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Marco Annunziata: Innovation Can Deliver Skills for MENAT Region’s Future

Marco Annunziata Ge
September 29, 2014
One of the most striking results of the GE 2014 Global Innovation Barometer is the extent to which the Middle East, North Africa and Turkey region (MENAT) is ready to embrace innovation.

Two MENAT countries top the rankings of those that think we are experiencing a true technological revolution, and among the eight countries that recorded the most revenue and profit gains from collaborative innovation, four are in the MENAT region. They include countries as different as Algeria and the United Arab Emirates (UAE), Saudi Arabia and Turkey.

This is good news, because the pace of innovation is accelerating, driven by three hugely disruptive forces: the Industrial Internet, advanced manufacturing, and the Global Brain — the Future of Work.  The Future of Work is about speed and collaboration; it accelerates innovation and change; it redefines economies of scale, enabling micro-factories and new artisanal activities; it reshapes supply chains and distribution networks; and it redefines the relationship between employers, who get access to a wider pool of talent, and workers, who gain greater entrepreneurial control over their skills and careers.

The Future of Work provides enormous opportunities for the MENAT region. MENAT countries have great potential, but struggle with formidable challenges and a status quo that is just not good enough.  The creative disruption of the Future of Work is a unique opportunity for the region. It can help oil importers broaden their manufacturing base: the greater flexibility and speed of advanced manufacturing processes, and the ability to tap the Global Brain to complement local talent, will lower barriers to entry and redefine the concept of scale — allowing new producers to break into markets with smaller initial investments. In Turkey, for example, the “Maker Movement” and 3D printing are making rapid inroads. Morocco has already made important progress in automobiles, aeronautics and electronics. Tunisia is making similar advances in electrical and mechanical equipment, electronics and chemicals — high-tech sectors where advanced manufacturing could deliver a further boost of efficiency. Oil exporters can use the same opportunity to diversify their economies, reducing their dependence on oil exports and the consequent vulnerability to oil price fluctuations.

This process should result in the creation of local supply chains and ecosystems. Large established industries within the region — such as oil and gas, aviation and transportation — can act as a magnet, with smaller companies emerging as new and more competitive suppliers. Dense and cohesive supply chains would have a number of advantages: lower transportation costs, lower inventories, the acceleration of innovation through a closer relationship between suppliers and manufacturers and the creation of human capital. Advanced manufacturing, which connects design, manufacturing, supply chains and distribution networks via a digital thread, would be a powerful enabler. For countries still contending with significant instability, a stronger local supply chain would also limit the risk of supply distortions until greater stability is achieved.

Sectors such as oil and gas, aviation, transportation and healthcare will benefit quickly and directly from Future of Work innovations, through greater productivity and efficiency. And as local supply chains become stronger, we will see the rise of robust mechanical components and electronics industries, feeding into the cycle of the larger established industries. This would help MENAT economies shift towards more knowledge-intensive, higher value-added exports.

Algeria is a powerful test case: IDEA (Industrie et Développement de l’Entreprenariat en Algérie) is a path-breaking entrepreneurship and innovation initiative to find suppliers for a new production facility that will produce more than 2 gigawatts (GW) of power generation equipment a year. The initiative, launched by GE and Sonelgaz, will build a domestic supply chain, develop local human capital and create jobs.

Innovation will help countries throughout the region meet one of their toughest challenges: creating good jobs for a young and growing population. There is widespread concern that innovation will lead to higher unemployment and greater income inequality; and GE’s Innovation Barometer shows that this fear is especially pronounced in MENAT — unsurprising, given the burden of high unemployment, particularly among the young. But Future of Work innovations can augment the abilities and productivity of workers at all levels of the skills distribution, via better access to information and collaboration tools. Greater productivity means higher incomes.

These innovations can also give workers new and more flexible ways of participating in the workforce, via crowdsourcing and open-source networks. The Future of Work innovations will strengthen social cohesion.

This new wave of innovation can improve living standards across all segments of the region’s population — not just by creating better job opportunities, but also by improving the performance of healthcare. Industrial Internet solutions can improve the efficiency of hospitals, enabling them to deliver better health outcomes at lower costs. They can also extend the geographical reach of healthcare services via portable and personalized medicine solutions.

Future of Work innovations will also bring substantial benefits in terms of sustainability. The Industrial Internet and advanced manufacturing will help improve energy efficiency in aviation, transportation and industry, as well as in power distribution — reducing transmission and distribution losses (a substantial problem for local utilities in some countries such as Jordan). This will help MENAT countries reduce consumption and cut energy subsidies — a major drain on public budgets — without imposing an undue burden on the population.

Achieving all this will require a shift in attitudes on the part of governments and private sectors. Governments will have to turn from being producers and employers to being consumers and enablers. They will need to bolster the necessary infrastructure, notably in terms of communication and data networks, transportation and energy distribution. And they will have to strengthen education systems, with emphasis on science and engineering, as well as flexibility and problem solving — a close partnership between schools and industry could play a fundamental role in this regard. Companies will also need to become ever more aware of the importance of attracting, retaining and fostering talent in order to succeed — in some countries, such as Turkey, awareness is already rising rapidly. Governments and private sectors should work in close cooperation to enable the creation of robust ecosystems.

Collaboration is the name of the game, and in MENAT, an increasing number of organizations and individuals are recognizing the value of partnerships to foster localized innovation and spur growth. GE’s Ecomagination Innovation Center in Masdar City, Abu Dhabi, and the Saudi GE Innovation Center in Dhahran epitomize this transition — with a special focus on energy efficiency and healthcare.

The innovation wave of the Future of Work is powerfully disruptive, and the MENAT region is ripe for a creative disruption that can improve living standards and opportunities for all segments of the population. The potential benefits ahead are huge. MENAT is already one of the world’s fastest-growing regions. The Future of Work can make growth more broad-based, sustainable and equitable. It is an opportunity the region cannot afford to miss.

Top image: GE’s Ecomagination Innovation Center in Masdar City, Abu Dhabi

Marco Annunziata is 
the Chief Economist
 and Executive Director of Global Market Insight at GE.