dispensing, this connected
devices concept will inform + empower healthcare professionals (e.g. NHS) and patients.
Transformational data access would include:
Medicinal point of sale data (Pharmacy Serialisation data)
Patient (pack) use feedback signal open/ depleted (Demand Signal)
Digital Phenotype data - (Fitbit/ personal digital data behavioural modelling)
Diagnostic data from the device, packaging or patient monitoring system
Whilst the NHS remains a viable organisation it represents a great opportunity for
collaboration with the UK Pharma industry. If digital technology is embraced within the NHS
such data, shared under appropriate conditions, could differentiate the country as a place for
Pharmaceutical companies to understand further, develop and invest in new methodologies
for the most innovative medicines.
This initiative will build capability to capture data to support new Pharmaceutical interaction
insights, leading to increased understanding of the medicine through the lens of real life
continuous 'clinical trials' thereby leading to safer, more cost-effective medicines. This real-life
data will add to the clinical trial results.
Development of new business models for outcome based service offerings from the

Pharma industry. Ability to incorporate effective diagnostics coupled with smarter

dispensing (driven by better diagnostics) will ensure that medicine dosing is optimised.

The further use of digitalisation and AI to transform pathology is a key area for R&D and

commercialisation and impacts Pharma and MedTech.
Integration of anonymised patient electronic records to support data analytics. This will be

coupled with the use of smart sensors and devices. This capability will be used in day to day

disease management and in the various clinical phases of drug development including post

launch to show 'real world' effectiveness. These platforms will enable data analysis for

better health management which includes use of Big Data and Artificial Intelligence to

improve healthcare outcomes. These technologies could initially be focused on

asymptomatic chronic diseases.
Airedale NHS foundation Trust care anywhere: remote collaboration between GP's and

patients in their home. The introduction of telemedicine showed a difference of 1.2million,
with a ROI of 6.74 per 1 spent. (Hex, 2015). This precedent highlights how collaboration

tools could bring the Pt into direct contact with a number of competencies to support

healthcare outcomes175.

175 https//www.nutfieldtrust.org/uk/files/2017-01/delivering-benefits-of-digital-technology-web-final-pdf
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Reinvigorating leadership in British
fashion and advanced textiles
TEXTILES
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Textiles
SECTOR DESCRIPTION AND NATIONAL OPPORTUNITY
Textiles production is one of the UK's heritage industries. In the 18th century Britain was the
world leader in textiles although the textiles landscape has altered vastly with the passing
of time, and the UK is currently the 15th largest textile manufacturer. Two World Wars forced
other countries to become independent of Britain's textile expertise and they developed their
own skills and manufacturing establishments. Combine this with the introduction of synthetic
materials (such as nylon and rayon), and the result was that the demand for the luxury fabrics
that Britain was renowned for was in decline, while textile production outside of Britain was
on the increase. The 1960's/70's in Britain saw a further decline of the equivalent of 1 textile
mill closure per week. During this time, companies have survived, and remain to this day in
business; a few are prosperous, whilst others struggle year on year for survival.
Today, the breadth of industrial activities covered in the textiles sector is massively diverse,
and can be split broadly into two main categories; traditional textiles (for example, upholstery,
clothing, linens, and floor coverings), and technical textiles (for example, load bearing webbings
and belts, harness assemblies, and medical textiles such as bandages or implants are all
examples). Due to the range of industries included within this sector, the business models
relevant are numerous, and consequently this report is selective in those it provides as
examples. A useful document that contributes to this review is the Alliance Project Report,
a 2015 document produced to provide recommendations to Government regarding the
repatriation of UK textiles manufacture. This report was extensive and substantial, based
upon interviews and input from over 200 manufacturers and retailers, and (some of) the
ultimate findings were these;
the UK still has significant capabilities within the traditional textiles sector and the supply

chain infrastructure is readily here, though the sector has lacked funding and innovation,
the technical textiles sector has undergone substantial innovation due to significant

funding, and is growing,
increasing costs in competing countries (associated with labour, energy, transport) means

that reasons to source outside of the UK are weakening,
the reasons for sourcing within the UK are strengthening, due to increased customer

demands for shorter lead times and genuine British products,
barriers to growth include an aging workforce with endemic skills shortages, micro-size

nature of the supply chain (hampering information exchanges, supply chain integration,

large sustained orders and major investments), and a negative image for potential new
workforce entrants.
textile firms are diversifying into higher value opportunities such as technical textiles,

seeking alternative manufacturing options for the expertise they possess, such as
medical textiles, engineered textiles, industrial materials.
The above suggests that the potential for UK textiles manufacture is unquestionable,
though there are sources that suggest other countries are pushing for dominance in this
market too. For example, China is expected to account for 44% of the global luxury goods
market by 2020. Whilst the UK will need to act pre-emptively to ensure its best success
in this area, the evidence provided so far would suggest that it should not be so difficult
to achieve great results.




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SECTOR CHALLENGE AND OPPORTUNITY FOR DIGITALISATION
The UK textiles sector is predominantly comprised of SMEs without OEMs at the head of
supply chain driving investment. The majority of the UK textiles manufacturing asset base
includes legacy manufacturing equipment that would need a legacy connectivity initiative to
fully realise productivity, quality and lead time reduction benefits of digitalisation. Additionally,
the fashion brands work on a traditional two season cycle with long lead times and remote
inflexible supply chains. This creates a need for the sector to move to more responsive, agile
and local supply chains. Adoption of digital technology would increase the competitive position
of UK supply chains.
The specific characteristics and opportunities in the UK textiles sector create an excellent
prospect for the application of digital technologies for value creation in the sector. Technical
textiles open up new market opportunities for an innovation rich UK textiles sector. Materials
and process modelling and digitised process control and verification will enable rapid
growth of this sector. At the same time, provenance of textiles is of increasing importance
to consumers with respect to ethics of supply and also marketing built on UK source and
branding. Digital traceability of raw material through to finished and supplied product will
enhance product value for UK made fabric and products and open up opportunities for the UK
textiles supply chain. Furthermore, Cut Make Trim (CMT) is a largely manual process relying
on skilled but low cost often part time labour. Targeted automation of the sewing process and
other aspect of CMT could transform productivity and open up increased capacity addressing
current skills shortages.
From responses received within this review, digitalisation can only be positive. It could
generate faster product turnaround which in turn
creating opportunities to work in sectors currently proven to be inaccessible,
increasing consumer requirements to have items sooner swaying further the amount of
manufacturing occurring within the UK, and
bringing some of the generations old textile mills into a more secure future, strengthening

some of the UK's heritage industry.
However, it is foreseen that some of the older textile mills may (perhaps unknowingly) resist
such changes, and would be unlikely to succeed in implementing digitalisation unless it
has the necessary skills to see the integration through, perhaps from younger members of
the workforce. It is recognised that the integration of digitalisation would require resources
and upgraded infrastructure, which would require sound justification to the companies'
stakeholders.
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BARRIERS TO DIGITALISATION
The phrase "digital technologies" in this case is assumed to mean a configuration of hardware
and software that can be used throughout a supply chain to increase connectivity and
transparency between links within the supply chain.
Whilst conducting this study, the input from a variety of people within the textiles industry
was sought. At times opinions were divided, but one thing was clear digitalisation can only
be a good thing. In the supply chains where the logistics are managed manually, the gains are
palpable a delay at one position in the supply chain may be mitigated effectively, and work
activities reprioritised to maximise productivity. In order for this to be effective however, each
link of the supply chain needs to be willing and able to integrate this technology, which may
be impractical across the globe. For the cluster supply chain system, you could be forgiven for
thinking that they already have an optimised system and are producing goods from concept
to product very rapidly, and already have a well refined business system. But to reduce this
manufacturing time still further, could step the purchasing habits of consumers to another
level. For example, the fashion industry at present can produce a new garment based on
an item a celebrity has been seen wearing and have it available to purchase within 4 days.
However, with an increasingly connected supply chain, a customer may be able to design
their own product, choose their own colourways, and have a unique item bespoke to them,
even faster than that.
Members of the technical textiles industry have stated that the growth they've achieved may
also have resulted in the business being more cumbersome, and finding a way to produce
materials with a reduced turnaround would be greatly beneficial. However, a concern from the
weavers was that the textile machinery downtime during a material changeover is currently
a very lengthy (sometimes weeks long) process, and the changes that digitalisation may
bring may simply exacerbate this issue. It may be sensible to make efforts to reduce the
turnaround time of such an activity, prior to attempting to optimise the rest of the entire supply
chain. Some participants of this study felt that they do not necessarily face a strong threat
of offshoring and have a manageable and reliable influx of work with a good forecast, but
they can struggle to capture work from within a rapid-turnaround environment - in fact, one
particular participant within this study claimed that an automotive OEM opted not to place
work with them.
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ACTIONS TO ENABLE DIGITALISATION
From responses received within this review, digitalisation can only be positive. It could
generate faster product turnaround which in turn could:
create opportunities to work in sectors currently proven to be inaccessible,
increase consumer requirements to have items sooner swaying further the amount

of manufacturing occurring within the UK, and
bring some of the generations old textile mills into a more secure future, strengthening

some of the UK's heritage industry.
However, it is foreseen that some of the older textile mills may (perhaps unknowingly) resist
such changes, and would be unlikely to succeed in implementing digitalisation unless it
has the necessary skills to see the integration through, perhaps from younger members of
the workforce. It is recognised that the integration of digitalisation would require resources
and upgraded infrastructure, which would require sound justification to the companies'
stakeholders.
It is also recognised that for digitalisation to be successful it should be integrated across
multiple independent companies, and for this the right responses would be required right
throughout the supply chain, not only within the individual enterprise. Hence an industry
wide integrated effort would be required with the right people in place to maintain impetus.
Perhaps a pilot scheme across a micro-supply chain perhaps even the cluster supply chains
mentioned earlier could be a good first step as a demonstrator to the remainder of the sector.
And finally, widely recognised across the textiles sector is the need to address the availability
of skills. Significant portions of the sector demonstrates an aging workforce, with a lack of
apprentices at the entry level and fewer being retained within a company, the skills are being
lost as the long-serving staff take on retirement. This is believed to be the first hurdle that the
textiles sector needs to address to ensure the longevity of textile manufacturing within the
UK. Perhaps the digitalisation of the UK textiles sector, combined with an initiative on skills
development together could provide security for the future for the UK's textiles sector.
In summary, the textiles sector proposes three key actions to digitalisation:
Development and integration of future skills
Resources and upgraded infrastructure
Connected clusters and supply chains
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APPENDIX TWO
INTERNATIONAL
GOVERNMENT
INDUSTRIAL
INTERVENTIONS
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International Government Industrial Interventions
Within this section we provide an overview of how other governments are seizing the
opportunity to be leaders in the Fourth Industrial Revolution through large National
Initiatives, and also highlight a number of IDT interventions particularly supporting SME's.165 166
This includes Germany's National Digital Strategy DE-DIGITAL167 -a large ambitious National
programme with the objective to make Germany the leading supplier and user of Industry
4.0 and as a result, it will be the most modern industrial location in the world. Of particular
interest is the creation of a national Digital Agency to provide strategic support to the
Government, financial support for SME's and start-ups, and encouragement for links with
established businesses, tax incentives to encourage investment in IDT, and a focus on cyber
and standards.
Another example is the US initiative America Makes this is a group of 14 Technology focused
Institutions which due to their relative immaturity has focused on R&D. However, they have
established large networks with industry and academia. Going forward they have recognised
the need:
To be more market driven than agency driven in terms of projects
Shift the focus from R&D to supporting Commercialisation, engagement of SME's

and training
Integrate across the networks to solve broader manufacturing problems (i.e. not single

technology problems)
Improve Governance to support sharing of best practice.
China's Made in China 2025 and Internet Plus168 these are ambitious initiatives undertaken
by the Chinese Government to establish China as a truly global leader in high quality advanced
manufacturing products. Core to these initiatives is the development and promotion of IDT.
Jack Ma, founder and executive chairman of the Alibaba Group, which owns many highly
successful Internet-based brands in China, asserted that "The most important source of
energy for future manufacturing is not oil, but data" (Li Q., 2015).
In addition, there are a range of policy intervention across Europe, Singapore, the United
States and Japan. These interventions illustrate the global focus from national governments
in promoting digital technologies within industry with a focus on collaboration between
academia, research organisations and Industry especially involving SMEs as well as direct
financial support to start-ups and SMEs.
165 Roundtable on Digitising European Industry: Working Group 1 Digital Innovation Hubs
166 Smart Service Welt recommendations for Strategic Initiative Web based services for business
167 Digital Strategy 2025
168 The Next Production Revolution Implications for Government & Business OECD
Appendix 2

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Germany: Digital Strategy 2025
Germany's Digital Strategy 2016- 2025 this is an initiative in which businesses, unions,
the scientific community, the government and a motivated public are already developing
approaches and projects for digital transformation in Germany DE.DIGITAL.
The strategy places a strong emphasis on Data:
"In the long run, the key competencies of successful companies will revolve around collecting,
processing, linking and protecting data and the specific measures and methods these
companies develop to carry out these tasks."
Significant benefit was identified - if digital technologies and German companies' ability to
use them are aggressively pursued. Projections put productivity gains of up to 30%, annual
efficiency gains at 3.3% and cost reductions at 2.6% annually. The sectors that will benefit
most in the next five years are the automotive industry with an increase in revenue of 52.5bn
(13.6%), mechanical engineering (32bn or 13.2%), process industries (30bn or 8.1%), the
electronics industry (23.5bn or 13%) and ICT (15bn or 13.4%).
And there is potential for the information and communication sector to have more of an
impact: While this sector only contributed 30% to GDP in the EU from 2001 to 2011, it reached
figures of up to 55% in the USA over the same period.
Additive manufacturing (3D printing) is becoming particularly important. Global sales in
products and services for additive manufacturing has climbed from $529m in 2003 to $3.07bn
in 2013, and is projected to be at $21bn by 2020 (share of German companies: 1520%). In
Germany, approximately 1,000 companies are active in this area, and about 90% of those are
SMEs. Up until now, additive manufacturing has been used in particular for Rapid Prototyping
(24.6%) and for basic technology experiments (28.9%). However, rapid manufacturing and
rapid tooling have increasingly gained in importance (9.6%).
There is a forecast increase in the use of service robotics, especially in material logistics,
production and handling assistance for handwork jobs. The industry association IFR World
Robotics expects global revenues in 2017 of $300m for service robotics in logistics (mainly
in manufacturing).
There is bold ambition:

'In digitisation, more than in any previous transformation, the fastest will win. Those who open
up new markets early and quickly set new standards will be successful.'
'It is our goal to make Germany the leading supplier and user of Industry 4.0 and as a result,
it will be the most modern industrial location in the world.'
'All government research and development expenditures must be at least at the level of the
most innovative regions on the globe.'
Areas of weakness identified:

'German companies invest only 14% of their annual research budget in commercial
applications for digital technologies. US companies spend twice as much. We must therefore
broaden digital research efforts, especially in traditional industries.'
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Big Data solutions in the US made up 49% of total patent applications in 2012, whereas
in Germany, they constituted only less than 5%. German companies presently still use old
technology for their data analyses. Already in 2014, no less than 509,000 data experts were
being sought in Europe. Analysts estimate that, 3.5 million data experts will be needed by 2020.

