by Gary Mintchell | Dec 18, 2018 | News, Organizations
Consolidation is not only a corporate phenomenon these days. It has hit the non-profit technology development sector, too. One situation, not sure if this one is the case but it’s a common thing, is that companies join many of these consortia. Resource commitment begins to creep upwards. Then they notice similarities between two organizations. They press for merger to reduce these commitments.
I’m not sure this is the case, but here are two organizations with much overlap pursuing similar goals. Makes a lot of sense to come together.
The Industrial Internet Consortium (IIC) and the OpenFog Consortium (OpenFog) announced that they have agreed in principle to combine the two consortia in Industrial IoT, fog, and edge computing. The move will bring OpenFog members into the IIC organization at a time when their complementary areas of technology are emerging in the mainstream.
The combined memberships will continue to drive the momentum of the Industrial Internet including the development and promotion of industry guidance and best practices for fog and edge computing. The organizations expect the details to be finalized in early 2019.
“This is great news for the industry. Both organizations have been advancing the IIoT, fog, and edge computing, and their members represent the best and the brightest in their fields. It makes sense to merge their expertise and work streams to continue providing the IIoT, fog and edge guidance that the industry needs,” said Christian Renaud, Research Vice President, Internet of Things, 451 Research.
“The Industrial Internet Consortium, now incorporating OpenFog, will be the single largest organization focused on IIoT, AI, fog, and edge computing in the world. Between both of our organizations we have a remarkable global presence with members in more than 30 countries,” said IIC President Bill Hoffman. “This agreement will help accelerate the adoption of the IIoT, fog and edge computing.”
The Industrial Internet Consortium is the world’s leading membership program accelerating the Industrial Internet of Things. The OpenFog Consortium was founded to advance fog computing and address bandwidth, latency, and communications challenges associated with IoT, 5G, and AI applications.
“We’re excited by the growth and advancement of fog technologies–from a technology, standards and general awareness standpoint—since our launch nearly three years ago,” said Matt Vasey, OpenFog chairman and president, and director, AI and IoT business development, Microsoft. “During that time, it has increasingly become apparent that we share so much synergy with the efforts of the IIC that it just made sense to bring the two consortia together. The resulting combination of memberships, resources and shared knowledge will only further the growth of the technologies, including fog, that will support IIoT ecosystems.”
The Industrial Internet Consortium is a program of the Object Management Group (OMG).
OpenFog was founded in November 2015 and today represents the leading researchers and innovators in fog computing.
by Gary Mintchell | Dec 17, 2018 | Commentary, News
There must be something in the air that makes the end of 2018 restructuring time. ABB has announced it is “shaping a leader focused in digital industries.” In other words, it is focusing its portfolio of businesses on digital industries through divestment of Power Grids business to Hitachi.
Interesting that ABB went through an acquisition cycle, replaced the CEO, and has been divesting (mostly) since. The outlier was the recent acquisition of B+R Automation—but that one fleshes out the factory automation (discrete) portfolio making it more competitive with Siemens and Schneider Electric. This divestment should give the company better investment strategies to continue to develop the core (performing) businesses.
Following are a few bullet point highlights and statements by the CEO and the Board Chair.
Finance
- Enterprise Value of $11 billion for 100% of Power Grids, equivalent to an EV/op. EBITA multiple of 11.2×1.
- Crystallizing value from the transformation of Power Grids including doubling operational EBITA margin since 20142
- ABB initially to retain 19.9 percent in the equity of carved-out Power Grids to ensure transition; pre-defined exit option on 19.9 percent equity at fair market value with floor price at 90 percent of agreed Enterprise Value, exercisable by ABB three years after closing
- Closing expected by first half of 2023
- ABB intends to return 100% of the estimated net cash proceeds of $7.6-7.8 billion from the 80.1% sale to shareholders in an expeditious and efficient manner through share buyback or similar mechanism
Simplification of business model and structure
- Discontinuation of legacy matrix structure
- Businesses will run all customer-facing activities as well as business functions and territories, fostering ABB’s entrepreneurial business culture
- Businesses to be strengthened by transfer of experienced country management resources
- Existing country and regional structures including regional Executive Committee roles to be discontinued after closing of the transaction
- Corporate activities to be focused on Group strategy, portfolio and performance management, capital allocation, core technologies and ABB Ability platform
Shape four leading businesses aligned with customer patterns
All businesses global #1 or #2 in attractive growth markets:
- Electrification led by Tarak Mehta
- Industrial Automation led by Peter Terwiesch
- Robotics & Discrete Automation, a unique combination of B&R and Robotics, led by Sami Atiya
- Motion, combining ABB’s market-leading offering in motors and drives, led by Morten Wierod, appointed to Executive Committee as of April 1, 2019
ABB Ability tailored digital solutions will drive customer value in each business whilst capturing synergies through common platform.
Actions position ABB with a leadership role in digital solutions, and evolving technologies such as artificial intelligence.Financial impact of new ABB
Executive Statements
“ABB has been driving industrial change for more than a century as a global pioneering technology leader. As a result of our Next Level strategy, all of our businesses are today number 1 or 2 in their respective markets. To support our customers in a world of unprecedented technological change and digitalization, we must focus, simplify and shape our business for leadership. Today’s actions will create a new ABB, a leader focused in digital industries,” said ABB CEO, Ulrich Spiesshofer.
