Talent driven innovation Advanced technologies and the critical role of talent Ben Dollar Partner, Human Capital Consumer & Industrial Products Leader Deloitte
Advanced technologies and manufacturing competitiveness
The Advanced Technologies Initiative Deloitte and the Council interviewed nearly three dozen CTOs and a dozen U.S. National Laboratories / broader research facilities, in order to identify the most promising technologies currently under development within the U.S. as well as determine perspectives on what challenges are most critical to U.S. manufacturing competitiveness moving forward. 3 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Advanced Industries drive national prosperity The Linkages between Advanced Technology and Innovation, Advanced Industries, and National Prosperity Executives interviewed expressed: Innovation and advanced technologies are critical to company-level competitiveness enables differentiation by creating premium products, processes, and services that capture higher margins. are core components of many companies overall future growth strategy. Advanced industries as defined by Brookings Institution are based on two criteria: R&D spending per worker (80 percentile) and share of workers (21%) working in occupations requiring high STEM knowledge. 4 Deloitte and US Council on Competitiveness Advanced Technology Initiative
And generates more jobs, output and wages. Executives interviewed expressed: Advanced manufacturing strengthens economies and creates higherincome jobs higher-skilled workforce that earns higher wages, create a greater proportion of jobs in the entire value chain, and lead to a higher standard of living for the nation overall. 5 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Advanced technologies will unlock new opportunities and underpin global manufacturing competitiveness US: Predictive Analytics, IoT, & Advanced Materials are considered the most promising China: Prioritizing Predictive Analytics and other similar technologies to close gap with the United States as well as create competitive advantage through HPC Europe: Integrated European priorities are very much aligned with Industry 4.0 creating an integrated and connected closed loop design & build process as key focus 6 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Deep dive technology example Source: IDC, Gartner, Deloitte, Texas Instruments, National Lab websites. 7 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Global R&D trends and assessing America s standing The United States is a global leader Executives interviewed expressed: The United States is a global leader in research, technology, and innovation. America is positioned well to realize the promise of advanced technologies due to: First-rate research talent and infrastructure Top-notch technology firms Strong, dedicated industrial clusters Source: Deloitte analysis based on OECD and UNESCO Institute for Statistics data. 8 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Global R&D trends and assessing America s standing The gap is closing especially with countries like China Executives interviewed expressed: The gap between the US and other nations in terms of R&D competitiveness is narrowing rapidly. They attributed this primarily to the growing competitiveness of emerging nations, though: Aggressively attracting STEM talent Building domestic R&D capabilities Offering attractive R&D incentives to foreign countries Meanwhile slower economic growth, especially in developed countries, has curtailed R&D budgets, contributing to the narrowing of the gap 9 Deloitte and US Council on Competitiveness Advanced Technology Initiative
The US currently leads in many advanced industries Source: Researcher survey conducted by Battelle and R&D Magazine. 10 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Human Capital Trend: Shape culture, drive strategy Culture Senior leaders must work with HR to align culture to business goals Culture helps bind people together and can drive execution and consistency 86% say the trend is very important or important 82% believe culture is a potential competitive advantage 28% believe they understand their culture well today 19% believe they have the right culture 11Global Human Capital Trends 2016 report
Executives interviewed expressed Innovation and economic growth have a compounding and symbiotic effect A strong, innovative, and technology-savvy manufacturing base leads to long-term economic prosperity and growth. This industrial base flourishes when a country provides an integrated support structure, thereby attracting more businesses, which, in turn, creates more demand for highpaying jobs, thereby attracting more toptier talent.
An innovation ecosystem is vital to competitiveness An ecosystem links resources invested in the knowledge economy to increased profits by creating new products, processes, and/or services Executives interviewed expressed: The competitiveness of a nation ultimately depends upon the success of its national innovation ecosystem. 13 Deloitte and US Council on Competitiveness Advanced Technology Initiative
An illustration of the current US innovation ecosystem A byproduct of historical legacies and new market dynamics 14 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Regional ecosystem clusters Regional innovation clusters not only act as magnets for top students, researchers, scientists and VC funds, but also enable fruitful partnerships between research and educational institutions and corporations, that can lead to revolutionary research outcomes in key focus areas. Examples include: Aerospace Technology CA OR WA NV ID UT MT WY CO ND SD NE KS MN IA MO WI IL MI IN KY Automotive NY PA OH MD DC WV VA ME VT NH MA CT RI NJ DE Biotech Pharma? Can the US sustain the necessary elements to continue to replicate and grow our innovation ecosystem clusters to advance our nation s competitiveness as a whole? AZ NM T X OK AR MS LA Oil and Gas TN AL GA NC SC FL Energy 15 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Human Capital Trend: The gig economy Distraction or disruption? say the trend is very important 71% or important The corporate workforce is changing: Increasing use of contingent freelance workers and growing the role of robotics and smart machines One-third of US workers are freelancers and growing The top three challenges cited include 20% Legal or regulatory uncertainty 51% expect to increase contingent workers in next 3-5 years 18% Corporate culture unreceptive to part-time and contingent staff 42% expect to increase the use of robotics and cognitive technologies 18% Lack of understanding among leadership 16
Executives interviewed expressed Regional innovation clusters not only act as magnets for top students, researchers, scientists and VC funds, but also enable fruitful partnerships between research and educational institutions and corporations, that can lead to revolutionary research outcomes in key focus areas. All these factors and variables are correlated with actions taken by both government and corporate firms. Thus, the onus of creating a highly developed innovation ecosystem should be borne by both business and government.
