How Digitalization Will Drive Transformation of Modern Economies

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Wednesday, September 21st, 2016
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The vast troves of data made available by smart technologies will change the way all sectors of the modern economy operate, with built assets particularly well positioned to reap the potential benefits of digitalization.

The rising ubiquity of smart devices in tandem with surging levels of connectivity has already resulted in far-reaching changes to multiple facets of modern life.

The remarkable amount of connected computing power that the average consumer can carry around in the form of a smartphone or tablet device is perhaps the most obvious example of this ongoing, transformative shift.

Trendy consumer devices, however, are only one of myriad forms of smart technology spreading rapidly through industrialised economies.

The growing incorporation of connected sensors and smart technologies into consumer devices, buildings, infrastructure and manufacturing facilities promises to make digitalization an essential and ubiquitous feature of advanced economies in future.

The economic push for digitalization

According to information provided by Siemens at its Digitalization Forum in Melbourne, there are already 3.8 billion objects connected to the Internet of Things at present, with the figure expected to surge to as many 25 billion by the decade’s end.

The digitalization permitted by the creation of a vast Internet of Things (IoT) could have profound ramifications for the operation and performance of modern economies.

Dr. Roland Busch, executive member of the Managing Board of Siemens AG, expects all sectors of the economy to be affected by digitalization, from healthcare and manufacturing to energy, buildings and infrastructure.

Siemens forecasts massive efficiency gains on the back of digitalization, including reductions in energy costs by as much as 40 per cent as a result of intelligent building technologies, and a halving of the time to market for new products as a result of life cycle management software.

A key driver behind the adoption of digitalization will be the mounting demand amongst businesses for these increased levels of efficiency and productivity.

These improvements will be imperative for the global economy as a whole, and industrialised nations in particular, given that ebbing demographics means future growth will need to rely on efficiency gains as opposed to expanding labour numbers.

“Over the next 50 years there will be basically zero increase in labour…we have a complete gap,“ said Busch while delivering the keynote address at the forum. “The Chinese labour market peaked a year or two ago, so there’s not so much labour coming onto the market.

“If we want to maintain our growth rate at roughly the same level, we have to compensate for the productivity gap.

In addition to compensating for a shortfall in labour amongst developed and some developing economies, Busch sees digitalization as “levelling the playing field” in the manufacturing sector.

The IoT will enable mature countries with high labour costs to compete in the manufacturing sphere against emerging economies by means of enhanced productivity and efficiency.

Implications for the built environment

For the AEC sectors, the impact of digitalization will be especially profound. The IoT is about the incorporation of sensors and smart technology into tangible property with the objective of reaping efficiency and performance gains, and few physical assets are better positioned to benefit from such improvements than buildings and infrastructure.

“Talking about smart buildings already implies digitalization,” said Stefan Schwab, head of Siemens Building Technologies. “There is so much data about buildings already, and we can use that data to gain productivity and energy efficiency.”

Improving the efficiency of built assets is poised to become an urgent global issue, given the developing world’s ongoing urbanisation drive as well as projected gains in the populations of major cities such as Sydney and Melbourne.

“Every week there is a new Munich, and every quarter the equivalent of a new Netherlands moves into the cities,” said Busch. “It puts huge pressure on the infrastructure of our cities, and one of the solutions is digitalization.”

Implementation

When it comes to the precise means of incorporating the IoT into built assets, Busch outlines an expansion upon conventional development processes that doesn’t necessarily involve dramatic budget growth.

“80 per cent of the money goes to your brick and mortar, to roads to rail and to tunnels,” he said. “You then need to have intelligent feed devices that you connect to your system.

“Next is the automation layer for energy, buildings and infrastructure, which is an incremental investment of perhaps 10 to 20 per cent.

“On top of that you can make all your analytics and digitalisation, so that you can really run you predictive maintenance and increase the capacity of your systems.”

Another core part of the digitalization process for buildings is the creation of a “digital twin” for the physical assets created in the real world – a process which is already widespread in the AEC sectors due to the increasing popularity of BIM.

Real world examples

Numerous examples already exist in the real world of the ways in which digitalization and smart technologies can enhance the operation of built assets and infrastructure – some of which are very close at hand for Australians.

Busch pointed to the Melbourne Cricket Ground stadium as an outstanding example of the efficiency gains made possible by digitalization. The MCG achieved energy savings of as high as 20 per cent by automating their systems in a more efficient manner.

One of Asia’s tallest buildings, Taipei 101, also achieved reductions in energy consumption of between 20 and 25 per cent via systems automation, helping to transform it into the world’s greenest skyscraper.

When it comes to transit infrastructure, digitalization has permitted the automation of the busiest line in the Paris metro system – Metro Line 1, and a capacity increase of 50 per cent via the deployment of driverless trains.

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