“Power Grids will strengthen Hitachi as global leader in energy infrastructure and Hitachi will strengthen Power Grids’ position as a global leader in power grids. With this transaction, we are realizing the value we have built through the transformation of Power Grids over the last four years. Our shareholders will directly benefit through the return of the proceeds of the divestment. Building on our existing partnership announced in 2014, the initial joint venture will provide continuity for customers and our global team.”
“To compete in today’s fast-changing world, we fully empower our businesses, through the discontinuation of the legacy matrix structure ensuring zero-distance to customers and increasing our agility in decision-making. Our four newly shaped businesses, each a global leader, will be well aligned to the way our customers operate and focus stronger on emerging technologies such as artificial intelligence. The continued simplification of our business model and structure will be a catalyst for growth and efficiency in our businesses. Our businesses will be further supported through the transfer of experienced resources from today’s country organizations.”
“All of this will only be possible due to the commitment of our global team who has made ABB what it is today. Our innovation power together with our inclusive culture will continue to be a differentiating strength of our company. We will live enhanced customer focus, provide attractive opportunities for our employees and deliver value for shareholders.”
Peter Voser, Chairman of ABB, said, “Today’s announcement marks the beginning of a new chapter in ABB’s history. Building on our technology and global talented employee base we will further strengthen our focus in digital industries, delivering competitive returns for shareholders, including our committed dividend policy. Over the past five years the deliberate execution of ABB’s strategy laid the foundation for our businesses to compete in the fast changing digital industries and deliver profitable growth.”
“We were very clear in the past that the actions required for the turnaround of Power Grids could be best achieved within ABB. Following completion of this step, we undertook a review of the Power Grids business and decided to secure the best home for the future development of the business through the combination with Hitachi. The new ABB will be positioned to write the future as a customer focused technology leader in digital industries.”
by Gary Mintchell | Dec 15, 2018 | Commentary, News
Remember the TV ads where the recent college graduate gets a job with GE? He then must explain to his parents that it is not an old-line dirty industrial company but a hip software company.
Send those ads to the never, never land of wherever bits go when they are deleted from servers.
GE has been trying to divest GE Digital for about a year. Evidently there were no takers. It just announced spinning off Digital into a new “IoT Software Company.” Or, if you want the GE spin on the action, “GE Advances Digital Leadership with Launch of $1.2 Billion Industrial IoT Software Company.”
I attended just one GE Digital Minds+Machines conference. It was 2017, and after listening to the new CEO (who is now a former CEO) asked “could this be the last Minds+Machines?” Appears I was right.
Bullet points from the press release:
- New GE-owned, independently run entity will be established to expand company’s leadership in IIoT market and better serve industrial customers
- GE selling majority stake in ServiceMax
The company will start with $1.2 billion in annual software revenue and an existing global industrial customer base. The company is intended to be a GE wholly-owned, independently run business with a new brand and identity, its own equity structure, and its own Board of Directors. The proposed new organization aims to bring together GE Digital’s IIoT solutions including the Predix platform, Asset Performance Management, Historian, Automation (HMI/SCADA), Manufacturing Execution Systems, Operations Performance Management, and the GE Power Digital and Grid Software Solutions businesses.
Additionally, GE announced an agreement to sell a majority stake in ServiceMax, a leading provider of field service management software, to Silver Lake, a leading private equity firm focused on technology investments. With these actions, GE will sharpen the focus of its IIoT portfolio to position the new business for future growth. The transaction is expected to close in Q1 2019, subject to customary closing conditions and regulatory approvals.
“As an early leader in IIoT, GE has built a strong business with its industrial customers thanks to deep domain knowledge and software expertise,” said GE Chairman and CEO H. Lawrence Culp, Jr. “As an independently operated company, our digital business will be best positioned to advance our strategy to focus on our core verticals to deliver greater value for our customers and generate new value for shareholders.”
GE’s new IIoT business would provide software for these asset intensive industries with a focus on the power, renewables, aviation, oil and gas, food and beverage, chemicals, consumer packaged goods and mining industries.
GE Digital CEO, Bill Ruh, has decided to depart GE to pursue other opportunities. The company intends to conduct an internal and external search to identify the CEO for this new independent company. Further details on GE’s new IIoT software company will be announced in Q1 2019. This plan is subject to customary regulatory approvals, including information and consultation with employee representatives where required.
by Gary Mintchell | Dec 13, 2018 | Commentary, News, Operations Management
Emerson has been methodically expanding its focus for the past few years. It began touting “Top Quartile Performance” for its customers. It has made some interesting strategic acquisitions yielding a stronger presence in IIoT, software, and discrete automation. It had a strong presence at the last Pack Expo.
In that vein, Emerson announced it has acquired iSolutions Inc., a Canadian-based consulting group with expertise designing and implementing data management solutions. iSolutions provides organizations with decision-support tools to make data-driven production and operational decisions based on the analysis of real-time insights from integrated field and plant systems.
