The popular saying holds that the future is here just unevenly distributed. According to a survey released by PWC and The Manufacturing Institute, that thought is certainly true about the Fourth Industrial Revolution (which PwC labels 4IR but many others label Industry 4.0). This research confirms my observations that many manufacturers have projects at a variety of stages, while many others have adopted a wait-and-see attitude.
The report notes that fourth industrial revolution has been met with both enthusiasm and fence-sitting. While sentiments and experiences have been mixed, most business leaders are now approaching 4IR with a sense of measured optimism. Indeed, larger systemic changes are underway, including building pervasive digital operations that connect assets, developing connected products and managing new, real-time digital ties to customers via those products.
While manufacturers recognize the potential value of advanced technologies and digital innovation—particularly robotics, the Industrial Internet of Things (IIoT), cloud computing, advanced analytics, 3D printing, and virtual and augmented reality—they are still deliberating how and where to invest and balancing the hype with their own level of preparedness. Meanwhile, they’re also well aware of the significant changes 4IR will bring to a new manufacturing workforce—that is, one that is increasingly symbiotic and increasingly beneficial for many workers and manufacturers alike.
This narrative is reflected in a new survey of US-based manufacturers carried out by PwC and The Manufacturing Institute, the workforce and thought leadership arm of the National Association of Manufacturers. We see a definitive—and, indeed, inevitable—shift to 4IR as companies seek to integrate new technologies into their operations, supply chain, and product portfolio. At the same time, they acknowledge that scaling, justifying 4IR investments, and dealing with uncertainty surrounding use cases and applications usher in a new set of challenges.
Some key survey findings include:
• While the sector as a whole is making assertive forays into 4IR, many manufacturers still inhabit the awareness and pilot phases. Nearly half of manufacturers surveyed reported that they are in the early stages of a smart factory transition (awareness, experimental, and early adoption phases).
• Manufacturers do expect the transition to accelerate in the coming years—73% are planning to increase their investment in smart factory technology over the next year.
• While we see a number of fence-sitters, the bulk of manufacturers are indeed prioritizing 4IR, the digital ecosystem, and emerging technologies. 31% report that adopting an IoT strategy in their operations is “extremely critical” while 40% report that it’s “moderately critical.”
• About 70% of manufacturers say the biggest impacts of robotics on the workforce in the next five years will be an increased need for talent to manage in a more automated, flexible production environment and the opening of new jobs to engineer robotics and their operating systems.
…While adopters have identified clear signs of success. Though most manufacturers are still climbing the 4IR adoption curve—albeit at different speeds—those that have made progress are reporting a modicum of performance boosts measured by productivity gains, reduced labor costs, new revenue streams from IoT-connected products and services, as well as improved workforce retention and worker safety. Those that have effectively defined their use cases with a focus on outcomes rather than technology are seeing early wins, and are looking for ways to generate even more value.
Manufacturers are seeking to balance 4IR hype and reality. And most acknowledge that sitting back and waiting for the inevitable may not be an option.
The road may be longer than the hype would have companies believe, but preparing for and embracing change is a muscle many of today’s manufacturers are ready to flex. Those that can build on their ad hoc pilots and prioritize investments and strategies with their long-term desired business outcomes will be better positioned to create lasting value for their organization.
I saw this note in today’s Espresso from The Economist, “France’s finance minister pledged to save jobs under threat at General Electric’s plant in the country’s north-east. The American industrial conglomerate, which made a loss of $23bn last year, had said it would cut around 1,000 jobs. Earlier this year GE paid France a €50m ($56m) fine for failing to create jobs after it took over Alstom’s energy business.”
Meanwhile in the US, officials are taking a second look at the results of Foxconn’s supposed multi-billion dollar investments. Politicians made great PR hay in 2017 with the announcement of a large investment in Wisconsin. Two years down the road, maybe the investment may not be so large and the employment a few thousand shy.
Governments can preach and give breaks and whatever, but market forces and bad management mean much more than governments for success. Take Alstom, for example. Perhaps there is French pride involved, but GE discovered that that particular acquisition was not all that it hoped for. One of a string of GE missteps. The French government can fine all it wants, but job creation depends upon good management and proper economic tailwinds.
I recently reported on the “success” of re-shoring manufacturing jobs, as the Reshoring Initiative would have it. Most likely it’s a result of financial analysts taking a closer look at supposed savings from only low wages discovering that other costs, such as logistics, insurance, loss of intellectual property, longer lead times, inability to quickly respond to changing markets all combined to make manufacturing offshore unappealing.
Most of the ills of manufacturing society I read about have a common root cause—less than competent management. I don’t see any quick fixes for that! And it won’t come from government fines generated by disappointment at lack of political gain.
