Need for transformative change – Part 1

July 2024

Increasingly, we talk about the need to move beyond piecemeal action to transformative change to meet the challenges of the future. But what exactly does it mean and why is it so important?

In a series of blog posts on transformative change, we highlight - sometimes provocatively - aspects to stimulate debate and thinking beyond the usual lines of thought. In this sense, the blog posts are not necessarily balanced and do not attempt to cover all perspectives and possible futures.

What is transformative change?

Transformative change is a deliberate, strategic initiative designed to bring about profound and lasting change in a system, organisation, community or individual. Unlike incremental improvements or minor adjustments, transformative changes aim to redefine the status quo and create profound shifts. They challenge existing paradigms and open up new possibilities. They are bold, innovative and often involve a fundamental rethinking of existing processes, behaviours or systems.

Characteristics of transformative change include

• Visionary thinking: It all begins with a clear and compelling vision of what the future might look like. This vision acts as a guiding star, inspiring individuals and organisations to strive for something greater than their current reality.

• Radical change: Transformations are about making significant changes that can alter the entire trajectory of a system or situation and not about tinkering around the edges.

Why do we need transformative change?

Europe is expected to face some big changes in the next few decades. We will probably focus more on being more competitive globally, on digital technology, green energy, defence and security, and on making our economies more independent. We will also have to adapt to climate change and make changes to our social security systems. These changes aim to make Europe fit for the future. They will require big changes in policies, investments and support. The changes will be too big to be managed by small changes. We need to think and act big.

Rising investment needs and a proliferation of policy objectives are likely to be met by shrinking public finances. Moreover, the transitions need to be supported by the population. To avoid setbacks, it will be necessary to manage the transitions in cooperation with people. Some of these transitions may be associated with increasing inequalities between places and people. Transitions often involve increasing inequalities in the early stages of innovation. In the later phase, when innovations are used more widely, there is a greater focus on making sure that everyone benefits. The challenge is to avoid the risk that transitions, especially in the early stages, leave people and places behind and do not offer desirable future prospects for all.

The bottom line is that transformative change requires, among other things, systemic interventions, institutional capacity, long-term commitment, citizen participation and cooperation. But changes must be more than small changes. Only big changes with more cooperation, a long-term perspective, citizen participation and understanding of global development can make regions fit for the future. Piecemeal changes are not enough to address the root of the problem. A transformative journey is necessary to ensure a resilient, inclusive and prosperous future.

To explore this further, let's look at five transformative areas. This blog post looks at transformative economies and industries. The next blog post looks at transformative climate change adaptation and mitigation, and transformative societal values. We then look at transformative governance and a transformative EU27+. Finally, we will summarise the blog posts in terms of how they affect local and regional development, territorial disparities and the need to address changes where the place of action is different from the place of benefit and where there are significant time lags.

This series of blog posts was inspired by discussions with Franziska Sielker and Maria Toptsidou about changing framework conditions in the Danube region.

Transformative economies and industries

In many respects, Europe is losing its global competitive edge and risks doing so even more in the face of the technological and economic transformations that could shape the next decades. This puts the focus on the need to increase global competitiveness and on the economic and industrial transformations that could help along the way. Already today, many European policy documents address the digital and green twin transitions, and some even add the demographic transition. This can be expected to increase, and a few more aspects may be added to the debate:

• Digital and Artificial Intelligence & Cybersecurity. Digital transformation and artificial intelligence (AI) are rapidly transforming industries and economies. Much of this is being driven by international companies and governments outside Europe. The EU is promoting European champions in this field and developing frameworks such as the Digital Services Act and the AI Act, which aim to set international standards. In addition to the economic dimension of who develops and leads this economic transition, cybersecurity, digital influencing of public opinion and elections, and e-governance play an important role in this transition.

• Green transition & dematerialisation. The green transition is often seen as the twin of the digital transition. In the coming decades, Europe is expected to further intensify efforts to reduce carbon footprints and promote resource efficiency, with industries moving towards climate neutrality by 2050. The current focus is on decarbonisation. In the coming decades, the focus is expected to shift to dematerialisation, i.e. the reduction of material products used (e.g. e-books instead of books or mobility as a service instead of private cars) and the reduction of the material input required for individual products. The focus is not just on reducing emissions, but on a broader economic transformation towards a circular economy where waste is minimised and the life cycle of products is extended. This is likely to require significant advances in technology, behavioural change and regulatory action.

• Industrial autonomy in key sectors. Recent geopolitical turmoil has led to a revival of industrial policy in Europe to reduce dependence on other countries. This is particularly the case in critical sectors such as health and cutting-edge technologies. In addition to efforts aimed at near- and/or home-shore industries that have relocated to other parts of the world, these efforts also include support for strengthening specific industrial sectors and promoting European champions. The focus is often on actors and clusters with the capacity to become global players in the field.