The acquisition will accelerate delivery of Emerson’s new digital transformation roadmap by adding proven skillsets in information technology/operational technology (IT-OT) and application knowledge to help integrate data from the plant floor to business systems.
“We make the Industrial Internet of Things (IIoT) tangible through our approach focused on business needs and readiness,” said Thomas Waun, general manager for Operational Certainty Consulting at Emerson. “With the addition of iSolutions expertise, Emerson can expedite roadmap implementation and digital transformation deployments across organizations – helping them realize faster return on technology investments and achieve Top Quartile performance in the areas of safety, reliability, energy consumption and production.”
iSolutions has a proven reputation with North American upstream oil and gas, power, and utilities customers for its successful and repeatable methodology that transforms plant data into real-time key performance indicator (KPI) visualization and business intelligence. In addition, its expertise will strengthen Emerson’s Operational Certainty Consulting organization with the addition of a data management practice for process, hybrid, and discrete businesses.
As part of Emerson, iSolutions will help organizations deploy Emerson’s Plantweb digital ecosystem.
“We’re excited to join Emerson and expand the reach of our expertise throughout Emerson’s global organization,” said Anil Datoo, on behalf of the four founding partners at iSolutions. “Together we can continue to make digital transformation practical, accessible and achievable.”
About Emerson
Emerson has been corporately restructuring in an interesting way partly by divesting non-core divisions. It describes itself as a global technology and engineering company providing innovative solutions for customers in industrial, commercial, and residential markets. Emerson Automation Solutions business helps process, hybrid, and discrete manufacturers maximize production, protect personnel and the environment while optimizing their energy and operating costs. Emerson Commercial & Residential Solutions business helps ensure human comfort and health, protect food quality and safety, advance energy efficiency, and create sustainable infrastructure.
by Gary Mintchell | Dec 12, 2018 | Commentary, News
What makes an industrial company stand above its peers? PwC recently released its 2018 Global 1000 Innovation Study authored by Barry Jaruzelski and Robert Chwalik revealing some interesting results. For the purposes of this study, PwC equated innovation with R&D spending. We could quibble with this definition, but let’s just run with it to see what they discovered.
Two key takeaways I noticed included top management encouragement and focus on customers—insights as well as experiences.
The report also shares 6 characteristics that high-leverage innovators and high-performance companies share that help them remain competitive.
The 2018 Global Innovation 1000 study included the 1,000 publicly held companies that spent the most on research and development. They looked at R&D spending trends and financial results over the last 15 years. A very select group of companies that consistently beat their peers on seven key financial metrics—and spent their R&D dollars more efficiently. They call these companies ‘high-leverage innovators.’
Only 88 of the Global Innovation 1000 companies qualified as high-leverage innovators for the five years ended 2017. Overall, they had higher sales and market capitalization growth, lower R&D expenditures as a percentage of sales, higher gross profit growth, higher operating income growth, and better total shareholder returns. Only two companies, Apple and Stanley Black & Decker, made the high-leverage innovator cut for the entire 15-year period.
In the 2018 ranking, the highest R&D spending industrial firms included Siemens, General Electric, Toshiba, Hon Hai Precision, Koninklijke Philips, Mitsubishi Electric, Caterpillar, China State Construction Engineering, and 3M.
Overall, the 161 industrial firms in the Innovation 1000 increased their R&D spending from $71.2B in 2017 to $82.5B in 2018, an increase of 15.9 percentage points. But total revenue increased as well, so that R&D intensity was unchanged at 2.8%. In comparison, R&D intensity levels for the 1000 global innovators in the study was 4.5% for both 2017 and 2018.
To gain further insights they surveyed a sample of leaders and managers to find out about their innovation efforts. Both the high-leverage innovators and the larger universe of companies that report relatively high performance share the following six key characteristics:
- They closely align innovation with business strategy. More than three-quarters of respondents reporting that their companies were outperforming their industries said their innovation strategies were highly or closely aligned with their business strategies.
- They create company-wide support for innovation. Seventy-one percent of respondents who reported that their company’s revenues were growing faster than competitors’ revenues said their corporate culture was highly or very aligned with their innovation strategy.
- Their top leadership is closely involved with innovation. Survey respondents reporting higher revenue growth than competitors were much more likely to say their company’s executive team was closely involved with the R&D program.
- They base innovation on direct insights from end-users. All of our survey respondents ranked consumer and client insights as the most important capability during the early stages of innovation. However, same- and slower-growth companies reported they are satisfied with their competence in this capability, while faster-growth companies are looking for improvements.
- They rigorously control project selection early in the innovation process. Companies reporting faster growth are most likely to say project selection is the innovation stage with the most opportunity for improvement.
- They excel at the first five characteristics and integrate them to create unique customer experiences. Companies at the highest level of innovation leadership excel at every aspect of innovation. And they work to push the boundaries of market expectations and transform the customer experience.
High-leverage innovators understand the importance of R&D spending. But they also know that is not enough. Innovation success is the result of painstaking attention to strategy, culture, executive involvement, customer insights, and execution throughout the stages of innovation—all focused on creating unique customer experiences.