The strategy was based on 10 Policy Interventions
1. Creating a gigabit optical fibre network for Germany by 2025

Support new distribution channels and logistics processes, the Internet of Things,
autonomous driving and Industry 4.0 which all require broadband real-time

communication in the gigabit range.
2. Launching the New Start-up Era: Assisting start-ups and encouraging cooperation
between young companies and established companies.

Set up a 500m growth facility as well as subsidies and tax refunds, grant funding

for compensation of losses, internationalisation promotion, connecting with
established businesses, actions for making the process of starting a company
easier and more efficient.
3. Creating a regulatory framework for more investment and innovations: -

Create a technical and regulatory Digital Single Markets, legal barriers and other hurdles
for cross-border e-commerce to be identified and removed, develop a European data
region policy based on common principles (e.g. data security and informational autonomy).
4. Encouraging "smart networks" in key commercial infrastructure areas of our economy

Promote digitisation in major infrastructure areas, such as energy, transportation, health,
education and public administration through improved certainty of demand, creation of
standards etc.
5. Strengthening data security and developing informational autonomy

Ensure that even those companies not subject to statutory requirements improve their
data security; Work together with partners from business and the scientific community
to expand the assistance provided under the IT Security in Business initiative; focus
on which key technologies and competencies are necessary for maintaining and creating
digital independence and provide support for them; Establish a data protection

certification. Establish electronic trust services - setting the standards for EU-wide secure
and reliable electronic transactions; Eliminate fragmented national data protection rules,
legal ambiguities and possibilities for circumvention through creation of European General
Data Protection regulation by 2018
6. Enabling new business models for SMEs, the skilled craft sector and services
Develop numerous centres of excellence for digital communication, cloud computing,
process management and commerce, and provide support services;
SMEs provided skills financing for external advisory services in IT security, Internet
marketing and digitised business processes; financing for 50% of consultancy
services fees for enhancing innovation management in companies with less than 100
employees; specific incentives for SME's investing in the digital transformation;

1bn Digital Investment programme for SMEs, investment grants for spurring
investments and IT implementation projects at SMEs, including assistance in the
implementation process;

establish showroom for the possibilities and feasibility of such digital projects;

matching established companies with start-ups and research organisations and
with best-practice examples;

set up an SME Digitisation Task Force and a one-stop agency.
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7. Utilising Industry 4.0 to modernise Germany as a production location

Funding programme for microelectronics. The sensor and actuator technology found in
machines and robots that is essential for Industry 4.0, including a European research and
innovation project for microelectronic with government subsidies of a total of 1bn (2017-
2019). Development of an Action Plan for Standardisation of Industry 4.0. Strengthen
cooperation on an international level. Bilateral cooperation with China in the context of
Industry 4.0 to strengthen the position of German companies on the Chinese market.
8. Creating excellence in digital technology research, development and innovation

Tax incentives to make Investments in digital technology made more attractive.

Depreciation schedules for hardware and software and for all digital technology devices
to be reduced to a maximum of three years. Establish support programmes specifically
on innovative technology and applications. Introduce R&D tax breaks for SMEs with up
to 1,000 employees. Providing this assistance in the form of a tax allowance would also
enable start-ups that have not yet made a profit to benefit from tax advantages.
9.
Introducing digital education to all phases of life

An additional 8m investment funding will be made available from 2016 to 2018 to
enable industry-wide education centres to be setup to offer further training in digitisation
at a high level. Modernising vocational training for IT systems electronics technician,
Information technology specialist, IT system support specialist and information
technology officer. Work with trade unions and employers to create means of more
flexible and individualised digital continuing education, in order to provide employees
with industry-wide, practical IT-related basic knowledge and supplemental knowledge on
communications and project work. BMWi has already developed an approach to digital
continuing education in a half-day format, particularly for SME.
10. Creating a Digital Agency as a modern centre of excellence

Creation of a Digital Agency that will function as a highly efficient and internationally
connected centre of excellence at the federal level. The centre will provide competent,
neutral and long-term assistance to the federal government both as a think tank in
preparing policies, and as a service point for implementation, and would also assist
in the digitisation process while representing the interest of business and consumers.
USA: America Makes
The USA only took action to intervene in Manufacturing technology when it was in crisis
It created a Manufacturing Network based on 14 Institutions which all have a large network

including academia/ and industry
Their establishment and remit was passed in legislation December 2014
Objective
"create" new production technologies, processes and "capabilities"

serve as "proving grounds" to test new technologies and related processes

support efforts to "deploy" for new production innovations
"build workforce skills" to enhance production and processes for the

emerging technologies
The institutions cover a broad range of Manufacturing technologies:-
The National Additive Manufacturing*
The Institute of Advanced Composites Manufacturing Innovation
The Digital Manufacturing and Design Innovation Institute (DMDII)*
The Lightweight Innovations for Tomorrow (LIFT) institute
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Power America, for next-generation power electronics
The Institute for Advanced Composites Manufacturing Innovation (IACMI)
The American Institute for Manufacturing Integrated Photonics (AIM Photonics)
NextFlex, for flexible hybrid electronics, Advanced Functional Fabrics of

America (AFFOA)
The Smart Manufacturing Innovation Institute*
The Rapid Advancement in Process Intensification Deployment Institute (RAPID)
The Advanced Regenerative Manufacturing Institute (ARMI)
The Institute for Reducing EMbodied Energy And Decreasing Emissions in Materials
Manufacturing (REMADE)
The Advanced Robotics Manufacturing (ARM) Institute
* IDT focused Institutions
Due to the relative immaturity, the focus to date has been on R&D, although their remit

is TRL3 to TRL7
They are only publicly funded for five years based on a matched funding public/private.
Level public funding targeted at between $70m - $140m for each Institute over the initial

five years
Private funding has significantly exceeded match requirement
Significant eco systems have been developed
Challenges and future focus
To be more market driven than agency driven in terms of projects
Shift the focus from R&D to supporting commercialisation, engagement of SMEs

and training
Integration across the networks to solve broader manufacturing problems (i.e. not single

technology problems)
Improved Governance to support sharing of best practice
The Digital Manufacturing and Design Innovation Institute (DMDII) involves the use of
integrated computer-based systems, including simulation, three-dimensional visualisation,
analytics and collaboration tools, to create simultaneous product and manufacturing process
definitions. Design innovation is the ability to apply these technologies, tools, and products
to reimagine the entire manufacturing process from end-to-end.

DMDII has 201 members, including major firms from a wide range of sectors, numerous
smaller firms and 11 universities. Its $70m in US DoD Army Mantech funding was matched
with industry and state funding of $248m. DMDII's mission is digital manufacturing to lower
product design costs by fostering deep connections between suppliers. It also aims to lower
production costs and reduce capital requirements, through better linkages from end-to-end
of the product life cycle. Cutting time to market through faster iterations, developing and
implementing innovations in digital design, digital factories and digital supply chains are
also goals. Overall, it seeks to develop both new products and improve legacy products.
The Smart Manufacturing Innovation Institute can be characterised as the convergence
of information and communications technologies with manufacturing processes, to allow
a new level of real-time control of energy, productivity, and costs across factories and
companies. Smart manufacturing was identified as a high-priority manufacturing technology
area in need of federal investment. Being able to combine advanced sensors, controls,
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information technology processes and platforms, and advanced energy and production
management systems, smart manufacturing has the potential to increase energy efficiency
and manufacturing capability in a wide range of industrial sectors. Of the $140m Smart
Manufacturing Innovation Institute budget, $70m over five years is already appropriated
federal funding from the Energy Department's Advanced Manufacturing Office. The remainder
is in matching funds. The Smart Manufacturing Innovation Institute will focus on integrating
information technology in the manufacturing process through devices like smart sensors that
reduce energy use. For example, the institute plans to partner with the US DoE's Institute for
Advanced Composites Manufacturing Innovation to test advanced sensors in the production of
carbon fibre. The Smart Manufacturing Innovation Institute expects to partner with more than
200 companies, universities, national laboratories and non-profits. Microsoft Corp., Alcoa Inc.,
Corning Inc., ExxonMobil, Google, the National Renewable Energy Laboratory and numerous
smaller firms are among the Smart Manufacturing Innovation Institute partners. The institute
plans to launch five centres, focusing on technology development and transfer and workforce
training, in regions around the country, headed by universities and laboratories in California
(UCLA), Texas (Texas A&M), North Carolina (NC State University), New York (Rensselaer
Polytechnic Institute), and Washington (Pacific Northwest National Laboratory).
China: Market and Development regarding IDT
The Market for IDT in China is significant and is growing at a rapid rate. For example in 2014,
the IoT market in China reached over CNY 600bn ($94bn), growing at a compound annual rate
of over 30% since 2011. It has been estimated that applying the IoT in Chinese manufacturing
could add $196bn to GDP over the next 15 years (Accenture, 2015).
In 2014, the market for public cloud services reached CNY 7.02bn (around $1.1bn), growing by
47.5% with respect to 2013. The market for big data was approximately CNY 8.4bn ($1.3bn)
in 2014. China's big-data market is expected to grow by around 40% a year over 2016-18.
The government is actively intervening in IDT technologies such as robotics and 3D printing. In
its national development plan for robotics it aims to achieve a 45% market share for domestic
companies in high-end robotics by 2020. The application of robotics, especially industrial
robots (IRs), is a direct response to labour shortages and the demand for higher quality output
in China. Over 2008-2013, the supply of IRs increased by about 36% per year on average in
China. China is the world's largest market for IRs, with 28% supplied domestically.
A national plan for promoting additive manufacturing (2015-2016) was released in 2015.
In 2016, a national research project, with a budget of CNY 400m, was started for additive
manufacturing and laser manufacturing. Among the seven priorities of the former, five aim at
commercialisation and must be led by enterprises. A standards technology committee and an
industrial alliance for additive manufacturing were also established in 2016. From 1988-2014,
79 602 industrial 3D printers were installed worldwide. During this period, in the world market
for 3D printers costing $5 000 or more, China ranked third, accounting for 9.2% of the total
units in use, behind the United States (38.1%) and Japan (9.3%). From 2013-2014 the market
for 3D printers in China increased from $315m to $582m and was expected to reach $1.6bn
by 2016, according to the China 3D Printing Technology Industry Alliance. By April 2015, China
ranked third in the global number of 3D printing patents, behind the United States and Japan.








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MADE IN CHINA 2025
This is a national ten-year strategic initiative covering the long-term comprehensive
development of China's manufacturing industry for which the Chinese government has
established a $2.9bn Modern Manufacturing Investment fund. Core to this strategy is
the promotion of IDT.
The percentage of R&D spending relative to manufacturing sales is targeted to reach 1.68%
Labour productivity is expected to increase by 7.5% annually to 2020, and thereafter by

6.5% to 2025
Broadband coverage should rise from 50% in 2015 to 82% in 2025;
Energy consumption per unit of added value should fall by 34% by 2025 .
Made in China 2025 identifies nine paths to achieving its ambitions. The following are of note
with respect to IDT
1. Enhancing innovation capability

The aim is to create a national innovation system in which enterprises lead, government

provides services and support for key technology R&D, and research outcomes from

academia can be efficiently commercialised.
2. Promoting digitalisation

Aimed at Digitalised manufacturing and covers not only equipment, such as computer

numerical control machine tools and robotics, but also intelligent manufacturing


processes and related infrastructures.
3. Making manufacturing greener

This consists of applying green technologies to traditional manufacturing sectors while

developing low-carbon industries such as new materials and biotechnology, promoting

resource recycling, creating green supply chains and logistics, and reinforcing greener

standards and environmental inspections.
4. Targeting priority technologies and products

These priorities include ICTs, numerical control tools and robotics, aerospace equipment,

ocean engineering equipment and high-tech ships, railway equipment, energy-saving

vehicles, power equipment, agricultural machinery, new materials, biological medicine

and medical devices.
5. Developing manufacturing as a service and services for manufacturing

This path aims to help manufacturing extend the value chain and develop and sell both

products and services. Services for manufacturing range from logistics and


human resources to IP services and after-sales services. Services for adopting ICTs and

mobile Internet business are emphasised.
INTERNET PLUS
This initiative seeks to better integrate the Internet with industry. Internet Plus promotes
digitalisation in 11 sectors,4 and aims by 2025 to see China with an interconnected
service-oriented industrial ecosystem. In manufacturing, integrating the Internet means
first developing so-called "intelligent factories" by promoting cloud computing, the IoT,
industrial robotics and additive manufacturing. Large-scale customised manufacturing is
another priority, in Internet Plus is implementation-oriented. Each priority has a designated
government department responsible for follow-up. But Internet Plus does not rely heavily on
government investments. Emphasis is laid on better public infrastructures, capacity building
for innovation, and a more flexible regulatory environment. Openness is also emphasised, with
goals established to advance open-source communities, open data, and open infrastructures
and facilities.

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European Initiatives
Digital Innovation Hubs in Horizon 2020
The European Commission is programming 500m in H2020 (through the work programmes
covering the 2016-20 period) towards Digital Innovation Hubs. Concretely, H2020 is funding
projects in which competence centres are providing the desired services and facilities
to industry.
I4MS
Consists of 11 large Innovation Actions funded by FP7 and H2020. It supports SMEs active
in the manufacturing sector to improve their products and processes by letting them
experiment with digital technologies, such as HPC cloud-based simulation/analytics services,
industrial robotics systems, laser-based manufacturing, smart cyber-physical systems, and
Internet of Things. A network of competence centres provides access to competences and
technology transfer to SMEs through competitive calls for experiments. Successful candidates
receive funding for the experiment, from which both technology suppliers and user SMEs may
benefit. So far 110m of European funding has been invested in I4MS since 2013. A further
28m has been invested through a similar network of competence centres supported under
SAE, which supports SMEs to improve their products through the inclusion of advanced ICT
components and systems.
Data Experimentation Incubators
A series of incubators being set up under H2020 ICT 14 WP. The objective is to foster exchange,
linking and re-use of data, as well as to integrate data assets from multiple sectors and
across languages and formats. This should lead to the creation of secure environments where
researchers and SMEs can test innovative services and product ideas based on open data
and business data, and should lead to new innovative companies and services for the data
economy.
ECHORD++
An initiative to bring robots from the lab to the market. Activities include: the Robotics
Innovation Facilities (RIFs), which allow SMEs to try out new business ideas and make field
tests at zero risk. It also helps manufacturing SMEs with small lot sizes and the need for
highly flexible solutions to try out innovative robotics technologies.
Pilot Lines in Nanotechnology and Advanced Materials
The PILOTS call activities under the NMBP39 work programmes in Horizon 2020 and FP7 have
resulted in 30 projects with a combined funding of 150m. These PILOT projects aim to help
transfer new technology developed under Horizon 2020 into industry by providing open access
for upscaling and pilot testing to SME users. Additional investments by Member States, public
or private organisations have contributed to establishing a variety of pilot upscaling facilities
across Europe, mainly in the EU-15 countries.
Mapping of Key Enabling Technology KETs competence centres
A Catalogue of KETs competence centres has been developed as a first step to facilitate
cooperation between technology centres and companies, and SMEs in particular.
The Catalogue is a mapping tool that provides an overview of the services available through
around 200 KETs-related technology competence centres. The centres are selected according
to a set of qualitative and quantitative criteria. They provide services to enterprises, such as
help with prototyping, testing, upscaling, first production and product validation.
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The aim is to foster synergies between digital and other advanced technologies
(e.g. sustainable manufacturing, advanced materials, industrial biotech, nanotech).
The Enterprise Europe Network
This network brings together 3,000 experts from more than 600 member organisations all
renowned for their excellence in business support. Member organizations include: technology
poles; innovation support organisations; universities and research institutes; regional
development organisations; and chambers of commerce and industry.
European Institute of Innovation and Technology (EIT)
The EIT is a EU initiative that brings together leading universities, research labs and companies
to form dynamic pan-European partnerships. Together, these unique partnerships, called
Knowledge and Innovation Communities (KICs), carry out a whole range of activities that cover
the entire innovation chain, from research to the market, training and education programmes,
innovation projects as well as business incubators and accelerators. The EIT is an integral part
of Horizon 2020, the EU'sFramework Programme for Research and Innovation.