• Changing (global) trade and trade routes. Geopolitical constraints can also affect global trade flows. This affects both the volume of global trade - which may decline in the face of dematerialisation and nearshoring trends - and trade routes. Ports in southern and south-eastern Europe are already being affected by the war in Ukraine and the security risks to routes through the Suez Canal. This will affect transport flows to and from ports, both by sea and by land, and could re-emphasise the importance of the major ports in northern Europe.

• Changing manufacturing. Expected developments in micro and additive manufacturing could reduce the overall pressure on large production and manufacturing sites and thus change trade flows within Europe. In both cases, there is a greater emphasis on decentralised and flexible manufacturing processes, where goods can be produced closer to the customer/user. Micro-manufacturing refers to the processes involved in producing extremely small, high-precision components, often at the micro- or even nanoscale. This type of manufacturing is critical for industries such as electronics, biomedical and optics, where the ability to produce small components with high accuracy is essential. The techniques often involve processes such as micro-moulding, micro-machining and laser machining, all of which are tailored to work with minute dimensions and tolerances. Additive manufacturing, commonly known as 3D printing, involves building parts layer by layer from 3D model data, usually without the need for machining or other subtractive processes. The technology is characterised by its ability to produce complex geometries that are often impossible with traditional manufacturing methods. It is used in industries as diverse as aerospace, automotive and healthcare for applications ranging from prototyping to the production of end-use parts. The flexibility and efficiency of additive manufacturing make it a key technology in the quest for more innovative and customised manufacturing solutions.

• Skills needs versus automation and an ageing population. All of these industrial transformations rely on a skilled workforce. While some tasks and jobs as we know them today will disappear - due to automation and/or replacement by artificial intelligence - many will change and new ones will emerge. Overall, this means that the workforce will need to adapt and be trained to ensure that there are skilled people who enjoy and can perform the tasks. Particularly in the context of an ageing society, this can be challenging as the overall workforce is expected to both age and shrink.

• Defence and security. Efforts and beliefs to ensure peace and stability through global trade patterns and deepening economic ties and integration have reached their limits. Armed conflicts and wars are once again dominating political discussions. This includes investment in defence and security industries - even to the extent of discussing 'war economies'. In the coming decades, we may see further growth in the defence and security industries and an increased focus on 'war resilience'. This concerns both physical and cyber defence and security.

As we discussed in an earlier blog posts about economic trends (S'ouvre dans une nouvelle fenêtre), all this affects local and regional development and cohesion in the EU. Some initial indications are that the outlined transitions in digital and AI technologies, green and dematerialisation efforts, industrial autonomy, changing trade routes, evolving manufacturing processes, workforce challenges and increased focus on defence and security will have a significant impact on local and regional development in the EU. Regions with an advanced technological infrastructure and skilled workforce will benefit from the digital and green transitions, while areas lacking these assets may fall further behind. Targeted investment in education, digital infrastructure and green technologies is essential to avoid widening disparities. In addition, the push for industrial autonomy and changing trade routes are likely to reinforce existing industrial clusters, requiring strategic support for less developed regions to promote balanced economic growth.

The evolving nature of manufacturing, with a shift towards micro and additive processes, offers opportunities to decentralise production and support smaller regions. However, addressing the skills gap and adapting to an ageing workforce will be crucial to ensure that all regions can participate in and benefit from these transitions. In addition, the increased focus on defence and security sectors can boost regions with established capabilities, but care must be taken to ensure that investment is distributed equitably to avoid exacerbating regional disparities. Overall, a coherent approach involving comprehensive regional policies and investments is essential to promote inclusive development and reduce territorial disparities across the EU.

The transformative changes require proactive and strategic action. However, the implementation of these transformative actions may be required in specific areas, while the benefits, such as economic growth and job creation, may materialise in different regions and with a considerable time lag. For example, investment in digital infrastructure in rural areas may not bring immediate economic benefits, but is essential to ensure that these regions can participate in the digital economy in the future. Similarly, efforts to promote green technologies and decarbonisation in industrial regions may take years to deliver significant environmental and economic benefits. This time lag between action and benefits underlines the importance of sustained and well-coordinated policy action. Continued support and long-term planning are needed to ensure that all regions are equipped to manage these transitions and ultimately reap the benefits. It is only through such comprehensive and forward-looking approaches that the people of the EU can become active agents of change rather than victims of it. This, however, requires a stronger focus on regional foresight.

by Kai Böhme