KEY ISSUES FOR DIGITAL TRANSFORMATION IN THE G20

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Open, voluntary standards, grounded in bottom-up and market-led approaches, are an important tool especially when dealing with fast developing technologies and shifts in markets. Such standards and related guidelines are needed to maintain current levels of safety, ensure trust based on enhanced levels of digital security and privacy, improve energy and resource efficiency, and address emerging social and organisational challenges brought on by the digital transformation. The development of standards and standards-based interoperability is critical for the development of Industrie 4.0 and the IoT, including smart cities and smart mobility. The key to success lies in inclusive standards development, built on collaboration and co-operation among the many players that make up the standards ecosystem. <strong>G20</strong> leaders could support the adoption of best practices and policies that enable groups/actors, including SMEs, to more effectively work together within the variety of processes used to develop standards. Advanced governance frameworks building upon both existing public- and private-sector-led processes and new multi-stakeholder initiatives for the benefit of all, as well as improved or new policy and implementation tools, are necessary to effectively address the complexity of today’s interlinked issues in successful Industrie 4.0 development and deployment. The <strong>G20</strong> could play a role in creating an architectural framework for Industrie 4.0. Standards impact many different policy areas and help foster increased innovation and productivity; promote competition in open markets; enable international trade; and reinforce trust among stakeholders. Standards are particularly critical in highly technical areas, including those that make up Industrie 4.0 and the IoT. In the case of sophisticated manufacturing and the IoT, machines need to be able to communicate with each other seamlessly, and with respect to the IoT, applications span a wide range of policy domains, including health, education, agriculture, transportation, manufacturing, electric grids, among many others. It is anticipated that the IoT will usher in a revolutionary, fully interconnected “smart” world, with integrated relationships among objects, people, and their environments. This complexity will be compounded by multiple factors: the fact that no single company possesses enough expertise to address the entirety of the IoT picture in a timely and economically viable fashion; the emergence and adoption of new technologies and disruptive business models; and, the addition of billions of people coming online as a result of both world population growth and digital development across geographic regions and industry domains. Although consumer and integrated commercial-consumer IoT systems and devices, such as self-driving cars and connected thermostats, receive the most prominent coverage in the popular press, the largest impact of the IoT may well be in business applications for the commercial/industrial IoT. Cyber-physical systems machines that sense their environment; collect, analyse and act on data; and collaborate with each other and with humans stand to transform industrial sectors as varied as manufacturing (e.g. Industrie 4.0), energy, and agriculture, which together account for nearly two-thirds of global gross domestic product (WEF, 2015b). McKinsey Global Institute (2015) estimates that approximately 70% of the USD 4 trillion to USD 11 trillion total value derived from the IoT will be captured by business-to-business applications.
The development of standards and standards-based interoperability is no less than a linchpin to Industrie 4.0 proliferation. While some companies perceive competitive advantages and economic incentives in building proprietary systems for the IoT, overall economic opportunities would be constrained in a marketplace of disparate silos. In a World Economic Forum study, 47% of respondents indicated that establishing and promoting common standards is an important action that governments can take to accelerate the adoption of the Industrial Internet (WEF, 2015b). Ultimately, Industrie 4.0 will demand no less than a neutral, standardsbased reference architecture, if the production industry is to successfully create value-added networks. Moreover, appropriate standards and guidelines are also needed to maintain current levels of safety, ensure trust based on enhanced levels of digital security and privacy, improve energy and resource efficiency, and address emerging social and organisational challenges brought on by digitalisation. As economies move towards an IoT-enabled future, reinforced by standards-driven interoperability and by societal acceptance, the various actors involved need to think and act strategically and in a co-ordinated and collaborative fashion so that the maximum advantages and benefits of Industrie 4.0 can be realised. It is likely that unco-ordinated and non-collaborative standards-setting actions be it by public or private actors would inhibit interoperability and slow down the adoption of better security and privacy practices, with potential negative effects on human rights and ethics. If these concerns are not addressed in a way to garner user confidence, IoT deployment and advances in sophisticated manufacturing could be significantly hindered. While a co-ordinated approach is the best way in which to develop fully interoperable standards, it is not always possible (or necessary) to do so. This is in part because buyers may be cautious in purchasing (and using) products and services that are connected to the IoT ecosystem if the IoT integration mechanisms are inflexible and they will in turn become “locked in” to the ecosystem, among other issues (Internet Society, 2015a). There are also additional concerns with respect to poorly designed and configured IoT devices and the disruptive impact they could have on the broader Internet and the digital economy (Internet Society, 2015a). Using standards that are generic, open, and widely available as technical building blocks for IoT devices and services would benefit economic opportunities and innovation. While such standards are not policy objectives unto themselves, they become a priority as a means to transition technology to, and develop, markets and there is an increasing interplay between standards and policy. Depending on the particular governance model, standards can provide support to many kinds of policy actions, including innovation and productivity, trade and competition policy, investment policy, technical regulation, consumer protection, security, safety, and environmental protection. In such ways, standards can serve as powerful instruments of governance, because of the effects their use can have on regulations, goods, services, and quality of life. These effects are evident whether standards are employed by the private sector or by the public sector. In the private sector, standards create market incentives for actors to follow internationally accepted practices by applying competitive pressure (while allowing fair competition) and also encourage innovation and growth by fostering technological development when based on broadly available and open technology platforms. In the public sector, standards can enable greater transparency and competition in public procurement and provide essential guidance for industry via their referencing into regulations and laws. In either context, standards can considerably improve efficiency and cost-effectiveness and support consumer protection (in areas such as security, privacy, safety, competitiveness, etc.) as well as reduce transaction costs (Hufbauer, Kotschwar and Wilson, 2001).
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KEY ISSUES FOR DIGITAL TRANSFORMATI
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Key Issues for Digital Transformati
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Figures Figure 1. Fixed broadband s
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As the cost of data collection, sto
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Open, voluntary standards, grounded
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Digitalisation is changing the worl
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It is useful to start with a brief
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In the past, there has also been un
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Having established a positive relat
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However, despite the rapid spread o
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Page 89 and 90: end user (European Commission, 2016
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Frontier firms Laggards Frontier fi
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Despite the steady increase busines
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YouTube to watch media content; Ube
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Platforms are often criticised for
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The potential and pitfalls of digit
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Cross-border commerce has long gene
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Digitalisation is changing the worl
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Digital technologies have a huge re
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One approach is to accept the fact
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and income opportunities. Becoming
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South Korea has opened numerous “
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The ongoing digitalisation of our e
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Developing tools for assessing the
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data across borders, transportation
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BCG (2012), ”The Internet Economy
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Deloitte (2015), “Connected Healt
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Karachalios, K. and K. McCabe (2016
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OECD (2016m), “The Internet of Th
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OECD (2012d), Connected Minds: Tech
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The Economist Intelligence Unit (20
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1. Chapter 2 discusses policies for
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KEY ISSUES FOR DIGITAL TRANSFORMATION IN THE G20

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