European National, Regional and Industry Initiatives

GERMANY
Mittelstand-Digital Competence Centres
An initiative of the German Ministry of Economy and Technology under "Plattform Industrie
4.0". Six centres are already operational, with five more launched in 2016, and a further five
planned for 2017, providing information, training and support in the implementation of digital
technologies in mid-caps and SMEs covering a wide range of manufacturing technologies.
Funding is 56m over three years.
German Federation of Industrial Research Associations (AiF)
AiF is Germany's leading national organization promoting applied R&D in SMEs. It is an
industry-driven organization managing public programmes of the German federal government.
The 'AiF innovation network' consists of 100 industrial research associations representing
50,000 businesses, mostly SMEs. Each research association of the AiF represents a certain
business sector from specific branches of the economy or fields of technology. By joining a
research association and taking an active part in its committees, companies directly influence
the association's research agenda and priorities. In 2014, the AiF disbursed around 500m of
public funding, in particular on behalf of the Federal Ministry for Economic Affairs and Energy.
Since its foundation in 1954, the AiF has disbursed more than 10bn in funding for more than
200,000 research projects for SMEs.
Cooperation Projects and Networks, Central Innovation Program for SMEs
(ZIM Cooperation Projects and Networks)
ZIM is a nation-wide funding programme for SMEs and research organisations closely aligned
with businesses. It is the most popular programme coordinated by AiF and it is open to all
technologies and sectors (i.e. all German SMEs are eligible for ZIM funding). It is geared
to SMEs with business operations in Germany, which want to develop new or significantly
improve existing products, processes or technical services. ZIM comprises different support
measures: Single Projects (funding of R&D projects undertaken by a single SME);
Cooperation Projects (funding of cooperative R&D projects between SMEs or SMEs and RTOs);
and Cooperation Networks (funding of management of innovative company networks and R&D
projects generated by them with a minimum requirement of six German SME partners).
The maximum project costs that are eligible for funding are 380,000 per company, and
190,000 per research institute.
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IraSME
Is a network of ministries and funding agencies, which are owners, or managers of national
and regional funding programmes for cooperative research projects between SMEs and in
participation of research and technology organisations (RTOs). IraSME supports SMEs in their
transnational innovation activities, helps them to acquire technological know-how, extend their
networks and bridge the gap between research and innovation. Twice a year IraSME issues
calls for proposals for transnational cooperative research projects between SMEs and RTOs,
with the objective to develop innovative products, processes or technical services. Funding is
made available through national and regional programmes. IraSME enables consortia of SMEs
and RTOs from at least two participating countries to work together in transnational projects.
Generally, IraSME Projects have to be research and development activities with significant
technical risks to realise new or notably improve existing products, processes or technical
services. The clearly describable project outcome has to show real market opportunities.
Participation in an IraSME project allows SMEs and RTOs to develop a new state of the art,
build new partnerships, benefit from know-how and resources that might not be available in
their country or region, and get an insight into the market in other countries.
IT's OWL (Intelligent Technical Systems OstWestfalenLippe)
IT's OWL is a consortium-led initiative focused on key digitalisation topics at the heart of
Industry 4.0. Research projects focus on product innovation, as well as on development,
deployment, maintenance, and life cycle management of new products and systems.
IT's OWL has seven industry support initiatives to support SME capabilities, including strategic
foresight, education/training, internationalisation, start-ups, market orientation, acceptance
and prevention of piracy. Key research area include self-optimisation, human-machine
interaction, intelligent networking and energy efficiency. It's OWL technology and knowledge
transfer concept aims to remove transfer barriers in SMEs. The foundation of the transfer
concept is made up of a four-step model for technology transfer. In the first step, companies
are introduced to the it's OWL technology platform and provided with basic information.
As part of the second step, understanding of the available content and solutions is broadened
even further. Here, the transfer of information is focused on a technological area. The third step
includes identification of concrete offers from the technology platform for solving issues from
operational practice within companies. Concrete execution of the focused technology transfer
projects forms the fourth step of the it's OWL transfer concept. Targeted use and integration
of the new technologies in companies is encouraged by project-related collaboration between
transfer recipients and transfer providers.
Cluster of Excellence Integrative Production Technology for High-Wage Countries
The Aachen Cluster of Excellence Integrative Production Technology for High-Wage Countries
is a major manufacturing research centre initiative funded by the German Research
Foundation. The cluster is part of a 180m investment awarded to the Rheinisch-Westflische
Technische Hochschule (RWTH) Aachen University to fund education, research and innovation.
The goal of this initiative is develop new sustainable production strategies and theories.
The cluster brings together 25 research departments from the RWTH Aachen University and
other research institutions and seeks active collaborations with industrial partners. Focusing
on SMEs support, the project cyberKMU develops an online platform, which supports SMEs
to identify Cyber Physical Systems in order to improve production processes and make them
more efficient. The online platform is for producer companies to look for solutions and to offer
their solutions, to make it easy to find suitable technology suppliers. To ensure the quality of
the evaluation method, the recommended solutions are implemented and validated using
demonstrators in the production companies.
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OTHER COUNTRIES
Alliance d' Industrie du Futur (France):
Organises and coordinates digital transformation activities of its members (research
institutions, public authorities and associations) on national level. Around 1200 SMEs are
involved. Four showcases have been developed with Air Liquide, Bosch, SNCF and DAHER
on advanced technologies.
Intelligent Factories Technology Cluster (Italy)
Groups large enterprises and SMEs, universities and research centres, entrepreneurial
associations, technological districts, and other stakeholders operating in the sector of
Manufacturing and Smart Factory. Activities include: research, technology transfer, sharing of
research infrastructures and mobility, support to a smart and sustainable entrepreneurship,
and support to the growth of human capital. Total funding of 43m is foreseen.
Vinnova (Sweden)
Vinnova is a Swedish government agency under the Ministry of Industry that administers state
funding for research and development. Their core function is to allocate funds to innovation
projects through call for proposals to both the private and public sector. In 2013 they invested
SEK 2.7bn SEK ($309m) in roughly 2,400 different research and innovation projects.
These funds were allocated mostly among universities, private companies and research
institutes. Vinnova is also Sweden's representative agency in Europe's Eurostar programme.
The Eurostar programme is a European funding support programme for R&D activities in
SMEs. The programme is backed by 861m of national funding from its countries. It is further
supported by 287m of EU funds, for a total of 1.14bn. Under four of its eleven strategic
priorities relevant to IDT : Smart Electronics, Internet of Things, Process and IT Automation
and Production 2030. Each of these areas benefits from an annual investment of approx. 40m
through public and private funding.
Future Industrial Services programme (Finland)
received 36m of funding up to 2015; the companies and higher education institutions in the
Finnish Metals and Engineering Competence Cluster fimecc are investigating the key success
enablers for future industrial services. Meanwhile, the recently launched Industrial Internet
Program will study the potential and impacts of smart services on a broad scale. 100m
of funding has been made available to this programme. Finnish examples of the growing
importance of services within traditional industrial enterprises include the lift and escalator
manufacturers KONE, Ponsse, who have developed a high degree of expertise in digital
diagnostics and remote maintenance for their forest machines, and enevo, who install sensors
in waste containers and use them to provide a range of smart services.
Tyndall National Institute (Ireland)
s partnering with a number of regional and national clusters to: launch needs-driven regional
and national initiatives; coordinate with public authorities and local government; build
European partnerships; and provide B2B match-making and brokerage. For example,
Tyndall is part of Ascent, a European project providing SMEs with access to state-of-the-art
facilities in nanoelectronics.43 It is also a partner in PIXAPP, a H2020 project offering the
world's first open access photonics packaging pilot manufacturing line. Other activities apply
advanced ICT in sectors as diverse as medicine and agriculture, including support for IoT
SMEs in accessing funding. It is helping to create innovation networks with multidisciplinary
translational competences.
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Fieldlabs (Netherlands)
An initiative under the national Smart Industry strategy, translated to the regional level.
Supports a wide spread of technologies (mainly manufacturing) and activities (e.g. business
coaching), access to regional funds, with five more hubs planned. Total funding of 100m over
five years.
FURTHER TOPICS
Private initiatives
Private initiatives are also in evidence In Barcelona, for example, the I4AM44 initiative aims to
create an ecosystem for 3D printing (3DP) and digital manufacturing with a mixture of private
and public funding. Led by leading players such as HP, Renishaw, Leitat Technological Center
and others, I4AM aims to accelerate the development and adoption of additive manufacturing
and 3DP technologies as an alternative way to design, develop and manufacture new
competitive products and services.
Relevant national, regional and industry initiatives are being documented in the Catalogue of
Digital Innovation Hubs that has recently been launched
Key Enabling Technologies
Key Enabling Technologies (KETs) are a group of six technologies micro and nanoelectronics,
nanotechnology, industrial biotechnology, advanced materials, photonics, and advanced
manufacturing technologies that have applications in multiple industries and help tackle
societal challenges. Three of the six KETs have a strong digital dimension (micro- and
nanoelectronics, photonics, and advanced manufacturing).
Actions undertaken within the KETs initiative include activities on skills and on the facilitation
of cross-border industrial projects, fostering successful translation of KETs-related smart
specialisation priorities as well as assistance to small businesses in accessing KETs
technology centres and expertise. As part of the latter, a catalogue of KETs competence
centres52 has been developed (see above) and a pilot network of technology centres providing
services to SMEs in the area of advanced manufacturing for clean production is being set up.
The European Commission will also support (under COSME and Horizon2020) a pan-European
Advanced Manufacturing Support Centre to help SMEs assess the possibility of adopting
advanced manufacturing solutions and transforming their business towards a factory of the
future. The centre will also help to launch new innovation advisory services for manufacturing
SMEs at national and/or regional level on the basis of a coherent EU methodology.
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Singapore
Germany-Singapore SME Funding Programme
This programme provides funding for joint R&D projects between German and Singaporean
SMEs. Projects should focus on the development of new and innovative products, technology-
based services, or processes with strong market potential. The funding schemes are the ZIM
programme in Germany and the CDG in Singapore.
Partnerships for Capability Transformation (PACT) initiative
This programme works with large organisations (LO, $100m in sales revenue and above)
to identify and implement collaborative projects between the LO and local SMEs in areas
of: Knowledge transfer; Capability upgrading; Development and test-bedding of innovative
solutions. Under the enhanced Gov-PACT, the government serves as the large organisation
with which the SMEs/start-ups work with to develop and test-bed innovation solutions that
do not yet exist in the market. Participating companies go through different stages of product
development from the ideation stage to pilot runs with the support of the lead demand agency.
Approved projects are eligible for up to 70% funding support for qualifying development costs.
National Trade Platform
The NTP can help businesses improve productivity through digital exchange and re-use of
data with their business partners and the government. Businesses can streamline their work
processes, reduce inefficiencies of manual trade document exchange, and tap on the potential
of data analytics to draw insights from their trade data. Potentially bring about up to $600m
worth of man-hour savings annually for businesses. Businesses will enjoy these features of
the NTP: (a) tools to support digitisation and business needs; (b) capability to support global
electronic information exchange; and (c) open innovation platform to facilitate development
of value-added services and applications.
Startup SG Tech grant
This grant supports Proof-of-Concept (POC) and Proof-of-Value (POV) for c
ommercialisation of innovative technologies. For POC projects, up to 100% of qualifying
costs are funded, subject to a maximum of S$250,000 (~ 140,000). For POV projects up
to 85% of qualifying costs are funded, subject to a maximum of S$500,000 (~ 280,000).
Criteria for eligibility of start-up companies include: registered for less than 5 years at time
of award; at least 30% local shareholding; company's group annual sales turnover is not
more than $100m or group employment size is not more than 200 workers and; Core activities
to be carried out in Singapore. The project should fall under one of the following areas:
advanced manufacturing; robotics; biomedical sciences and healthcare; clean technology;
information & communications technologies; precision engineering; transport engineering
or engineering services.
Innovation & Capability Voucher (ICV)
The aim of this programme is to upgrade and strengthen the core business operations of
SMEs through consultancy in the areas of innovation, productivity, human resources and
financial management. Apart from consultancy, ICV also supports SMEs in the adoption
and implementation of pre-scoped integrated solutions to improve business efficiency and
productivity. The duration for each project should not exceed six months. Eligibility criteria
include: registered and operating in Singapore; have a minimum of 30% local shareholding;
have group annual turnover of not more than $100m or group employment size of not more
than 200 employees.
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Technology Adoption Programme (TAP)
This programme supports collaboration amongst public sector research institutes, private
sector technology providers, Institutes of Higher Learning, Trade Associations and Chambers
(TACs) and private sector system integrators, to identify and translate new technologies into
Ready-to-Go (RTG) solutions. These RTG solutions aim to address productivity challenges
and give SMEs a competitive advantage. The TAP supports sectors identified for the Industry
Transformation Maps (ITMs) to formulate and execute technology adoption roadmaps.
Approved projects are eligible for up to 70% funding support for qualifying deployment
and/or adoption costs under the Capability Development Grant (CDG).
Local Enterprise and Association Development (LEAD) programme
This is an industry development initiative aimed to improve the overall capabilities of
local enterprises in their industries and capture opportunities overseas. LEAD promotes
partnerships with trade associations and chambers (TACs) which are willing to take the lead
in industry development. The programme supports industry development projects in areas
such as: technologies adoption, which includes info-communication technology, development
of technical standards and establishment of industry-wide infrastructure; expertise and
managerial competence, including industry-wide certification; business collaboration;
intelligence and research; advisory and consultancy (promotion of best practices and
competence).
SIMTech's Knowledge Transfer Office (KTO)
KTO provides technology and case study-based training for manufacturing specialists,
engineers, managers, among other industry professionals and executives. The training courses
are conducted in close collaboration with the SkillsFuture Singapore (SSG) Agency. The courses
offer hands-on practical training in cutting-edge precision engineering technology, allowing
participants to upgrade their skills and equipping them to take on advanced roles
in the industry.
SIMTech Membership Programme
This programme is a platform for local manufacturing companies to collaborate in R&D
initiatives that help reduce their market risks while creating new opportunities. The services
provided by this membership programme range from technology intelligence and business
management tools, to technology transfer and technical advisory. Members can participate
in a wide range of seminars, workshops, and professional networking sessions organised by
SIMTech. As a part of the SIMTech Membership Programme, there are a number of Special
Interest Groups (SIGs) that cater to specific industrial sectors such as marine, oil & gas,
aerospace, and med-tech.
Manufacturing Productivity Technology Centre (MPTC)
MPTC promotes the use of technology to enhance manufacturing productivity by improving
efficiency and effectiveness. It supports engaging of local companies to harness A*STAR's
technologies, tools, and capabilities in automation, processes, and systems aiming to
gain "step-change" improvements in manufacturing productivity. MPTC services include
technologies and tools for productivity improvement, such as: Inventory network optimisation;
Virtual factory; Virtual machining technology; Integrated production planning & shop floor
tracking solution.
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Sustainable Manufacturing Centre (SMC)
This innovation centre aims to showcase and promote sustainability in manufacturing and
bring together relevant government agencies, industry, and research communities to develop
and implement sustainable manufacturing technologies. E2MAPS - Energy Efficiency
Monitoring, Analysis, Planning & Solutions is a programme managed by this innovation centre.
E2MAPS enables companies to improve their energy efficiency by providing rigorous training
to their staff via actual implementation of monitoring, analysis and test-bedding of energy
efficiency solutions.
Technology for Enterprise Capability Upgrading (T-UP)
The purpose of this scheme is to identify and implement R&D projects for a period of up
to 2 years, with the help of research scientists and engineers from the Agency for Science,
Technology and Research's (A*STAR). Project areas include: Data storage; High performance
computing; Info communications; Materials research & engineering; Microelectronics;
Manufacturing automation & technology; Chemical and engineering sciences; Bioimaging;
Bioprocessing; Genomics & Proteomics; Molecular & Cell Biology; Drugs/Biologics Discovery
and Development; Bioengineering & Nanotechnology; Computational Biology; Immunology;
Medical Technology. T-UP subsidises cover up to 70% of the secondment costs.
Tech Depot
This is a centralised platform under SPRING's SME Portal aimed at improving local enterprises'
access to technology and digital solutions. More than 25 technology solutions across a
wide range of industries and business functions are currently featured at Tech Depot. These
include solutions developed and/or pre-qualified by A*STAR, Info-communications Media
Development Authority of Singapore (IMDA) and SPRING Singapore for funding support.
A*STAR collaborative commerce marketplace (ACCM)
ACCM is a free online portal for new businesses and partnership. The portal provides a listing
of companies in which the companies' process and skill competencies are profiled and
validated. The ACCM helps to facilitate the matching of technological requirements, create
opportunities for research collaboration, and to establish collaboration and partnership
among local companies and large multinational companies.









