Living in a 4.0 world
The impact of emergent technologies for the public sector
- Dr Stephanie Fahey, Chief Executive Officer of Austrade
- CPA Congress 2017, Canberra, 25 October 2017
- Talking Points - Not checked against delivery
If Australians can harness our creativity and ingenuity in this fourth
industrial revolution, the payoffs for the nation will be impressive.
Industry boundaries are already blurring as we undergo rapid and
transformational technological change.
The global GDP impact of Industry 4.0 through 2025 has been put at more
than $10 trillion.
If this wasn’t change of an almost unimaginable scale, we wouldn’t be
calling it an industrial revolution.
Innovation in isolation is not enough, though. It’s vital that Australian
business, industry and government
recognise the value of our scientists, researchers and
who are leading disruption of traditional business models with their work.
We need to invest in those strengths, now more
Austrade has a significant role to play in this new future.
First, in identifying new possibilities and niches in the global economy
for Australian suppliers of world-class products and services;
Second, in creating genuine partnership between innovators and investors,
business and industry;
And third, in helping those innovators scale up and access global markets.
This is something Austrade is already doing with its five "Landing Pads" in
global innovation hubs – San Francisco, Shanghai, Singapore, Tel Aviv and
Australian businesses that are innovation-active are 40 per cent more
likely to increase income and profitability; twice as likely to export, and
five times more likely to increase the number of export markets targeted;
two-to-three times more likely to report increased productivity, employment
and training; three times more likely to increase investment in IT; and
almost five times more likely to increase the range of goods and services
offered, and make social contributions such as donations.
WHY AI AND WHY NOW?
AI is expected to underpin the next wave of digital disruption globally.
A bibliometric analysis of global research found that the production of
artificial-intelligence related articles grew dramatically between 1990 and
2014: from around 200 a year to over 1,000 a year.
It will offer new opportunities for automation and insight, solve
real-world challenges and generate significant economic and social benefits
for early adopters.
Recognising this potential, corporations and governments globally are
rapidly scaling up their investment into AI, including in key capability
areas such as machine learning and natural language processing, computer
vision, robotics and automation technologies.
McKinsey estimates that in 2016 alone, global corporate investment into AI
hit US$39 billion (up from US$25 billion in 2015), with tech giants such as
Baidu, Google and Amazon contributing around $30billion of that total.
In October 2017, Chinese retail giant Alibaba announced plans to invest
US$15 billion in AI-focused R&D labs across China, the US and Israel,
to ensure its place as a global leader in the field.
Similarly, global Governments are actively stepping up their AI investment
focus, with recent examples including:
- UK Government’s Industrial Strategy committing $2 billion pounds p.a. by
2020 into future-focused R&D, particularly in AI and robotics;
- China setting a target to grow its AI industry to US$150 billion by 2030,
and to match world AI research capability by 2022
- Singapore’s National Research Foundation announcing a S$110M commitment
over 5 years into industry-focused AI and data science initiatives,
including establishing. AI SG, a collaboration between six leading
Government agencies on AI initiatives.
Australia has globally recognised, established research strengths in a
number of the underpinning AI technology streams, in particular machine
learning and robotics.
We have the opportunity to recognise global returns from being an early AI
mover and technology adopter.
AlphaBeta estimated in its recent report, "The Automation Advantage", that
Australia has a $2.1 trillion market opportunity if we use AI and related
technologies to transition our industry base and accelerate automation.
One thing the report notes is lagging, however, is corporate investment in
AI – in Australia, 50 per cent fewer firms than other leading countries in
the report are actively investing in AI.
Another recent report, by McKinsey, said the key sectors most likely to
benefit from AI and as early adopters include: manufacturing, financial
services, resources and health-related companies and service providers, all
significant economic and employment industries for Australia, and all of
them already major priorities for Austrade in the work we do globally.
Using the health sector as an example, McKinsey identified $300 billion in
potential savings in the US alone from the use of machine learning in
population health forecasting, a further 30-50 per cent improvement in
nurse productivity through access to AI support tools. Globally it
identified potential for $2-10 trillion in efficiency savings through use
of AI in drug tailoring and discovery activities.
Nike is one global company that is already grappling with these issues. As
a business that has traditionally relied on low-cost foreign labour to
develop a product that relied on intricate handiwork.
Traditional production can require as many as 200 different pieces across
10 sizes. But Nike’s embrace of AI to develop laser cutting and auto-gluing
could have a big positive impact on its profit margins.
Analysts at Citibank estimate that the new technology could decrease the
cost of labour for one of its top-selling lines by 50 per cent. Materials
costs would fall 20 per cent. That’s a 12.5 percentage point increase in
So given the obvious incentives to automate many of the jobs of today, what
new jobs will be created in the future?
The AlphaBeta report notes that more jobs are being created in a range of
service industries that rely on specialised but uniquely human skills such
as thinking creatively and being able to understand, acknowledge and
respond to other people’s emotions.
Education providers must train workers of the future in new skills, and in
new ways; new industries will sprout. Those who will succeed in this
climate are those who can adapt and adjust quickly, spot niches,
imagination new ways of doing business.
Australia has done incredibly well to achieve 26 years of consecutive
economic growth – AI, big data and blockchain are all building blocks for
ensuring we continue that winning streak.
Blockchain has the potential to reframe existing industries, such as
financial services and personalised healthcare. This year the world
economic forum predicts 80 per cent of banks will initiate distributed
Blockchain is a type of online distributed ledger technology which
processes and records Bitcoin transactions.
By using blockchains, individuals and organisations can transact or form
agreements with known entities or complete strangers without going through
an intermediary such as a bank to confirm their identity.
Blockchains can also be used for contract, clearing and record keeping.
Blockchain connects different parties over the internet to provide a secure
and trustworthy record of their transactions ensuring data integrity
(accuracy and consistency of data stored on a network), without giving
control to a third party. This is a big deal.
Since they remove the need for a third party, blockchains can reduce the
number of stakeholders involved in a transaction therefore reducing cost
and saving time.
Blockchains can enable better information sharing, better business
processes, giving stakeholders more confidence and reducing cost and risk.
How can government and the public service use AI, blockchain and big
There is enormous scope for Australia's public sector to harness new
technology on behalf of the public.
For government, Blockchain can be potentially used as a
common reference point to bring together different levels of government
data (local, state and federal) to host government registries of open data.
We are also developing expertise in regulation of blockchain and the
implications for regulatory authorities worldwide.
Australia currently acts as secretariat for the International Standards
Organisation – Blockchain Standardisation process, which gives us access to
the key players around the world.
We also have a regulatory system which is supportive of exploring the
potential and thinking about how we can use it – Australia has already been
successful in sharing its regulatory expertise in other areas for
commercial gain, and we can achieve that in this arena.
IBM conducted a worldwide analytics study of 1,226 respondents, and found 95
per cent to believe that big data and analytics are now necessary to stay
on par with competitors or required to outpace them (IBM 2015).
A study of 179 large public companies revealed that firms which adopt data
driven decision-making have output and productivity that is 5-6 per cent
higher than what would be expected given their other investments and
information technology usage (Brynjolfsson et al. 2011).
A survey of financial, health and other sector fortune 1000 companies
revealed that 26.8 per cnet would invest more than $50 million into big
data during 2017, up from 5.4 per cent of firms in 2014 (NVP 2016).
Since 2013, the Australian Government has published over 7,000 additional
data sets on the data.gov.au website - a 15-fold increase (DIIS 2016a).
83 per cent of Australians (16 years and over) accessed government services
or information online in the last 12 months (DIIS 2016a).