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150 years (or so) ago, everything was done by hand
2
Now it’s done by finger (tap)
3
Yet…. slow growth is painful for everyone
4
Source: World Bank, New York Times
The Innovation Paradox
Michael Holman
VP Intelligence
June 1, 2017
Agenda
Challenges to growth
Innovations to fight back
Strategies to succeed
6
Agenda
Challenges to growth
Innovations to fight back
Strategies to succeed
7
Productivity growth has slowed
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2014
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U.S. total factor productivity growth, previous 10 years
Source: The Rise and Fall of American Growth, Robert Gordon
And it isn’t just a U.S. phenomenon
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What to make of this?
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“There has been a burst of innovations recently… that we will see come to fruition in the next five to 15 years…”
- Erik Brynjolfsson, MIT Sloan
“The economic revolution of 1870 to 1970 was unique… so many of its achievements could happen only once”
- Robert Gordon, Northwestern
Demographics are poised to make things worse…
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Europe
Corporate innovation strategy is missing the boat
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Slowing productivity
growth
+
Demographicheadwinds
?=
Lower growthopportunity
This is an innovation challenge – is your firm set up to meet it?
155 clients
Of 15firms
just
discuss productivity in corporate goals
5firms
and only
have productivity in innovation goals
Agenda
Challenges to growth
Innovations to fight back
Strategies to succeed
13
Where to focus for opportunities ?
14
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%
TF
P G
row
th, 2
00
4-2
014
Output growth, 2004-2014*Bubble sizes indicate 2014 output
Productivity and output growth of select U.S. industries
Source: U.S. Bureau of Labor Statistics
Where to focus for opportunities ?
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-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%
TF
P G
row
th, 2
00
4-2
014
Output growth, 2004-2014*Bubble sizes indicate 2014 output
Building and Construction
Source: U.S. Bureau of Labor Statistics
Productivity and output growth of select U.S. industries
Building and construction: From mass production…
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… to building information modeling and advanced construction technologies…
17Source: Lux Research, “The Industrial and Digital Revolution in Building and Construction”
… to robots and, believe it or not, 3D printing
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~$10,000 – Levittown prices!(actually Levittown house ~$80k in 2017 dollars)
Where to focus for opportunities ?
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-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%
TF
P G
row
th, 2
00
4-2
014
Output growth, 2004-2014*Bubble sizes indicate 2014 output
Fabricated metal products
Chemical products
Food, Beverage and Tobacco
Petroleum and coal products
Source: U.S. Bureau of Labor Statistics
Productivity and output growth of select U.S. industries
Manufacturing: From electrification…
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First industrial electric motors
Sources: Electrical Power in American Manufacturing, Richard Duboff; “From Shafts to Wires: Historical Perspective on Electrification,” The Journal of Economic History 43 (2), 1982, p. 347
…to sensing and connectivity…
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…to ease of integration
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Where to focus for opportunities ?
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-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%
TF
P G
row
th, 2
00
4-2
014
Output growth, 2004-2014*Bubble sizes indicate 2014 output
Ambulatory Health Care Services
Hospitals and Nursing and Residential Care Facilities
Source: U.S. Bureau of Labor Statistics
Productivity and output growth of select U.S. industries
Health: From saving us from bad water…
24Source: Gordon; Encyclopedia of Chicago; Chlorination of Water, Joseph Race 1918
…to saving us from bad food…
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Source: OECD ObesityUpdate 2017
0%
5%
10%
15%
20%
25%
30%
35%
40%
1985 1995 2005 2015
France
Italy
Spain
England
USA
Switzerland
Prevalence of obesity
Ad
ult
ob
esit
y ra
te
…to giving us better food
26
Agenda
Challenges to growth
Innovations to fight back
Strategies to succeed
27
Why do we need a new approach?
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The future is already here – it’s just not evenly distributed yet
Leading firms are seeing productivity growth, but most others are flatlining
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Source: Andrew G Haldane, Chief Economist, Bank of England
Business model innovation can help the leaders bring laggards along
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Revenue Model
Supply Technology
Organizational Design
Application Technology
Markets
Product Product Requirements
Value chain
supplier buyers
product
moneySU
PLLIER
BUYER
SSU
PLLIER
BUYER
S
TASKORG
TASKORG
Source: Lux Research, “Business Model Innovation: Industry’s Latest Fad or a Useful Approach to Strategy?”
Bringing manufacturing analytics to the masses
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0%
20%
40%
60%
80%
100%
Manufacturing Energy Heavy Industry
Manufacturing lacks in adopting predictive maintenance (PdM)
Use PdM Don't use PdM 0% 10% 20% 30% 40% 50% 60%
Cost to implement
Effort to implement
Culture
Lack of knowledge
Lack of proof of value
Lack of mgmt support
Non-adopters lack know-how
Source: Lux Research, Predictive Maintenance: The Art of Uptime
“the idea was to take the expensive approaches (which often cost more than $10 million …) and make them more affordable”
Enabling adoption of distributed generation assets
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2kj
Targeting the developing world
33
Conclusions
Declining productivity growth is a key megatrend affecting growth – companies need to have an innovation strategy to respond
Technologies emerging today can help address this trend – and generate strong new business opportunities
Widespread adoption of these advances will require business model innovationas well
34
Lux Research Inc. 100 Franklin Street, 8th Floor Boston, MA 02110 USA Phone: +1 617 502 5300 Fax: +1 617 502 5301 www.luxresearchinc.com
Thank you
Michael HolmanVP [email protected]+1 646 723 0161