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United States
Hollings Manufacturing Extension Partnership (MEP)
Part of the Commerce Department's National Institute of Standards and Technology (NIST),
MEP is a network of 60 centres and 1,200 manufacturing experts across the US. MEP provides
technical expertise to small manufacturers, strengthening the capabilities of individual
suppliers and entire supply chains. The budget of MEP was $130m for FY16, with Cost Share
Requirements for Centres MEP was created in 1988 with the aim of providing small businesses
access to management and technological expertise. Around 30,000 manufacturers were
served by MEP in FY15. MEP services focusing on supply chain development and technology
acceleration for small manufacturers include: Supplier Improvement and Supply Chain
Optimization, Supplier Scouting and Business-to-Business Networks, and Supply Chain
Technology Acceleration.
Hollings Manufacturing Extension Partnership (MEP)
Part of the Commerce Department's National Institute of Standards and Technology (NIST),
MEP is a network of 60 centres and 1,200 manufacturing experts across the US. MEP provides
technical expertise to small manufacturers, strengthening the capabilities of individual
suppliers and entire supply chains. The budget of MEP was $130m for FY16, with Cost Share
Requirements for Centres MEP was created in 1988 with the aim of providing small businesses
access to management and technological expertise. Around 30,000 manufacturers were
served by MEP in FY15. MEP services focusing on supply chain development and technology
acceleration for small manufacturers include: Supplier Improvement and Supply Chain
Optimization, Supplier Scouting and Business-to-Business Networks, and Supply Chain
Technology Acceleration.
New Mexico Small Business Assistance (NMSBA) programme
NMSBA helps small businesses in the area by providing access to experts at the local Los
Alamos National Laboratory and Sandia National Laboratories. Technical assistance is
funded by the state and provided to businesses free of-charge. To help small businesses
compete for funding, the NMSBA created a national lab voucher program that since 2000
has helped over 1,000 small businesses gain access to the Los Alamos and Sandia labs.
The state government provides the funding for the vouchers through a partnership with the
NMSBA. Small businesses can participate in the NMSBA Program through three different
types of projects: 1) Individual Projects: projects address challenges specific to the business
that can be solved with national laboratory expertise and resources; 2) Leveraged Projects:
this category of projects allow multiple small businesses that share technical challenges to
request assistance collectively for a larger project.; 3) Contract Projects: through this type of
projects NMSBA Program contracts entities that have the capability to provide small business
assistance services not available in the private sector at a reasonable cost.
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Small Business Innovation Research (SBIR) program
SBIR encourages small businesses to engage in Federal Research/Research and Development
(R/R&D) that has the potential for commercialization. The programme is structured in three
phases. Phase I: The objective of this phase is to establish the technical merit, feasibility,
and commercial potential of the proposed R/R&D efforts and to determine the quality of
performance of the small business awardee organization. SBIR Phase I awards normally
do not exceed $150,000 total costs for 6 months. Phase II: funding is based on the results
achieved in Phase I and the scientific and technical merit and commercial potential of the
project proposed in Phase II. SBIR Phase II awards normally do not exceed $1,000,000 total
costs for 2 years. Phase III: The objective of this phase is for the small business to pursue
commercialization objectives resulting from the Phase I/II R/R&D activities. The SBIR program
does not fund Phase III. Some Federal agencies may involve follow-on non-SBIR funded R&D
or production contracts for products, processes or services intended for use by the
U.S. Government.
Small Business Technology Transfer (STTR)
STTR funds opportunities in the federal innovation research and development (R&D) arena.
Central to the program is expansion of the public/private sector partnership to include the joint
venture opportunities for small businesses and non-profit research institutions. STTR follows
the same three phases than the SBIR programme and involves equal amounts of funding.
The unique feature of the STTR program is the requirement for the small business to formally
collaborate with a research institution in Phase I and Phase II. STTR's most important role is
to bridge the gap between performance of basic science and commercialization of resulting
innovations.
National Robotics Initiative (NRI)
This initiative aims to support fundamental research that will accelerate the development and
use of robots in the United States that work beside or cooperatively with people. It supports
innovative approaches to establish and infuse robotics into educational curricula, advance
the robotics workforce through education pathways, and explore the social, behavioural, and
economic implications of ubiquitous collaborative robots.











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Japan
Industrial Value Chain initiative (IVI)
IVI is a collaborative forum that promotes the adoption of Internet of Things-based solutions
to address common technical problems found in manufacturing operations. Working groups
involving large and small firms are formed to develop solutions across a wide range of 'smart
manufacturing scenarios' where improvements can be made by developing and deploying
IoT solutions. Based on Japanese concepts of continuous improvement, these scenarios
are developed bottom-up to tackle problems and 'create value from data' in manufacturing
operation areas including: production process engineering; production planning and control;
quality system management; and maintenance planning. One of the most recent efforts to
increase adoption of IoT solutions by cash-constrained SMEs is the development of "100,000
yen (~700) IoT kits". These kits are developed by the working groups with the aim of achieving
attractive prices by integrating low-cost components, such as the Raspberry Pi single-
board computer. To disseminate the benefits of the initiative among SMEs, IVI works with
municipalities and supporting organisations to hold seminars across Japanese regions.
Cross-Ministerial Strategic Innovation Promotion Program (SIP)
SIP is a national project for science, technology and innovation, spearheaded by the Council for
Science, Technology and Innovation. The Cabinet Office set aside a budget of 50bn (~ 350m),
shifting funds to various ministries on the path to creating this program. The programme
emphasises the use of digital manufacturing technologies to minimise time and costs for R&D
and production, as well as opportunities to utilise digitalisation (internet-of things and smart
factories) to respond to customer needs quicker. Such efforts are expected to increase the
ability of firms to understand customer requirements and therefore manufacture products
that provide superior levels of customer satisfaction. Examples of research projects funded
by the SIP Programme, specifically within the theme Innovative Design/Manufacturing
Technologies, include production technologies for non-conventional geometries and the
application of digital tools to the development of new prototyping systems that could
accelerate the scaling-up of products from R&D and design to production.
Programme to promote bridge research and development to second-tier companies and SMEs
This programme aims to promote commercialization of research centres technologies among
second-tier companies and SMEs. New Energy and Industrial Technology Development
Organization (NEDO) certified 144 publicly funded laboratories and other institutions
nationwide as organs with "bridge" functions that help with technology commercialization
and provide subsidies (assistance rate of up to two-thirds, maximum assistance of 100m, ~
700,000) to second-tier companies and SMEs implementing joint research.
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APPENDIX THREE
OVERVIEW
OF KEY IDT
TECHNOLOGIES
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Overview of Key IDT Technologies
In this appendix, the impact of the following key IDT technologies is discussed in more detail
Additive Manufacturing,
Artificial Intelligence/Machine Learning & Data Analytics,
Robotics and Automation,
The Industrial Internet of Things (IIOT) and Connectivity (5G, LPWAN etc.)
Virtual Reality & Augmented Reality,
to
Understand the UK's relative position within these industries
And key issues preventing the UK becoming a world leader in these technologies
As part of the MSR a benefits analysis was undertaken for 3 of the key technologies (Additive
manufacturing, Artificial Intelligence, Robotics and Automation). To try and determine the
approximate geographic distribution of the industry a heat map was developed based on
applicants for UK innovation grants as a proxy.
Additive Manufacturing a compelling case for UK Industrialisation
INTRODUCTION TO ADDITIVE MANUFACTURE
Additive Manufacturing (the successive adding layers of material using generic "3D printing"
machines) presents an opportunity to radically transform certain manufacturing lifecycles,
changing the very limits of what can be physically and economically produced. It disrupts
existing concepts of business models and supply chains, bridging the worlds of digital and
physical, and in principle allows even the most complex designs to be digitally transmitted for
production at the point of demand. Additive Manufacturing (AM) offers the potential for rapid
prototyping, radical design innovation, lower tooling costs, reduced time to market and lower
production costs - particularly for custom / low volume / high complexity components.
Although AM can currently only be applied to certain specific manufacturing use cases, it
is nevertheless considered to be a key enabler of what has been termed the 4th Industrial
Revolution and it lies at the heart of the High Value Manufacturing (HVM) industry, which in
the UK contributes more than 100bn GVA and employs an estimated 1 million skilled people.
Whilst the directly attributable value of AM products and services is currently a more modest
300m (6bn worldwide), employing ~35k people in the UK, it is experiencing a steady CAGR
of around 30% and this growth is expected to accelerate as issues of standards, raw material
consistency, IP protection and parts verification are addressed.
Appendix 3

HEAT MAP
NUMBER OF UK INNOVATION GRANT
FUNDING APPLICANTS
AI
260
AR/VR
127
ADDITIVE MANUFACTURING
833
ROBOTICS AND AUTONOMOUS SYSTEMS
780
DATA SCIENCE AND ANALYTICS
523
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THE UK POSITION
The UK is amongst the world's leaders in research, innovation and adoption of AM technology
for high performance applications in medical, aerospace and other industry sectors. It is a
global force in advanced materials, technology, life sciences and high value manufacturing.
It is equipped with a strong capability in universities, Catapults and R&D organisations.
The UK has world class AM machine manufacturing capability; well established national centres
for AM (MTC); university excellence in AM research; and a relatively small but solid foundation
of companies applying AM within product development activities for prototyping and tooling.
The potential of AM is recognised by a number of UK companies and academic institutes with
an expected industry investment in AM of 600m over the next 5 years, and more than 30m
spent on AM related research.
Despite this exciting potential and progress to date, many UK companies, especially within
the SME community, lack the awareness, resources or confidence to apply AM as a core and
integral part of their manufacturing toolkit. A recent global survey conducted by Ernst & Young
showed that only 17% of UK companies have any experience with AM, compared to 37% in
Germany and 24% in China (over 50% of Chinese and South Korean companies expect to use
AM technologies for production parts within 5 years).
For those UK companies that do make use of AM technologies, the revenue it generates only
accounts for approximately 1% of their overall company revenue. This compares with 8.8%
in US and a 2% average across all countries. It is clear that in the application of AM, the UK is
beginning to lag behind other nations. As a consequence, production is tending to move away
from UK, primarily because of capability, but also lower cost. This is highly significant not only
because direct part production accounts for around 50% of direct AM related revenues, but
also because an understanding of AM production processes is critically important for creating
value at other stages of the AM production lifecycle.
Globally, other nations, particularly USA, China, Germany and Italy are seeing AM adoption and
growth rates much higher than in the UK, largely because of strategic government investment
programmes that back formally announced AM based industrial strategies. Whether directly
or indirectly, this puts the UK in a declining position in comparison with the global market.
It is estimated that the UK has a window of less than 2 years to reverse this trend of decline
if it is to avoid a serious threat to its status as a top 10 global industrial manufacturing player.
The number of UK organisations involved in AM is growing and was estimated to be around
250 in 2014, however this activity appears to have a strong bias towards the research end of
the lifecycle and is somewhat fragmented.

"The manufacturing community in the UK is highly fragmented with
organisations only networking through projects rather than through
a structured network, community of interest or association."
UK Research Mapping Report 2012
For the most part, UK manufacturing companies (particularly within the SME community),
view AM as a somewhat immature technology that may offer benefits in terms of prototyping,
but for which the barriers to entry for full production applications are too high.
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"What is required is a more co-ordinated approach to pull through
the UK's world-leading research and innovation to improve process
efficiency and material choice, to consolidate critical know-how in design,
production and testing, and to de-risk private investment in the supply
chain (materials, machinery, software, skills). Only with active and visible
government support and funding in these key areas can the requisite
manufacturing capability be scaled up and anchored in the UK."
TRANSFORMATION IMPACT OF ADDITIVE MANUFACTURE
Analysis undertaken as part of the MSR identified that the application of Additive Technology
within UK industry offered a Value at Stake of 72.1bn to the UK economy with additional
benefits identified to both the individual and society (see http://industrialdigitalisation.org.uk/
industrial-digitalisation-review-benefits-analysis/ ).
Much of the value that will be realised from AM is not in the efficiency of the production
process itself, but in the wider benefits that are introduced through design innovation and
the downstream application of new capabilities.
As an example, Airbus has used AM thinking to reinvent its A320 partitions, using designs
that mimic bone and cell structures. The result is a 45% reduction in component weight
which, if introduced throughout the A320 aircraft fleet, would save up to 465,000 tons of
CO2 emissions annually.
AM does not just impact the production of new parts, but can also be used for repair and
refurbishment. Siemens uses AM to produce replacement gas turbine burner tips. The worn-
out burner tips are removed and AM produced replacement parts are then welded onto the
burner. This reduces the lead time to a repair by as much as 90% from 44 weeks down to
4 weeks. The AM approach also makes it possible to change the geometry of the burner tip
at each repair, optimizing the performance of the turbine. This can mean up to 60% less fuel
consumption and 50% lower gas emissions.
VALUE AT STAKE FROM ADDITIVE MANUFACTURING IS ESTIMATED TO BE 72.1BN BETWEEN 2017-2027
VALUE LEVER DESCRIPTION
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
Revenue growth through new
revenue streams
27.6
10% of cost savings, worth 4.4bn,
are expected to be passed on to
consumers as the manufacturing
process becomes more effi cient
through the use of Additive
Manufacturing
50% increase in customer
satisfaction due to personalisation
of manufactured products
Increased comfort for prosthetic
recipients related to greater access
to personalisation of products
enabled by Additive Manufacturing
12.6 mn tCO2e reduction in
transport emissions in 20271 due to
reduced transport and structural
weight of products
7% reduction in non-fatal injuries
during manufacturing
Cost reduction through digitally
enabled R&D
4.4
Cost reduction through digitally
enabled resource effi ciency
16.7
Cost reduction through digitally
enabled supply chain management
23.4
Total value to industry
1) Reduction of emissions is not presented as a cumulative fi gure, rather as the reduction saving potential in 2027
72.1
27.6

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Actions required to specifically accelerate innovation and adoption of Additive Manufacture
UK industry has an excellent track record in R&D and design innovation and should aspire
to be a world leader in "Design for AM" and a catalyst for the downstream transformation of
product manufacture for selected market segments.
Research would indicate that the top three reasons why AM is not being more widely adopted
by industry are: Lack of knowledge; lack of skills; and lack of clear business case for capital
investment. There is also a growing concern over the management and protection of design IP.
The critical success factors for achieving a truly collaborative AM eco-system for UK industry
must seek to address these barriers. The areas for focus should therefore be:

Stimulate local UK demand for AM by supporting industry and trade associations in raising
awareness of the capabilities (and limitations) of AM.
Address the skills gap by supporting the creation of specialist AM education programmes,
including schools, apprenticeships, on-line training courses, further education and
in-work reskilling programmes.