Opportunities and challenges faced by US businesses
Opportunities and challenges faced by US businesses A host of promising global opportunities will help spur growth US multinationals see substantial opportunities to bringing advanced technologies to new markets as a result of: 6X increase in middle class consumption Global urban population grows to 6.3B by 2050 19 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Opportunities: US is positioned in growth markets Asia-Pacific will drive both demand and competition 1403 1766 In next 15 years, a 25% increase In 2015, US to reach 17 million 2015 2030 Source: 2015 Global aerospace and defense industry outlook, Deloitte Source: Deloitte analysis based on data from IHS Automotive. China ($1,831 B), US ($801 B), and Japan ($291 B) are the top three nations Source: Deloitte analysis based on data from IHS. Source: Deloitte analysis based on data from American Chemistry Council. 20 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Challenges: Talent shortage is a major hurdle to the sustainability and growth of US companies Source: 2014 Skills Gap Study, Deloitte and The Manufacturing Institute. 21 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Challenges: Aging populations represent challenges Other advanced nations such as Japan, Germany and South Korea face far more severe demographic challenges than that in the US By 2030, India and the US are well positioned to take advantage of their younger population segments Other nations, like Japan, Germany and South Korea, will have higher proportion of aged population (65+ years) than that in the US 22 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Challenges: Waning interest in STEM fields in US Asian students outperform American students in international assessment, while China and India lead in the number of STEM graduates Executives interviewed expressed US is gradually losing ability to hire and retain STEM talent Government is boosting STEM education, but more is needed Source: Deloitte analysis based on data from OECD, National Bureau of Statistics of China and University Grants Commission, India. 23 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Challenges: Decline in apprenticeship programs Higher demand for skilled workers in advanced manufacturing industries, and decline in apprenticeship programs, are aggravating US skills gap Focus has shifted to acute demand for high-skilled workers Too few skills-based training programs are a cause for concern While other countries, such as Germany, have increased apprenticeship programs and designed programs that better prepare their students to enter the manufacturing workforce Source: US Department of labor, Federal Institute for Vocational Training (Germany) and Federal Statistical Office, Germany. 24 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Challenges: Impact of stringent immigration = US brain drain Current immigration policies make it difficult to recruit and retain top global talent Tremendous pent-up demand for temporary work visas Abnormally long waiting period for green cards International students work visa woes results in brain drain Source: Department of Homeland Security, Wall Street Journal. 25 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Challenges: Unfavorable regulatory environment US companies are concerned about the high costs and complexity of regulatory compliance, and need to be more predictable and competitive NAM estimate federal regulations cost/worker: (2012) All Businesses $9,991 Manufacturing Ave $19,564 Reduce regulatory and tax credit uncertainties (like permanent R&D tax credit) Source: National Association of Manufacturers. Make corporate tax rates more competitive Complex, outdated, and overly burdensome regulatory mechanisms need to be update Stringent immigration policies creating a brain drain in the United states Source: World Economic Forum. 26 Deloitte and US Council on Competitiveness Advanced Technology Initiative
Human Capital Trend: People analytics Gaining speed 77% say the trend is very important or important 32% of companies are ready for people analytics, up 1/3 from last year 40% of companies report replacing core HR systems over next two years People analytics brings together HR and business data Challenge will be to transform insights into business value 51% are now using HR data to predict and improve workforce performance 48% feel they are conducting multi-year workforce planning
Executives interviewed Are confident that the US has the ability to endure and prosper. Recognizing the great economic power of advanced industries is meant to sharpen the sense of urgency, America has already benefitted significantly from the growth of advanced industries. The US requires a long-term strategy that, when aligned with short-term priorities, can foster the innovation ecosystem and further encourage the flow of required investments, growth in innovation capacity, the development of STEM talent, and the creation of highvalue jobs.
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