Technology is all around us, and sometimes in us. We experience it daily in the way we stream music, in how we use an app to navigate a museum or a shopping centre, or to check our calorie burning and heart rate. This technology is changing our lifestyle and consumption. There is, of course, a lot more technology around us that we don’t see or touch at source. A wave of technological innovation has started to fundamentally alter how we make stuff. And it signals an era of huge change.
In the 1920s, Russian economist Nikolai Kondratiev linked waves of technological change occurring every 50 years or so with cycles in global GDP growth. He suggested that radical inventions could profoundly revolutionise the techno-economic nature of economies. Indeed, the subsequent spawning of countless minor and incremental innovations could penetrate every aspect of the economy.
The idea of Kondratiev waves is that as old technologies exhaust their potential for new ideas to boost the economy, they slow down until a critical mass of new technologies comes to fruition all at once. That then kicks off a new technological wave that is able to trigger a spate of new applications in new processes, new products and new services.
You can see this in the cellphone-to-smartphone shift. This was made possible by digital technology which created a common platform across a number of functions: communications and internet, imaging, video, GPS, the digital camera and of course apps. This is radical innovation and from it, subsequent hardware and software variants have added marginal value.
And so, each wave fundamentally changes which resources are used and how they are used, as well as reshaping the organisation of production. New sectors are created while others become obsolete. This dynamism resets the economy and sparks growth again.
There is some consensus that four industrial revolutions can be associated with new technological waves. Innovations related to steam power, cotton, steel, and railways helped to give us the first industrial revolution of mass production and mechanisation. The second was triggered by the introduction of electricity, heavy and mechanical engineering and synthetic chemistry. The third was triggered by innovations in electronics and computers, petrochemicals and aerospace.
And what about the fourth? Right now, a host of new technologies are driving a wave of innovation that takes us into a new age.
Think of the internet, nanotechnology, bioscience, electronics, photonics, advanced materials and renewable energies. Changes to our own techno-economic system started in the mid-1980s, but we had to wait the turn of the century to witness their impact on our production methods.
Smart manufacturing may enable the upgrading and anchoring of manufacturing activities even in advanced and high-cost economies such as the European Union.
We can identify some key characteristics. First, we see new technologies initiating new sectors or upgrading old ones. Core to this is the symbiosis between traditional manufacturing and services, through processes of “servitisation”. Take Rolls-Royce, which of course produces engines, but also sells them within a “power-by-the-hour” maintenance package that restructures its offering as a service that delivers the ability to fly planes rather than simply selling a one-off product.
Co-creating and producing
There are also untapped market niches for personalised and customised products. These need to be produced in small batches or even as unique pieces. Such niche markets require customers to co-innovate or even co-produce with the manufacturer. Digital communications enable manufacturers to manage small scale businesses that have design and produce locally while connecting with global customers.
Local Motors is a small US manufacturer focused on low-volume, open-source designs which are assembled in microfactories. Products have included cars and motorbikes as well as electric bicycles, children’s ride-in toy cars, and remote-controlled toy cars and skateboards. It 3D prints some of the components used in making its products. Its Rally Fighters cars have involved “co-creation”, where the product is designed cooperatively with the customer.
3D printing enables innovators and inventors to become manufacturers and to connect directly with markets both locally and globally. One company, Shapeways, was spun out of the Dutch electronics giant Phillips in 2007. Now based in New York it offers a 3D printing marketplace and service. You can design and upload 3D printable files, which are then made for you or a client from materials including acrylics, stainless steel, food-safe ceramics, and silver. Alternatively consumers and designers can work together in “co-creator platforms” to design unique things which Shapeways prints.
Products like this tend to have a high content of technology, innovation, customised design and servicing. Moreover, their consumers tend not to be as price sensitive, so technology, knowledge and innovation are the key elements which shape the competitiveness contest.
Another prediction for smart manufacturing is that it will redesign product supply chains by integrating the local and the global more strategically. Some hands-on innovators in the so-called “makers movement” are making the most of a trend towards linking innovating and making. They choose suppliers nearer to home, but connect with demand both close and far from home.
It promises a more efficient form of production, which we can also see in the increased use of more sustainable processes, where resources are re-manufactured and components re-used, or where bio, waste or natural products are used as feedstocks. There are echoes here of the circular economy, where waste is fed back into the production process, where alternative energy changes business models, or food production and consumption is “relocalised”. And it is this kind of efficiency at the heart of smart manufacturing that presents a real opportunity for advanced economies to pursue more distributed and sustainable socio-economic growth.
This has been co-published with the World Economic Forum. Read more here.