Secure the production of physical AM assets in the UK by providing (e.g.) capital grants
for investment in AM machines, especially for those to be made available for use by local
communities of SME users. Such investment could be directed at establishing AM
co-operatives that have resources able to be accessed on-demand, "as a service" (40% of
companies see capital investment in AM machines as the main barrier to adoption).
Establish a platform for best practice sharing with assured IP protection.
An element of this "Design for AM" leadership would involve clear actions relating to standards
and legislation to help address some of the concerns especially with regards to the use of AM
produced parts. These include:

Raw material standards to help resolve the risk of vendor lock-in when AM machine
manufacturers restrict approved material sources.
Finished product testing standards to address concerns over component integrity.

Business collaboration standards to facilitate co-operation within multi-enterprise
eco-systems. These should enable best practice sharing and data exchange without
violating IP.
A long-term future perspective
Additive Manufacturing is a rapidly evolving technology. Maintaining a position of market
leadership will require continuous innovation and evolution of approaches. Research and
Development will need to rapidly move up the technology readiness levels. Technology
refinements will inevitably see more automation in areas such as component design (and
simulation), machine operation, testing and even post production processes. New materials
and methods will open up opportunities in an increasing set of use cases and sectors. The UK
must pursue a sustained and sustainable strategy with regard to Additive Manufacturing and
its position within the HVM industry.
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Technology
Technology
Materials & Supporting
Skills & ApplicationsSectorsNano-technology
Biological products
Suitable IP and
warranties framework
M/C cost reduction
Microelectronics
Construction
Food
Additive manufacturing
point-by-point
Multi-materials
Medium volume
production (Metals)
Reduced
post-process need
Integrated inspection
and testing
Large scale
machines
In-process
monitoring& control
Medium volume
production
Plastic)
Hybrid
Manufacturing
4D
printing
Smart materials
Traceability solutions,
cybersecurity
Economical
raw materials
Ceramics
Recyclability
Composites
Processes
Certification
New Alloys
Digital platforms
Simulation of
Manufacturing
Process
Full process
cost models
Design guidelines,
decision tools
Standards
development
Energy
Dental
BIO-Medical
Automotive
Consumer/Retail
Fully automated
M/C operation
Output from AM
specific educational
training modules
Standards maturity
Design automation for AM
Sustainable
business models
Pharma
Marine
Industrial spare parts*
Aero-space
product
ADDITIVE MANUFACTURING
AN ANTICIPATED TECHNOLOGY ROADMAP (SUBJECT TO REFINEMENT)
2020
2025
2030
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Additive manufacturing heat map
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Artificial Intelligence in Industrial Digitalisation
INTRODUCTION TO ARTIFICIAL INTELLIGENCE
We are in the early days of a promising new technology which is as radically different from
the programmable systems that have been produced by the IT industry for fifty years as those
systems were from the tabulators which preceded them. The technology is commonly referred
to as artificial or augmented intelligence, cognitive computing or machine learning and will
touch every facet of work and life with the power to radically transform them for the better.
Although the underpinnings of artificial intelligence have been around for seventy years, its
ability to live up to expectations has only become possible with the advent of high performance
computing over the cloud and widespread connectivity. The vast amounts of data necessary
to deliver value from AI are now becoming available in many forms, not least through the
availability of cost-effective data capture devices and sensors.
Today we see data being produced at an estimated rate of 2.5bn gigabytes, with 80% of
this data being unstructured and more or less invisible to traditional computing systems.
AI systems are designed to deal with this massive amount of data and to understand
unstructured data, but they are not intended to map the human mind. A significant part of the
economic benefit of AI will come from the combination of AI systems and people, allowing the
current workforce to focus on the parts of their job that add the most value, complimented by
new tools which help them in their decision making. Adding AI capability also allows better use
of existing capital investments, improving efficiency as well as quality and reducing costs.
AI technologies are a subject of intense public debate with concerns around their impact on
privacy and employment, accompanied by hype concerning the capabilities. In part these
perceptions are a result of the maturity of the market and a shortage of real proof points in
its adoption.
AI is expected to change the nature of work by augmenting human skills, but as with each
successive technological revolution there are fears concerning reduced employment.
However, history and experience with AI are so far supporting the view that more and higher
value jobs will be created than will be displaced. Previous technology shifts have resulted in
the re-shaping of the workforce over time towards higher value professions. Studies suggest
that the impact is, at worst, equivocal and, at best, positive. In their 'From Brawns to Brains'
report, Deloitte suggests that technology has potentially contributed to the loss of 800,000
jobs in the last 15 years, but helped to create nearly 3.5 million new highly skilled roles paying,
on average, 10,000 a year more.165 A BT survey of IT Directors shows one third expecting AI
automation to result in more jobs versus one third expecting fewer.166
PwC's UK Economic Outlook in March 2017 is often quoted as concluding that up to 30% of UK
jobs could be at risk of automation in general by the early 2030s but it also acknowledges that
new AI technologies will increase productivity and generate new jobs elsewhere.167
165 https://www2.deloitte.com/uk/en/pages/growth/articles/from-brawn-

to brains--the-impact-of-technology-on-jobs-in-the-u.html#
166 http://home.bt.com/tech-gadgets/tech-news/






impact-of-artificial-intelligence-on-uk-jobs-market-divides-opinion-says-bt-survey-11364187371166
167 http://www.pwc.co.uk/services/economics-policy/insights/uk-economic-outlook.html
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ARTIFICIAL INTELLIGENCE IN UK INDUSTRIAL SECTORS
The UK does have a comparative advantage in developing AI technologies with a thriving
ecosystem of researchers, developers and investors. UK AI companies Deep Mind, VocalIQ
and Swiftkey have all been acquired by global technology companies on the basis of the
technologies they offer.
MMC Ventures estimates there are at least 226 early stage AI software companies in the UK
(see AI Heat Map below), more than 60% founded in the last three years, although it is at an
earlier stage of development than the US, with 75% at a 'seed' or 'angel' funding stage, compared
with 50% in the US. More than 80% deliver specific functional or industry sector focused
offerings but the number delivering manufacturing specific solutions appears small compared
with the identified opportunity.168
The majority of UK businesses will have to work within the constraints of their existing
investment in plant and systems. Any approach to adopting AI needs to be able to deal with
a combination of instrumented and non-instrumented equipment and a variety of planning
systems, but the poor adoption of productivity enhancing technologies in the UK shows there
is a great deal to play for. European Commission data for 2015 shows a very low proportion
of UK companies using ERP systems to share data internally and enhance productivity.
At 17% of all enterprises, this is around half the EU average with the problem concentrated
in companies with fewer than 250 employees, although large companies are still 20% lower.169
A CBI survey in May 2017 shows that AI tops the list of technologies that UK organisations plan
to invest in over the next five years but it also highlights that, while leaders in a number of UK
businesses are taking steps to realise the benefits of AI, the slow uptake of others risks creating
a divide and leaving many behind.170
Engagement with UK businesses during this review has revealed that many are confused by
a combination of hype and a lack of specific information on how AI can help solve specific
business problems. Those who overcome these challenges then find it difficult to build a
business case to invest. The limited number of case studies contribute to the difficulty in
quantifying ROI and de-risking projects. There is a gap between those who have started and
those who have not, but even the leaders appear to be implementing point solutions rather
than making AI investment part of an overall strategy. In addition, businesses raised concerns
about the predictability of outcome from machine learning.
Also highlighted has been the need to navigate a complex ecosystem of suppliers, customers,
academia, government, regulators and other stakeholders. The complexity of this ecosystem
acts as a disincentive to adoption of AI technologies.
A further area mentioned by businesses as a potential block to AI adoption is an inadequate skill
level, with limitations falling into two distinct groups. The first concerns the skills necessary to
understand, develop and deploy AI solutions, but the second, and potentially larger concern, is
the ability of the existing workforce to work alongside AI technologies.
Finally, businesses expressed a variety of concerns about sharing and processing data, ranging
from an understanding of the data an organisation processes and its value, through issues of
protection, security and liability when sharing and processing that data, to the interoperability
standards that will facilitate sharing.
168 https://medium.com/mmc-writes

artificial-intelligence-in-the-uk-landscape-and-learnings-from-226-startups-70b9551f3e4c
169 http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=isoc_bde15dip&lang=en
170 http://www.cbi.org.uk/news/half-of-firms-expect-ai-to-transform-their-industry/
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TRANSFORMATION IMPACT OF ARTIFICIAL INTELLIGENCE
Analysis undertaken as part of the MSR identified that the application of Artificial Intelligence
within UK industry offered a Value at Stake of 198.7bn to the UK Economy between 2017
and 2027.
Other earlier studies identify significant benefits should be expected from the adoption of
artificial intelligence. The 2016 Accenture report 'Why Artificial Intelligence is the Future
of Growth' conducted with Frontier Economics, proposes that the productivity enhancing
impact of AI has the capability to add 650bn GVA to the UK economy through a combination
of intelligent automation, augmentation of labour and capital investments and the resulting
innovation diffusion across the economy with a productivity level 25% higher than would
otherwise be the case for the UK. 171 A February 2016 report from CEBR and the SAS Institute
highlighted a cumulative benefit of 'big data' across the economy of 240bn by 2020 with
the greatest benefit from efficiency savings and the manufacturing sector gaining the most
(57billion).172
AI case studies, while currently limited, are continuing to emerge from implementation of AI
by leading organisations; these generally fall into three key business areas and can be used
to counter some of the concerns of reluctant adopters referenced above.
Intelligent Assets and Equipment enable assets and equipment equipped with sensors and
combined with AI capability to sense, communicate and self-diagnose issues to optimise
performance and reduce downtime. Time based maintenance can be replaced by predictive
and ultimately prescriptive maintenance where systems not only predict the need for
maintenance based on machine learning algorithms but also act on that need. This leads
to improved production line performance and reduced (equipment) downtime, improving
process efficiency.
171 https://www.accenture.com/lv-en/_acnmedia/PDF-33/Accenture-Why-AI-is-the-Future-of-Growth.pdf
172 https://www.sas.com/content/dam/SAS/en_gb/doc/analystreport/cebr-value-of-big-data.pdf
VALUE AT STAKE FROM ARTIFICIAL INTELLIGENCE IS ESTIMATED TO BE 198.7BN BETWEEN 2017-2027
VALUE LEVER DESCRIPTION
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
Revenue growth through new
revenue streams
91.4
10.7bn of cost savings are
expected to be passed on to
consumers as the manufacturing
process becomes more effi cient
through the use of AI
19% increase in job satisfaction due
to higher value activities
5.4 mn tCO2e reduction in
emissions from manufacturing
processes in 20271
70% reduced machinery
breakdown, leading to lower
resource waste
Improvement in quality of life from
AI in healthcare. Treatment costs
for hospital patients are estimated
to fall by 50%
72,600 workplace injuries avoided
by moving labourers away from
machinery
Cost reduction through digitally
enabled R&D
9.5
Cost reduction through labour
productivity improvements
39.4
Cost reduction through digitally
enabled supply chain management
58.4
Total value to industry
198.7
91.4
FIGURE 35
1) Reduction of emissions is not presented as a cumulative fi gure, rather as the reduction saving potential in 2027
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KONE Corporation is using the cloud to gather data from sensors installed in their elevators
and escalators and will use prescriptive maintenance capabilities to deliver more cost-
effective maintenance whilst improving the service to their customers.173
AI Processes and Operations: Cognitive or AI systems support the analysis of the increasing
volume and complexity of data collected by businesses to support better decision making and
improve operations and quality. Businesses can thus improve productivity and sustainability
through inventory and scrap reduction and improving quality and yield.
Smart resource optimisation: Optimising the use of people, energy and knowledge is critical to
improving productivity levels and lowering cost. Using AI to analyse data from IoT devices can
improve worker safety, productivity and expertise as well as reduce energy consumption.
Combining wearable devices with artificial intelligence systems has allowed North Star
Bluescope Steel to monitor the response of employees to a hazardous working environment
and provide personalised protection for each employee and improved safety for the workforce as
a whole.174
Faced with the problem of how to retain and learn from the knowledge and expertise acquired
during the construction of offshore platforms, Woodside Energy has used cognitive technology
to consolidate 30 years of experience and 38,000 documents to make information available to
subsequent projects.175
Actions required to specifically accelerate innovation and adoption of AI
1. A programme to encourage the business adoption of AI technologies to solve problems

and deliver practical business value. In addition to developing practical propositions which

address business problems there is a clear need for expertise to develop and advise, for

help in building investment and business cases. Businesses expressed the need to start

with a minimum viable product but which permits the ability to mature into an integrated

strategy. Reassurance on approaches to security is one key area of intervention.
2. Transforming the skills of the existing workforce will be an essential part of any mass

adoption programme. Many current policies have focused on training new entrants to the

workforce but this will not be sufficient. Government and employers should encourage

and provide continual education and training for existing employees through their careers

and evaluate how to tailor existing policies and develop new approaches to achieve this.
3. The skills needed to develop and deploy AI solutions will still be dependent on an


education system which encourages STEM skills, with incentives where necessary,


and further education which provides data science and AI skills accompanied by industry

and professional certifications.
4. To take forward thinking on ethics and trust, a forum for the UK to contribute to this global

debate is required, widely drawn from government, academia and industry. It should go

beyond the B2C debates around personal data and include frameworks for the safe

sharing of B2B data.
5. The Government should focus on initiatives which encourage the adoption of advanced

technologies to transform productivity. Large publicly funded projects are one way in

which the government could encourage technology adoption. More broadly, there are legal

and regulatory challenges which can slow down technology adoption and which will


require government assistance to overcome. Finally, investment incentives will also have

