Opening speech at High Level Conference on "Digital Transformation of the European Industries", Brussels 16 February 2016

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The challenges and opportunities of digital transformation

Ladies and Gentlemen,

I welcome all of you to today’s conference on the digital transformation of European industries. I am glad that after the cancellation of the event in December we can gather and share views on this priority topic. The fact that all of us are here clearly shows the importance of digital transformation. It was also the main theme of the World Economic Forum summit last month. When Davos gets interested in an issue, you know that it is centre stage.

And the issue is so important for a very simple reason. Because if we get it right, there could be massive gains for all of us. The opportunities that come with digital technologies are relevant for all of us. Because it is not primarily about creating a stronger ICT sector.

This is one part of the coin.

The real added value comes when we unlock the opportunities for all industry segments – goods and services, small and big companies, more traditional and highly innovative companies. We need to start now in order to be ready for the changes in the decades to come. Gains in terms of growth. Gains in terms of improving people's lives.

That is why Europe needs to be at the forefront of innovation and modernisation today. That will not be easy.

I see three main challenges.

First, all the power of the fourth industrial revolution lies in innovation and collaborative business models.

To be competitive, industry needs more innovation. And it needs to embrace new collaborative business models. Both these elements are empowered by digital technologies.

Second, the fourth industrial revolution is founded on the convergence between traditional industries and the digital sector.

This is happening as we speak. We are seeing a rapid integration of smart products with intelligent, personalised services, placing the consumer at the centre. Digital technologies are combining with other technologies, such as advanced materials, nanotechnologies, or biotechnologies. But we need to stay ahead of the curve.

Third, we need to use scarce resources more responsibly.

Digital transformation is helping us. We are moving to a more Circular Economy. This profoundly affects all industries, from transport and automotive to the way health care is delivered. But it will be an increasing challenge. If industry is to respond to these challenges, it needs to be fast and it needs to be ready to invest.

These, ladies and gentlemen, are the rules of the game.

We have to ask ourselves:

  • Are European industries fast enough in embracing the fourth industrial revolution?
  • Are they investing enough?

We are making progress. Many European firms are seizing the opportunities. But too many European businesses - in particular the small ones - are slow to embrace change.

Only two in one hundred EU companies make smart use of advanced digital technologies and reap the new business opportunities.

Almost half of European manufacturing companies have not used any advanced manufacturing technologies in the past and do not plan to use them in the next year.

This is the result of insufficient investments. Over the last 10 years, investments in Europe in digital technologies have been a third of what companies invested in the US. To close this gap with the US, the EU would have to invest about 335 billion Euros. Investments in modern disruptive business models, advanced technologies and platforms are not at the level that they need to be.

So our competitiveness and productive capacity are falling. We need to reverse this trend.

How?

Working together to address great challenges and seize opportunities

The simple answer is that we will succeed by being collaborative ourselves. Each of us must play our part and work together. In this European Commission, we will play our role. And since we came into office, we have been doing so.

We have put industrial competitiveness at the core of all major initiatives of this Commission:

  • The Digital Single Market strategy.
  • The Energy Union package.
  • The Circular economy.
  • The Capital Markets Union.
  • The European Fund for Strategic Investments.

But most of all, for European companies to transform quickly and to scale-up, we need a fully integrated European market. The lack of a truly Single Market prevents resources from being efficiently allocated and quickly reallocated. It holds back investment and innovation. And reduces productivity.

So this is why the Single Market Strategy that we adopted a few months ago is so important. A well-functioning Single Market removes barriers and attracts investments. It crucially increases the speed at which the EU economy reacts and adapts to developments in the global environment. So we have moved to strengthen our intellectual property rights regime.

We are making it easier for Europe's start-ups and SMEs. And we are providing clarity on the collaborative economy.

But the European Commission alone cannot speed-up this revolution. We cannot establish modern ecosystems across Europe from Brussels. But we can help to put together collective efforts from across Europe. We are all partners in this race.