a role to play.
173 http://www.kone.com/shared/people-flow-magazine/2015-15/
174 https://brainxchange.io/3-great-use-cases-wearable-tech-ehs/
175 http://www.woodside.com.au/Working-Sustainably/Technology-and-Innovation/Pages/Data-Science-.aspx
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AI Heat Map
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Data Science and Analytics Heat Map
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ElecTech: Automation and Robotics
INTRODUCTION TO ELECTECH
The digitalisation of manufacturing relies heavily on many different skills, components, and
capabilities from the ElecTech sector (electronics, electro-technical + embedded software).
The ElecTech sector is widely regarded as one of the sectors driving greatest innovation and
creativity in any advanced economy. In Germany, for example, more than 35% of all innovations
in manufacturing were initiated by ElecTech industries (source: ZVEI).
The ElecTech industrial sector covers companies who design, deploy and support hardware
built using some combination of ultra-low power, highly integrated electronics chips; medium
to high power electro-technical systems, and embedded software (the low-level software that
controls the hardware). ElecTech is at the heart of every automation system and every robot.
ElecTech is the largest manufacturing category in Europe, employing more than 3m people
generating over 675bn revenues. More than 37% of all manufacturing in Europe is of
electrical, electronics, ICT and instrumentation (source: OrgaLime 2016). However, it's not
just what is made: ElecTech powers every digital factory regardless of what it makes.
Investing in ElecTech as the heart of digitalisation impacts manufacturing in every sector.
Almost every aspect of the digitalisation of industry requires many different ElecTech
technologies, from communications to power subsystems; from embedded processing for
automation and control to intelligent lighting and security systems. Advanced ElecTech
computation powers everything from the largest datacentres to the tiniest sensors and
servos, doing everything from day to day computing to accelerating AI-based machine
learning and making every electric motor smarter and self-maintaining. Without ElecTech,
industrial digitalisation simply couldn't be implemented!
ElecTech is a major sector in the UK, employing more than one million people in over 45,000
companies. The UK has one of the strongest Intellectual Property capabilities in ElecTech in
the world. The UK already attracts significant inward investment from companies like Apple,
Google and Amazon thanks to our strengths in ElecTech technologies and early adopters
in the automotive, aerospace and creative industries.
THE UK POSITION
The rise of automation in the 4th Industrial Revolution is as dramatic as the introduction of
steam engines in the 1st only it is happening four times more quickly. Given the UK's pivotal
historic role as the leader of the industrial age, it seems disturbing that we appear to be falling
ever further down the list of automated, digitalised countries. Yet that is just what is happening.
Automation and digitalisation of manufacturing plays to UK strengths in both core
technologies and systems engineering, through leveraging cross-discipline R&D skillsets
coming together to integrate and deploy new automated workflows leveraging advanced
technologies such as robots.
Many of the ElecTech technologies essential to the future of automation and robotics have
industry leaders here in the UK, including silicon chips (ARM), sensors (Renishaw), AR/VR
(Imagination), AI (GraphCore), power (Dynex Semiconductor) and communications (5GIC Surrey;
CSR, now part of Qualcomm).
The UK already has world-leading research in robotics, in fields as diverse as healthcare,
subsea autonomous vehicles and vacuum cleaners. Groups such as the Edinburgh Centre for
Robotics, Sheffield Robotics, Bristol Robotics Lab, Imperial College's Hamlyn Centre are all
recognised as significant contributors and innovators in global robotics research.
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Robots bring together a wide range of ElecTech technologies, such as smart electric motors
and servos, power systems, sensors, AI-based control systems, high speed communications,
highly integrated silicon chips, embedded software, and AR/VR based modelling of workflows.
The UK has some highly innovative robot companies already, such as the Shadow Robot
Company (artificial hand robots), Peak Analysis and Automation (laboratory robots),
Engineered Arts (human-emulating interactive robots) and Tharsus (warehouse robots
for Ocado and others), while Dyson is an example of a consumer goods company investing
tens of millions into robotics for household appliances.
Automotive multi-nationals such as Jaguar Land Rover and Nissan have already seized on the
benefits of robots as a key part of their automation strategies in their UK factories facilities
that also happen to be some of the largest employers in their region. Technology innovators
such as Ocado leverage networks of thousands of robots to enable them to deliver new levels
of productivity and efficiency in warehouse logistics.
However, overall the uptake of manufacturing automation in the UK is disturbingly slow
compared to most other developed nations. The UK has only 33 robots per 10,000 employed
compared to 93 for the US and 170 for Germany (source: IFR) - and the gap is widening.
Germany invests 6.6 times more than the UK in automation, although its manufacturing sector
is only 2.7 times the UK's in size (source: ZVEI). And in robots per millions of hours worked,
the UK is a factor of 10 lower than Germany or Japan (source: IFR). The UK is falling seriously
behind our competitors, based on pretty much every metric.
Robots per million working hoursTOTAL COUNTRY STOCK OF INDUSTRIAL ROBOTS
*Data for JPN 2007 is missing therefore data for 2006 is graphed instead
DNK
JPN*
FIN
FRA
GER
ITA
ESP
SWE
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
UK
2004
2007
2010 (estimate)
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There appear to be several reasons why in manufacturing the UK is falling behind:
1. Public perception: A fear by both business leaders and the public that robots will take too

many jobs, fed by the media that human-like robots will replace people completely.
2.
Lack of ambition: Not enough businesses strive to be more than profitable; the lack of
determination to scale-up UK-based business and be seen as a shaker and mover on the
world stage.
3.
Risk-averse: Too many companies have a strong preference to "sweat their assets" by
repairing older equipment until it becomes obsolete or fails, rather than upgrading it
periodically to remain globally competitive.
4.
Shortage of skills: The shortage of staff skilled in automation means too many companies
don't have internal champions comfortable with adopting new technologies never used
before to do more tasks differently.
5.
Finance: With a lack of incentives from government, and a conservative financial sector
unwilling to encourage investment for increasing competitiveness and productivity, it is far
too easy for Boards to delay investing in automation until it's too late.
The reality is that while high growth economies like China are seizing on robots as key to their
future growth (see Made in China 2025 at appendix 2) , the UK has so far failed to grasp the
significance of embracing the future rather than denying it. Action must be taken soon to
change these attitudes, or the UK risks losing yet more of its manufacturing base.
Regional and national variation
The current and future impact of automation varies between regions and between countries
and a comparison is beyond the scope of this paper. However, data from IFR and other
sources suggests:

China will emerge as a major robotics manufacturer and user of robots, benefiting from
jobs created by robot manufacturing and productivity gains from robot use. China has
topped sales of robots to any one single market every year since 2013. The Chinese
government has included a focus on robotics in its 10 year strategy. In order to achieve its
target of a robot density of 150 units per 10,000 workers by 2020, Chinese companies will
have to install around 650,000 new industrial robots between 2016 and 2020
2.5 times more than were installed globally in 2015 (International Federation of
Robotics, 2016)

Japan currently has the largest stock of industrial robots in operation, primarily in the
automotive industry. Driven by a rapidly ageing population and low productivity rates,
the Japanese government has set its sights on a 20-fold increase in the use of robots in
the non-manufacturing sector and a three-fold growth rate of labour productivity in the
service sector , both by 2020 (Ministry of Economy, Trade and Industry, Japan, 2015).

Some emerging and developing economies notably Indonesia and Thailand - are
installing robots as a high rate, recognising not only productivity but also quality
advantages from automation. (Boston Consulting Group, 2015)
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Transformation Impact of Automation & Robotics
One of the most iconic symbols of innovation in automation is robots. Robots are perhaps one
of the most powerful and creative technologies being aggressively developed in the race for
greater productivity and more cost-effective production.
The design, deployment and support of robot-based manufacturing systems has been
embraced by most G7 countries such as Germany, France, Italy and the US, as well as
powerhouses such as China and South Korea as key to increasing productivity. These countries
recognise that automation changes the underlying economics of manufacturing, enabling
them to create high growth and better productivity, enabling their factories to make more
competitive products be it cars, furniture, food or clothing. Indeed a recent study by Barclays
estimates that an accelerated level of investment in robots could raise manufacturing Gross
Value Added in the UK by 21.0% over 10 years.
BEST
JAPAN
GERMANY
UK
FRANCE
ITALY
SPAIN
SWEDEN
FINLAND DENMARK
Food,
Tobacco
FIN
13.7%
8.7%
13.7%
11.4%
11.7%
11.2%
7.1%
0.0%
7.4%
Textile,
Leather
DNK
9.7%
8.8%
9.7%
9.3%
9.6%
9.5%
9.7%
8.6%
0.0%
Wood,
Furniture
DNK
21.5%
1.2%
21.0%
20.4%
19.8%
18.7%
17.4%
19.7%
0.0%
Paper,
Publishing
FIN
2.1%
1.8%
2.8%
2.0%
2.3%
2.5%
2.5%
0.0%
1.9%
Chemical
products
ITA
13.0%
12.2%
29.4%
22.2%
0.0%
24.3%
19.6%
10.2%
20.7%
Glass,
Ceramics,
Stone
GER
8.2%
0.0%
9.6%
6.7%
7.2%
7.7%
8.5%
6.8%
4.0%
Metal,
Machinery
DNK
5.5%
5.1%
11.7%
8.7%
6.2%
8.7%
1.0%
3.7%
0.0%
Electronic
Equipment
JPN
0.0%
16.8%
24.2%
22.5%
22.2%
22.3%
20.3%
13.9%
16.8%
Transport
Equipment
GER
15.9%
0.0%
76.3%
28.5%
8.1%
36.0%
65.8%
80.2%
81.4%
All Other
JPN
0.0%
27.9%
41.3%
40.0%
39.3%
38.8%
39.3%
39.0%
39.6%
Total
8.1%
8.0%
22.3%
15.4%
10.5%
16.3%
15.7%
14.9%
15.2%
TABLE 8. PRODUCTIVITY CHANGE IF AUTOMATION AS IN THE MOST AUTOMATED COUNTRY
Note: The "Total" is the employment weighted average of the productivity change in all industries.
For each industry we apply the highest ranked country as "best performance". Then, we are able to predict how productivity and employment would have been in
each industry within a country the actual measure of robot-intensity was substituted with the intensity of the "best performance".
Automation, labor productivity and employment a cross country comparison: Lene Kromann, Jan Rose Skaksen, Anders Srensen, CEBR, Copenhagen Business School
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MADE SMARTER. REVIEW 2017
A study undertaken by the Copenhagen business school identified productivity improvements
of 22% if the UK invested in automation in line with the 'Best in Class' for each Industry sector.
Robots enable a growing number of jobs to be done that cannot be safely handled by humans
that's why they enable new businesses and improve productivity. Their ability to operate in
hazardous environments, work with dangerous materials and continue operating 24 hours a
day are all examples of where robots enhance our workforce.
The ability for aerospace to use robots to enhance specialised skills has already been
demonstrated in factories like the GKN Aerospace plant in Bristol, where they use automated
carbon fibre placement robots to build 27m wings that would simply be impossible using
manual labour.
Analysis undertaken as part of the MSR identified that the application of Automation
and Robotics within UK industry offered a Value at Stake of 183.6bn to the UK economy
with additional benefits identified to both the individual and society (see URL http://
industrialdigitalisation.org.uk/industrial-digitalisation-review-benefits-analysis/).
The value of robots as part of automation strategies is not just for high-tech industries.
Enabling cost-effective production is also key to labour-intensive industries such as food
and drink or agriculture, where immigration challenges in the coming years mean availability
of migrant and transient labour might become harder to attract. If factories in the UK are to
remain competitive in an increasingly global marketplace, investment in automation must
be seen as integral to raising our competitiveness.
Highly automated manufacturing enables the creation of new factories that generate new
jobs, because without automation those factories would not exist. By enabling many more
factories to be created across the country, a wider range of highly creative, innovative goods
can be produced which would simply not be competitive using conventional manufacturing
approaches. Robots can also ensure manual skills are available where otherwise suitable
labour is in short supply a growing problem when trying to revitalise regional economies.
VALUE AT STAKE FROM AUTOMATION AND ROBOTICS IS ESTIMATED TO BE 183.6BN BETWEEN 2017-2027
VALUE LEVER DESCRIPTION
VALUE TO INDUSTRY ( BN)
VALUE TO INDIVIDUALS
VALUE TO SOCIETY
Revenue growth through new
revenue streams
54.1
13bn of cost savings is expected to
be passed on to consumers over the
next decade, as the manufacturing
process becomes more effi cient
through the use of Automation and
Robotics
13% increase in job satisfaction due
to higher value activities
4.8 mn tCO2e reduction in
emissions in 20271 from more
effi cient manufacturing processes
8% reduced waste from more
effi cient manufacturing processes
Reduction of 633,600 cases of
musculoskeletal disorders
resulting from manual
manufacturing
Improvement in quality of life from
robotics in healthcare
127,050 workplace injuries avoided
by moving workforce away from
machinery
Cost reduction through digitally
enabled R&D
13.8
Cost reduction through automation
of labour
44
Cost reduction through digitally
enabled manufacturing and asset
maintenance
71.7
Total value to industry
183.6
54.1
FIGURE 40
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But jobs aren't just created on the production line itself. That's because for every new factory,
everything that surrounds that factory creates jobs, too, from the admin to logistics; from
supplying canteens to new specialist companies created thanks to the presence of a factory.
Automation creates far more jobs than it takes, by enabling new businesses to flourish where
they previously could not be competitive or reliably productive.
Actions required to specifically accelerate innovation and adoption of Robotics
& Automation
The strategic value of Robotics and Autonomous Systems (RAS) has already been recognised
by the government, with the first round of the ISCF allocating 93m for development of world-
leading technologies for robots in hazardous environments. However, we believe this is just
the start far more needs to be done to make automation happen much faster in the UK, and
overcome the cultural and business resistance to automation and robots. We need to enable
the UK to focus on leveraging the advantages of automation in increasing our productivity,
competitiveness and global reach.
1. Template factories for SMEs

We believe the UK should build a series of highly automated showcase factories across the
UK, targeting those specific manufacturing sectors which are most successful with SMEs
in the UK - as diverse as food & drink, furniture, buildings, pharmaceuticals and consumer
goods. These "template" factories producing examples of real goods would enable SME
business owners - with little understanding of digital or robotics - to invest confidently in
digital factories by simply saying "I want one of those!". Many of these model factories could
be part funded by Tier1 companies eager to increase sales of their automation equipment in
the UK, enabling far more SME's to easily apply the technologies used in their own factories
through various financial incentives.

By stimulating the creation of highly automated digital factories, accelerated upgrade
of existing facilities across the UK, and by showing the new jobs being created with every
additional factory built jobs which would otherwise not exist at all - the government can
more quickly challenge the public's concerns about robots taking jobs.
2. Automation Task Force and Mobile Outreach Demonstrators

An Automation Task Force should be created, specifically briefed to maximise outreach to
manufacturers large and small, using the template factories as catalysts for this. The task
force should not just be about automation technology, however it should also actively
help any business to raise the finance needed to either increase automation in an existing
factory, or build new highly automated plants.

Too often businesses cannot see automation in action, so they are intimidated by it: seeing
is believing. To ensure the message gets to the broadest base of businesses across every
part of the UK, the Automation Task Force should operate a mobile demonstration unit,
possibly co-funded by automation equipment suppliers, to demonstrate the broad spectrum
of automation technologies for every company large or small. The mobile demonstrator
should cover everything from robots to simple upgrades to existing low-tech facilities, with
a clear emphasis on broadening adoption, not just showcasing high end technologies.
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3. Financial incentives encouraging automation adoption

By strongly incentivising businesses that are willing to invest in automation, especially
those leveraging UK ElecTech technologies, an ecosystem across the UK of businesses
embracing automation can be created. Not only will this stimulate manufacturing, but
it will also create a growing, energetic and innovative network of specialist services and
technology companies. By sharing their experiences, participants in this network will
encourage more reticent companies to join them, stimulating a virtuous cycle of growth
and expansion.
4. Establish an Interoperability Institute

As already proposed by the ElecTech Council in its response to the BEIS Industrial Strategy
Consultation, a new Interoperability Institute should be established, focused on ensuring
that automation products all communicate and co-operate with each other regardless of
supplier. This would ensure that when companies start investing in automation equipment
from a wide range of suppliers, they can be reassured that their investment will not be
obsolete if any one component or supplier needs to be upgraded or replaced by another,
and that key issues such as security and collaboration are consistently addressed.
The world won't wait for the UK: Industrial digitalisation and the upgrade of our manufacturing
infrastructure is key for the future of the UK's global competitiveness. Production costs are
rising, and unless action is taken competitiveness will continue to drop. There needs to be
greater strategic focus than simply "make more things in the UK". Automation, robotics, and
the ElecTech technologies and skills surrounding them, are an ideal focal point to rapidly build
the UK's position in the global economy as a leader in the practical application of advanced
digital manufacturing for economic growth and global export success.
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Robotics and Autonomous Systems Heat Map
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Connectivity and the Industrial Internet of Things
the Foundations for Innovative Transformation of Industry.
INTRODUCTION TO INDUSTRIAL INTERNET OF THINGS, CONNECTIVITY AND CYBER SECURITY
The Industrial Internet of Things (IIoT) brings together a number of elements to drive more
informed, faster business decisions for industrial organisations. It combines cutting
edge machines, advanced analytics and a plethora of devices that connect together by
communication technologies which allow for monitoring, collection, exchange and analysis
of data of these devices to deliver valuable insights for industrial companies. 176
In an industrial setting, IIoT allows traditionally non-digital companies to build a data footprint
through sensors and monitoring of equipment and machinery. This data footprint allows for
new business models to develop and provides greater opportunities for the digital sector to
work closer with industry. For example, by taking the data that is generated from IoT devices,
there are opportunities to gain insight into the condition of equipment on a factory floor,
to monitor environmental factors that may impact quality and to even optimise production
lines through an accurate "digital twin" (or direct digital replica) of an industrial process to
streamline and increase productivity.
In addition to IIoT, it is also crucial to build the connectivity infrastructure that will underpin the
factories of the future. From Low Powered Wide Area Networks (LPWAN) to the next generation
of the internet in 5G, there is huge potential to accelerate the transformation of industry.
Improved connectivity is essential to utilising the technologies that underpin the 4th Industrial
Revolution, and without it you will not achieve the same levels of productivity and efficiency
through the adoption of sensor equipment wearables, collaborative robots and digital twin
/ 3D modelling and VR/AR. Allowing for flexible and reliable connectivity across all of these
technologies will help with real time data processing, and to monitor assets distributed across
larger areas, and optimise logistic flow across the supply chain.
Further to the importance of connectivity infrastructure, manufacturers also need to step up
their cyber security strategies and investment. With the increasing adoption of the Internet of
Things in industry, manufacturers have been much slower in their adoption and investment
into IT security strategies. The risk of this on a global scale is almost unquantifiable as it can
impact reputation, relationships with a broad range of customers and partners across the
supply chain - not to mention production, logistics and (as manufacturing begins to develop
a closer relationship with consumers) personal data. During the WannaCry ransomware
attack earlier this year, manufacturing businesses such as France's Renault were affected
which led to them temporarily stopping production at several sites to prevent the spread
of the attack. It has been quantified through an independent survey that the reported financial
cost to business is also significant, with the average annual cumulative cost being $347,603,
in fact larger companies with 500+ employees reported annual accumulative losses of
almost $500,000.177
Based on the above it is crucial that to enable the future of connectivity underpinning IIoT
and to mitigate against the threat of cyber-crime in manufacturing the UK needs to
increase awareness and adoption of innovation strategies in these technologies across
industrial SMEs. This will drive the UK's 4th Industrial Revolution forward and avoid potential
stumbling blocks to growth in the future.
176 "Everything you need to know about the Industrial Internet of Things" by GE Digital http://invent.ge/2eqfX43
177 The State of Industrial Cyber Security 2017, Global Report -



Kaspersky Business Advantage - http://bit.ly/2f1D6WM
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THE UK POSITION
The UK is home to a rapidly growing community of companies developing and commercialising
IoT component technologies, products and services which are already having an impact on
businesses, in homes and in individuals' lives. It is predicted that the Internet of Things will
bring 67,000 jobs to the UK by 2020.178 The UK government has invested significantly in the
connected technologies sector through the 32m of funding awarded to the IoTUK Programme
in the 2015 Budget. IoTUK is a national initiative designed to support IoT development and
uptake in the UK, through applied research, demonstrating the technology at scale, attracting
international investment and supporting small companies. IoTUK has also built a database of
companies so it can track the activity in the supply side of the UK's IoT industry to demonstrate
both breadth and scale, highlight some of the significant commercial products being
developed, and to analyse how IoT-focused suppliers are distributed by type, size, application
area and location.
The research field in IoT is also vibrant in the UK with much IoT research being driven by
universities. As part of the IoTUK Programme 179, the start of 2016 saw the launch of a new
Internet of Things Research Hub for the UK, PETRAS180 , underpinned by 9.8m support
from the Engineering and Physical Sciences Research Council (EPSRC) 181, and boosted by
partner contributions to approximately 23m. Designed to lead interdisciplinary research in a
number of areas critical for the development of the country's Internet of Things capability, the
foundation of the PETRAS IoT hub adds to what is already a vibrant and industrious research
community. PETRAS comprises nine UK universities UCL, Imperial College London, University
of Oxford, University of Warwick, Lancaster University, University of Southampton, University of
Surrey, University of Edinburgh and Cardiff University. It is expected to bring in expertise from
over 50 other partners from the public sector and from industry.
Over the next three years PETRAS will continue to research into solving many of the challenges
facing IoT developers including the ethics, privacy, trust, reliability, acceptability and security
issues already being given significant attention. The funding awarded to PETRAS accounts
for a significant proportion of all UK IoT research value (around 10%).182 In addition, the
consortium represents many of the organisations that have already been most active in UK IoT
research.
According to IBM's Cyber Security Intelligence Index, manufacturing was ranked as the
3rd the most frequently hacked industry in 2017. This is due to it being a tempting market with
systems within the sector being seen as "weak by design as a result of a failure to be held to
compliance standards."
178 AS Big Data Internet of Things http://bit.ly/2nr38sm
179 The IoTUK Programme is the UK government's ambitious fully-integrated IoT acceleration programme, which saw 32m
of funding distributed across an end-to-end ecosystem of IoT activities from 2015. The programme includes academic
research (PETRAS), hardware accelerators (StartUp Bootcamp and R/GA), large scale demonstrators (CityVerve and
two NHS Testbeds) and dissemination models to increase take-up rates (Future Cities Catapult and NHS England).
The Digital Catapult provides co-ordination, SME acceleration and amplification services to the programme.
180 http://www.petrashub.org
181 http://www.epsrc.ac.uk
182 The IoTNation database has identified 122m of research funding, of which c100m is still deployed
in live projects in 2016. The PETRAS funding of 9.8m is therefore 10% of the total.
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MADE SMARTER. REVIEW 2017
It is also almost 40% higher than the average across all industries for "security incidents".183
The UK manufacturing sector is particularly at risk, with (according to research from EEF)
almost half (46%) of manufacturers failing to increase their cyber security investment in the
past two years (with 56% of this number being small manufacturers), 20% of manufacturers
not making employees aware of cyber risks in company policies, just over half 56% saying that
security is given serious attention by their board, just over one third (36%) of manufacturers
having an incident response plan in place, and only 24% monitoring cyber threats through
business KPIs.184
In terms of 5G, the UK Government has laid out plans for the UK to be a global leader
in the next generation of mobile technology - seeing good digital infrastructure as the
building block of the Government's modern Industrial Strategy. Further to this, the National
Infrastructure Commission (NIC) and the Future Communications Challenge Group (FCCG)
established by DCMS, set out in December 2016 and January 2017 respectively a series of
recommendations and steps to ensure the UK becomes a world leader in the deployment of
5G telecommunications networks. From this a developing strategy around 5G in the UK is
emerging, with three universities (King's College London, Universities of Surrey and Bristol)
awarded 16m to develop a cutting-edge test network to make sure people and business
can enjoy the benefits sooner.
Finally, on Low Powered Wide Area Networks (which can greatly reduce the overhead costs
of IIoT connectivity), the UK is behind the rest of Europe who have begun rolling out the
wireless network technology over the past few years. The UK is as such playing catch up on
the implementation, with Digital Catapult playing a key role in this with its "Things Connected"
network that will initially provide a test bed of 50 base stations across London and expand
geographically across the UK.
TRANSFORMATIONAL IMPACT AND MITIGATING RISK IN IIOT, CONNECTIVITY AND SECURITY
IN MANUFACTURING
On a global scale, IoT is predicted to generate up to $11tn in value to the global economy by
2025185, while in a report by Accenture, it is projected that adopting the Internet of Things on an
industrial level (IIoT) could boost the UK economy by 352bn by 2030. Conservative estimates
put IIoT's potential worldwide spending at $20bn in 2012, expected to reach around $500bn
by 2020. More optimistic predictions put the value created by the IIoT as high as $15t of global
GDP by 2030. 186
The huge potential impact of IIoT has also been supported and reflected by a 2016 survey
of decision makers and analytics professionals in industrial companies, with 69% believing
Industrial Analytics will be crucial for business success in 2020, and 15% considering it as
already crucial today. Further to this, in the same report and survey, predictive and prescriptive
maintenance of machines (79%), customer/marketing related analytics (77%) and analysis
of product usage in the field (76%) are the top three applications of industrial analytics in the
next 1 to 3 years. 187
183 "Security Trends in the Manufacturing Industry, 2017 IBM Security https://ibm.co/2yaH2PK
184 EEF Cyber Security Survey Results 2016, http://bit.ly/2kAFr0u
185 Unlocking the Potential of the Internet of Things by James Manyika et al. http://bit.ly/2eRn6X8
186 "The Growth Game Changer" by Mark Purdy and Ladan Davarzani, https://accntu.re/2mHhAb
187 Industrial Analytics 2016/17 by Knud Lasse Lueth et al. http://bit.ly/2li6PM1
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MADE SMARTER. REVIEW 2017
The increased adoption of Industrial IoT devices in the market will mean there is a huge
opportunity for relevant and accurate data to be processed and analysed to underpin
Industrial Analytics. If the UK is able to drive this convergence of information technology and
industrial automation, it can bring about increased productivity and develop new data-driven
business models. To do this, it must create effective collaborations between machine learning
researchers and innovators and developers of Industrial IoT devices via IoT platforms to
bridge the gap between the physical and digital systems.
However, in order to utilise the full potential of IIoT it is also crucial to have the connectivity
infrastructure around it to maximise its benefits and increase adoption. According to IHS
Economics it is estimated that 5G will enable USD$12.3tn of global economic output in
2035.188 Mobile technologies are seen as constantly evolving and the huge amounts of data
traffic post both challenges and opportunities for the UK. 5G will support new consumer
experiences based on constant and seamless connectivity. The new technologies, applications
and business models that will come from it are still yet to be seen, but 5G is expected to
enhance productivity across the economy by opening the door to revolutionary technologies.
Adoption of LPWAN is also crucial in manufacturing, with its capability of connecting sensor
devices and their data across the factory at a much lower cost and increased reliability when
compared to traditional mobile connectivity (3G, 4G etc.). This will reduce the cost overheads
for manufacturing SMEs and ensure reliability for IIoT networks across geographically wide
and often hard to reach parts of factories.
Actions required to specifically accelerate innovation and adoption of IoT
Research has indicated that adoption of Industrial IoT in the UK is dependent on a number
of key factors: lack of understanding around the benefits, a lack of skills, security of IoT
devices, the high cost of implementation, inadequate infrastructure, lack of standards and
interoperability (legacy concerns). As such the areas of focus should be:

Driving the adoption of IIoT by supporting industry and innovation agencies in raising
awareness of the opportunities afforded through the use of the technology. A concrete
example is to enable subsidised access to digital transformation consultants that help
businesses to identify initial pilot projects exploring the benefits of IIoT inside their
organisations, enabled by digital readiness level assessments.

Establishing a "library" of best in class IIoT use cases that can act as reference examples
for others who wish to implement similar solutions in their organisations. These use cases
could be curated from successful early adopters across the country and brought together
virtually or even at physical show rooms.

Encouraging national availability of adequate IoT connectivity networks to underpin the
exploding demand for connected devices of the IIoT. This includes the rapid rollout of
Low Power Wide Area Networks to minimise the deployment costs for low bandwidth
communication use cases and 5G networks to support low latency mission critical
applications. Driving open innovation and collaborative exercises to help industrial
companies understand the potential of adopting these technologies. It is important that
these collaborations result in tangible pilots that allow rapid validation of underlying
business cases.

Raising awareness of security standards for the IIoT and other trust enabling solutions.
Rapid adoption of IIoT technology requires that the concerns of industrial organisations
are adequately addressed around business sensitivities in order to grow their confidence
in the underlying technology base.
188 IHS Economics / IHS Technology "The 5G economy: How 5G technology will
contribute to the global economy" 2017 http://bit.ly/2rWtnta
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Support the UK Government's rollout of 5G and engage industry in the 5G test beds being
developed to maximise the visibility and adoption of the technology by IDT innovators
across the board (VR/AR, AI/ML, Robotics/Cobotics, Additive Manufacturing etc.)