Member States are already developing policies to speed-up the modernisation of their industries. They cover a broad spectrum of policies. Regions and cities have a crucial role to play here and are increasingly deploying vibrant innovation ecosystems.

These efforts should be intensified. That means working in partnership with businesses. Ultimately only businesses can make the move to digital. Only businesses can create the jobs that Europe needs.

As for the European Commission, I see our role as a catalyst to make this happen. For example by facilitating the sometimes difficult dialogue between the ICT and manufacturing sectors. And we will drive forward our agenda on innovation in close association with the current Dutch Presidency.

A roadmap

Ladies and gentlemen, that is how we can succeed. But let me now talk about what we need to do to succeed.

I see four areas that we need to address together.

First, we need to put in place pan-European scale and effective coordination.

Europe's industrial future needs to be designed cross-border. And it needs to be effectively implemented by smart regions and cities. I have had many discussions with business leaders, social partners, politicians to identify the key issues that we still need to address. I would like to outline the main conclusions: Europe needs to unleash the full potential of the data-driven economy. In Europe the use of digital platforms is large and growing.

But we see the emergence of many isolated, incompatible platforms and data sets that strive to reach a viable scale. Europe needs the right framework to boost significant industry investments, pool demand and promote an innovation culture.

We need to ensure that any industry, wherever it is, knows the opportunities that are available and can seize them. We need to provide easy access to expertise, development and testing facilities, as well as finance, support and training. We have to reflect how to provide clear rules on the rights of data generated by business. This will increase people and businesses’ trust to embrace the digital revolution.

We should also explore how to build an intellectual property framework for standard essential patents. How to make them more predictable, interoperable and accessible. And of-course a major issue is how to strike the right balance between ensuring trust and encouraging more innovation.

Second, Europe needs to strengthen regional ecosystems and cooperation.

This will foster industrial modernisation, innovation and stimulate mega investments. We already have several tools to do this:

  • the European Structural and Investment Funds for the regions,
  • the Research and Innovation Programme Horizon 2020,
  • the financial instruments of COSME, and
  • the Investment Plan for Europe.

The financial support that is available for investment in innovation is without precedent. But finance is not enough. So we need to reflect on what else we can do.

Third, we need also to improve the regulatory environment and make it fit for the digital age. And fast.

This is why I very much like the approach of "innovation deals" introduced by Commissioner Moedas. Innovation deals will help in identifying EU regulatory or administrative barriers to innovation that are preventing industry from investing or developing innovative products in new areas. I think that all of us should look at the first results of this exercise and learn from it.

In my view there is room for further improving the regulatory environment for innovation.

Fourth, and finally, Europe needs the skills and talents to lead disruptive innovation and the fourth industrial revolution.

On one side, industry feels that workers with high-level skills are scarce. At the same time, new technologies and automation allow replacing human labour in a pace not seen before. This means major transformations in the way work is organised and in employment relationships.

To be prepared for these future changes we need to understand better how to match supply and demand. We should focus on future skills needs of industry, including the better and faster embracing of disruptive innovation.

Conclusion: we need to deliver

Ladies and gentlemen,

The forces of renewal are already at work. I am convinced that the European industry has great potential to grow now and in the decades to come. Europe should lead the world in these areas. But we will only realise that potential if we work together to deliver. We don't just need Big Data: we need Big Delivery. There is no point in having roadmaps if you don't all get in the car and start the engine.

It means all of us working together to find pragmatic solutions and decent compromises. Working together to craft intelligent rules. Working together to use funds as effectively as possible. Working together on platforms, data, hubs and the like. To foster a creative, high-performing and globally competitive European industry. To underpin sustainable economic recovery, growth, jobs and prosperity for European citizens. To create the conditions in which our businesses can adapt and grow.

In the Commission, we will play our role. This is why with Commissioner Oettinger I am working on how best to help our industry to seize the opportunities of this digital revolution. We will share the results of our reflections on it in April. But you need to play your role too.

I look forward to hearing from you today what are the most important challenges and how the Commission can help speed-up the process. But I also want to hear what you are going to do to respond.

We must do this together.

We must deliver.

Thank you.

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