Delivery of training and awareness building to encourage appropriate change and influence
industry to adopt and develop publicly available standards (PAS) in cyber security.
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Virtual Reality and Augmented Reality
Virtual Reality (VR), which immerses users in a computer generated world and Augmented
Reality (AR), which overlays digital information onto the physical world, are already reshaping
existing ways of doing things and have further potential to increase productivity in engineering
and manufacturing.
A recent report by Goldman Sachs Global Investment Research estimates a potential user
base of 6 million engineers in the US, Europe and Japan of AR and VR, further democratising
the technology. This is further backed by a global addressable ecosystem opportunity of $80bn
by 2025. 189 Additionally, a recent PWC report forecasts that VR in the UK entertainment and
media industry alone will reach a value of 801m by 2021, making it the fastest growing and
largest VR industry in EMEA.
While AR is still in its infancy, UK manufacturing is demonstrating its desire to use this
technology. The retail and marketing sectors have already widely adopted this technology,
but now the manufacturing sector is realising (and driving) the enterprise adoption.
A recent PWC report identifies nearly 500 companies or institutions in the UK who have
adopted or invested in VR or AR in the UK, in the past year. However, this is only the start. In
2016 UK digital tech investment reached 6.8bn, that's 50% higher than any other European
country. The UK hosts a number of notable companies in the industrial VR/AR field including
Autodesk, Virtalis, and Eon Reality, and it is this applied sector in which much of the future
industrial value lies. The construction industry is exploiting this technology to leapfrog and
modernise the whole sector through rapid training and increased quality, efficiency and safety
of workers. The Construction Leadership Council believes that through digital technologies
mainly AR and VR - there is immense potential to transform the industry.190
The UK national body ImmerseUK (supported by InnovateUK), which was launched in 2016,
is bringing together the community of industry developers, researchers, government bodies
and end users to support UK in becoming the global leader in applications of immersive
technologies - including high-end visualisation, VR, AR, haptics and other sensory interfaces
with data. This mixed community promotes interaction between industrial sectors and
incubates innovative solution development. It also allows manufacturers to have direct access
to technology start-ups which may not have engineering and manufacturing as an end-user
for their product. The connection between solution providers and end-users will be key to
developing the UK as the leader in the development and use of applied visualisation.
VR and AR are already being used by manufacturers to support the development of complex
assemblies, planning for the maintenance of equipment and products, the provision of remote
expert support, and the enablement of higher quality assurance and increased productivity.
For instance, when the UK division of the Hosokawa Micron Group looked to improve its
productivity, the route that this innovative powder processing company chose was to couple
its market leading equipment and services to the world of virtual and augmented reality, and
then to harness this to data analytics. The result has been to transform a business that had
appeared to plateau in terms of revenue and growth to one with a target operating income
rarely seen in the industry.
189 Virtual & Augmented Reality: Understanding the Race for the Next Computing
Platform. Goldman Sachs Global Investment Research. 13 January 2016
190 A New Reality: Immersive Learning in Construction. October 2017
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Other users include companies like BAE Systems who are using the technology developed by the
video games industry to build warships for the Royal Navy more cheaply and efficiently, which
directly supports the aspirations of the National Shipbuilding Strategy. 191 The defence and
aerospace company has started to employ 3-D virtual reality, allowing engineers and sailors to
"walk" through life-size computer-generated versions of the ships they areworking on.
It is in these potential scenarios, from validating design (VR), to virtually prototyping
manufacturing processes (VR), to validating assembly procedures (VR/AR) and delivering
operational support (AR) where true value will be obtained. The strategy to 'fail fast, but fail
virtually' and provide a 'many to one' support through the adoption of virtual and augmented
reality is where true productivity gains can be made.
The UK has both the capability to deliver truly innovative VR and AR solutions and the capacity
to lead the way in the adoption of these technologies to help drive UK productivity to new levels.
191 National Shipbuilding Strategy: The Future of Naval Shipbuilding in the UK. September 2017
Hosokawa Digital Twin VR model
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VR/ AR Heat Map
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APPENDIX FOUR
INDUSTRIAL
DIGITALISATION
BENEFITS
ANALYSIS
APPROACH AND
METHODOLOGY
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Industrial Digitalisation Benefits Analysis Approach and Methodology

INTRODUCTION
In collaboration with industry, government and academia, Accenture analysed the
economic and societal impact of digital technologies within UK manufacturing to support
the recommendations of the Industrial Digitalisation Review. This 'value at stake' analysis
aims to serve as a directional framework for further action and assessment from both
government and industry.
APPROACH
For the benefits analysis, Accenture brought together a unique working group for each industry
sector (Aerospace, Construction, Food and Drink, Pharmaceuticals) and Technology, (Additive
Manufacturing, Artificial Intelligence, Automation and Robotics) analysed. Working groups
combined key stakeholders from UK manufacturing companies, academia and Accenture
technology and industry experts.
During a series of workshops, the working groups created a list of use cases that could be
applied over the next ten years. These digital use cases form part of the larger digital themes
that relate to some of the major trends powering digitalisation.
VALUE AT STAKE FRAMEWORK
To quantify the benefit of these use cases to business and society, we used a value at stake
analysis framework developed in partnership with the World Economic Forum. An illustrative
example is shown below.

Value at Stake framework



Appendix 4

Illustrative
Profits expected to be generated
from new business streams
Productivity and efficiency
improvements
Revenue increase
Value to industry
Value to individuals
Value to society
Discounts and cost savings
Increased satisfaction
Increased safety
Emissions reduced
Cost reduction
Lower prices, increased
convenience and wider choice
Improved product quality,
personalisation and job satisfaction
Reduction in the number
of injuries and deaths
Emissions reduction calculated
in CO2 equivalent
Total value
at stake from
initiative
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Digital value to industry
Value at stake for an industry comprises of two elements; revenue increase and cost reduction.
Within this, value to industry could either be value addition or value migration:
Value Addition: The potential impact on an industry's (pre-tax) operating profits that
will be generated as a result of implementing digital initiatives.

e.g. a new revenue stream created by selling valuable data collected in the food and drink
manufacturing process could potentially create new demand as other companies along

the supply chain could optimise their operations using analytics. As such, this new

demand would predominantly be value added to the economy.
Value Migration: Operating profits that will shift between different industry players.

e.g. additive manufacturing could be used to create building parts that are challenging

to construct on-site. As demand for additive manufacturing increases, this may decrease

construction companies' demand for specialist builders who are skilled in these types

of activities. This loss of demand could potentially net out some of the value created from

the introduction of additive manufacturing in construction.
Digital value to individuals
Value impact for individuals is the potential gain to individuals (B2C) in the form of cost and
time savings, as well as increased job or customer satisfaction.
Digital value to society
Includes benefits to the wider environment, as well as society. Each element is measured
as follows:
Value impact for society: the impact of digital initiatives, e.g. lives saved (these vary

by industry).
Value impact on the environment: the estimated impact of digital initiatives on

increasing or reducing emissions of CO2 and other gases (these vary by industry).

APPLICATION OF VALUE AT STAKE APPROACH
The value at stake approach is further explained as follows:
1. Define the value drivers that impact industry and society: with input from the working

groups, 70+ digital use cases for industries and 40+ for technologies that could impact

manufacturing over the next decade were identified. The value at stake framework was

then used to categorise these initiatives (i.e. value to industry or environment).
2. Uplift factors for value at stake were calculated: The modelling team found uplift factors

for each use case. When calculating the uplift factors, several checks were performed to

ensure the uplift factors were mutually exclusive, applied an addressable market and had

multiple data points that supported the assumptions made.
3. Apply uplift values to the baseline over 10 years: Uplift factors were then applied to the

related industry baselines. The baseline forecasts for value to industry were based on ONS

manufacturing growth examined over the last 10 years.
4. Apply adoption rate of technology over 10 years: The next step was to assume an

adoption rate (or uptake) of the digital technologies for each industry. Each working group

had the chance to provide feedback on whether they thought the adoption rate would

be linear or exponential and over what timeframe. After application of the adoption rates,

aggregate value at stake was calculated for the 10-year period.
5. Testing, revision and validation of assumptions and results with academics, economists

and IDR working group members.
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Comparison of findings with other studies
Our approach to estimating value at stake was limited to a range of industries and
technologies and therefore may not be directly comparable to other studies.
Despite these scope limitations, we identified reports that are held in high regard by industry
participants and are cited for their contribution to quantifying the future benefits of digital and
its role in industry 4.0. Among others, reports include BCG's analysis of the UK's readiness for
the 4th industrial revolution, PwC's industry 4.0.
AREAS OF COMPARISON
1. Size of the opportunity for UK manufacturing industry: Triangulation of data points with
alternative reports confirm the size of the opportunity identified seems to be in line
with other studies. BCG estimates a 0.5% increase in annual GDP by 2025165, whilst PwC
estimate a revenue increase of 2.9% and cost reduction of 3.6% annually166. Most reports
also agree that benefits could be much higher with a clear national strategy that supports
the UK's industrial digital transformation plans.
2. Size of the opportunity for UK society: Few reports analysed consistently compare the
benefits of digital to society as well as to industry. As mentioned within this report,
the value to society from implementing digital technologies are likely to be significant
in terms of reducing carbon emissions, waste and workplace incidents.
3. Proportion of value realised from cost savings compared to new revenue streams:
The reports mentioned find that cost reduction opportunities are significant and
proportionally higher in value than new revenue streams. BCG analysis suggests that the
UK could realise industrial efficiency gains of 25%, with manufacturing sector growth of
1.5-3%. Similarly, PwC estimate cost reduction to be 0.7% higher than revenue increase.
This is in line with the IDR findings presented in this analysis.
The detailed analysis can be found at: http://industrialdigitalisation.org.uk/
industrial-digitalisation-review-benefits-analysis/
165 Source: https://media-publications.bcg.com/Is-UK-Industry-Ready-for-the-Fourth-Industrial-Revolution.pdf
166 Source: https://www.pwc.com/gx/en/industries/industries-4.0/landing-page industry-4.0-building-your-digital-

enterprise-april-.pdf
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APPENDIX FIVE
ACKNOWLEDGEMENTS
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Acknowledgments

The MSR would like to acknowledge and extend its sincere thanks to the Leadership Team.
Prof. Juergen Maier
Siemens UK & Ireland
CEO
Nick Roberts
Atkins
CEO, UK & Europe
Nigel Stein
GKN
CEO
Sean Redmond
Vertizan
CEO
Phil Smith
Cisco UK & Ireland
Chairman
Brian Holliday
Digital Factory
UK Managing Director
Sir Charlie Mayfield
John Lewis
Partnership
Chairman
Grace Gould
Local Global
Entrepreneur in
Residence
David Stokes
IBM
COO, Europe
Oliver Benzecry
Accenture
CEO, UK & Ireland
Prof. Andy Neely
Cambridge University
Pro-Vice-Chancellor
for Enterprise and
Business Relations
Marcus Burton
Yamazaki Mazak UK
Director
Carolyn Fairburn
CBI
Director General
Graham Malley
Accenture
IDR Project Manager
Prof. Nick Wright
Pro-Vice Chancellor
Newcastle University
Mark Elborne
GE
President & CEO
UK & Ireland
Roger Connor
GSK
President Global
Manufacturing
and Supply
Dr Ralf Speth
Chief Executive
Officer Jaguar
Land Rover
Adrian Gregory
Atos
CEO, UK & Ireland
Hayaatun Sillem
Deputy CEO &
Director of Strategy
at Royal Academy of
Engineering
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ABB ROBOTICS
ABPI
ACCENTURE
ACCESS PARTNERSHIP
ADA: NATIONAL COLLEGE FOR DIGITAL SKILLS
ADS
ADDED SCIENTIFIC
AFRC
AMAZON
AMRC
AMUK
ANUP
APPLIED TECH SYSTEMS
ARCINOVA
ASDA
ASTRA ZENECA
AIRBUS
ARM
ATI
ATKINS
ATOS
AUTODESK
AVIVS
BABCOCK
BAE SYSTEMS
BAKKOVAR PLC
BARCLAYS
BBC
BOSCH
BEIS
BERRY GARDENS
BOC
B&R AUTOMATION
BCS
BENTLEY MOTORS
BP
BRE GROUP
BROMPTON BICYCLE
BSMIMPACT
BSI
BT
BURNLEY COUNCIL
CAMBRIDGE UNIVERSITY
CAPGEMINI UK
CARILLION
CARRS
CENSIS
CASTING PLC
CFMS SERVICES
CGI
CBI
CHESHIRE AND WARRINGTON GROWTH HUB
CIBSE
CISCO
COLLISON AND ASSOCIATES
CIM LOGIC
CLOUDNC
COSTAIN GROUP PLC
COVENTRY UNIVERSITY
CPI
CRANFIELD UNIVERSITY, CORROTHAN
INTERNATIONAL CROWN
DELL
DEFRA
DCV TECHNOLOGIES
DFE
DIGITAL CATAPULT
DIAGEO
DIRECT LINE GROUP
DONG ENERGY
DXC TECHNOLOGIES
DWP
EAMA
EDINBURGH CENTRE FOR ROBOTICS
EEF
ELECTECH COUNCIL
ENRICH
ENGINEERING COUNCIL
ENGINEERING EDUCATION WALES/STEM CYMRU
ENGINEERING UK
ERNST & YOUNG
EVRI INSIGHT
FORECAM
FRA
FSA
FDF UK
FESTO
FUTURELEARN
FUJITSU
GAMBICA
GE AVIATION
GKN
GLAXO SMITHKLINE
GREATER LINCOLNSHIRE
GREEN-ALLIANCE
GOOGLE
GSK
HACKNEY COMMUNITY COLLEGE
HERIOT-WATT UNIVERSITY
HEWLETT PACKARD
HENNIK GROUP
HOME OFFICE
HOSOKAWA
HOWDEN HPE
HP
HSBC
IBM
IET
IFS
IG GROUP PLC
IMI PRECISION
IMS LTD
IMS EVOLVE
INNOVATE UK
INTEL
INVMA
IQE
IQEP
ISHIDA
JDR CABLES
JJ CHURCHILL
JLR
JOHN LEWIS PARTNERSHIP
JP MORGAN
KEB UK
KPMG
KYN
LANCASTER UNIVERSITY
LANG O'ROUKE
LEONARDO
LIVERPOOL CITY REGION\LEP PARTNERSHIP
LOCAL GLOBE
LINCOLN UNIVERSITY
LLOYDS BANK
MANUFACTURE AI
MANCHESTER GROWTH HUB
MARCHANT CAIN DESIGN LTD
MAZAK
MCCANN ENTERPRISE
MEGGITT
METROPOLITAN POLICE
MERCKS
MICROSOFT
MIDDLESEX UNIVERSITY
MOTT MACDONALD
MTA
MTC
MTL INSTRUMENTS
MULLEN LOWE GROUP
NATIONAL GRID
NETWORK RAIL
NEWCASTLE UNIVERSITY
NISSAN
NOTTINGHAM UNIVERSITY
NORTH EAST AUTOMOTIVE ALLIANCE
NPL
NVIDIA
OCF
OAL GROUP
OPENREACH
OPTIMITY
ORACLE
ORE CATAPULT
PFIZER
PINUSI LTD
PIRAMALS
PIRUSI
POWER PANELS
PRAGMATIC PRINTING
PREMIUM CREDIT LTD
PSE
PTC
PWC
QUICKSILVA
RA ENG
RAS COUNCIL
RAYNORS
RELIANCE
RENISHAW
RESONATE GROUP
ROBINSON BROTHERS
ROCKWELL AUTOMATION
ROLLS ROYCE
ROBERT BOSCH
ROYAL ACADEMY OF ENGINEERING
SAP
SAFRAN
SEMTA
SFIA FOUNDATION
SHOP DIRECT
SIEMENS
SMMT
SONY
SSE ENERGY
STARTUPBOOTCAMP IOT
SUMMIT ENGINEERING
SYCORA RESEARCH
TATA CONSULTANCY
TECHCITY
TECH UK
TECH PARTNERSHIP
TELEFONICA
THALES
TESCO PLC
THE ITP
THE MANUFACTURER
TOYOTA
TRANSPORT FOR LONDON
TRAVIS PERKINS
TRIDIUM EUROPE
TUI GROUP
TWI TWO SISTERS PLC
TWI
UNIVERSITY COLLEGE LONDON
UCLH
UNILEVER
UNIVERSITY OF LIVERPOOL
UNIVERSITY OF SHEFFIELD
VMWARE
VERSON
WALES QUALITY CENTRE
WMG
WINSAFEL LTD
WIPRO
WORK FOUNDATION
WOOGIE
XEREDIA UK
XPERTRULE
XPERTRUME
VERTIZAN
The MSR would like to acknowledge and extend its sincere gratitude to a broad community of contributors across Industry,
technology start-ups, academics and experts, some of whom are mentioned below.
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