I just received my Spectrum invoice for the month. It was up 15% over last month. Last month it was up 10% over the month before. I called. The guy told me, yes, and it will increase another 15% next year.
However, if I were a new customer, I’d receive a 30% discount. I said, if I quit and come back, then I’d reduce my bill. But, I’d have to go 30 days without cable. I said, that must be why I’m seeing so many signs popping up all over my neighborhood proclaiming a switch from Spectrum to the only competitor in town.
The cable TV business is tough these days. Therefore, consolidation is not surprising. Spectrum (Century) acquired Time Warner Cable. So, they raise rates to pay for the acquisition. In the end, consolidation does not benefit the customer with lower costs.
Unfortunately for them, there is another alternative. I can keep the Internet cable connection, which isn’t bad, and drop the phone (who needs “land line” anymore anyway) and drop TV. Most of what we watch we can stream over Amazon Prime and Netflix. I just have to discover where to get my soccer fix.
The reason I relate this story involves treating it like a fable—a story with a moral.
I also see much consolidation in the controls and automation market. This is inevitable. It reveals the state of maturity of the market. I used to earn some money consulting with companies about potential acquisitions in industrial instrumentation, control, and automation. The deals have been done. I haven’t had an inquiry for a year.
Check out how ABB, Emerson, and Schneider Electric are all growing through acquisition becoming more viable all-around competitors to Siemens. Look at how the stock prices of Emerson and Rockwell Automation shot up last fall when Emerson was pursuing an acquisition. Rockwell’s board turned down the offer and both stocks dropped. But both stocks have been on quite a rise for the past few weeks. One wonders? That combination would really shake things up.
I have no inside knowledge, and I’m definitely not telling you to rush out and buy stock. However, for all of you who are customers, I’d keep my eyes open and contacts updated.
It starts with digital then moving toward autonomous processes. I’ve written about the strategy ABB has followed for the past four years since Ulrich Spiesshofer assumed the CEO post. We can summarize much of the strategy and also technology roadmap from those two words.
Spiesshofer brought in Guido Jouret in 2017 from Cisco for the role of Chief Digital Officer with the task of bringing digital to all business units. He has made a lot of progress in this short period of time.
Jouret elaborated, “We aren’t trying to be a software company, but hardware requires software.”
Kevin Kosisko, business unit managing director power generation & water, industrial automation and my interview about all things digital at the ABB Customer World conference. We talked about what autonomous meant. “Things we can do without sending people,” he told me. “For example, consider an oil platform taking the first step toward autonomous. Say they must take down a well for routine inspections and then bring it back up. It’s a difficult task, not to mention danger of flying crew to platform and being in the environment. So a combination of digital + autonomous to remove as much human intervention as possible. They took 2 days out of the entire process. That’s 2 additional days of production.”
Two things he told me that highlighted themes I would hear later. The first as “autonomous” being toward the end of a continuum going beyond preventive and predictive. Second, to use the digital twin model to help operators and engineers remove manual steps from a process.
Later I found a spot at the back of a full house for a panel on autonomous—The Journey Towards Autonomy in Industrial Operations Panelists were:
- Matthias Roese, Chief Technologist Manufacturing & Automotive, HPE
- Hakon Berg, Technology Development Manager, ABB
- Dr. Zied Ouertani, Global Digital Lead, Chemicals, ABB
- David Funderberg, Technology Manager, Chemical and Refining, ABB
Businesses in the industrial space have undergone a paradigm shift to move from isolated operations to collaborative and ultimately more autonomous operations. By 2025 we will witness humans working with systems in a collaborative way, leveraging artificial intelligence (AI) seamlessly. Disruptive technologies like AI, machine learning and augmented reality (AR) have all changed the way we do everyday tasks and in some cases made them autonomous. Hands-free collaboration can help repair remote issues or predict plant incidents.
The goal does not include taking humans out of the loop. I’m afraid I instigated a post-panel discussion where an editor argued that very definition of autonomous is “without humans”. So, he was asking the usual question you get from newspaper reporters and politicians—are they doing away with humans in production and manufacturing. Rebuttal came from one of the panelists who suggested he look at autonomous as part of a continuum, e.g., preventive->predictive->prescriptive->self-healing->operates with minimal supervision. This is applicable probably not to an entire plant, but to certain processes.
Guido Jouret spoke later on the status of digital at ABB following two years into his digital transformation leadership. He said the digital emphasis has led to more interactions with customers. And there are 185%
18.5% more customers year over year. ABB gets invited at earlier stages of the project process allowing it more input and influence. The company also has better C-level conversations with customers. ABB Ability should be considered a new technology platform.
ABB Customer World began Monday, but keynotes began Tuesday. Uli Spiesshofer, ABB CEO, described a renewed and refocused business model. ABB is all in for the Fourth Industrial Revolution and digitalization with ABB Ability, says Spiesshofer.
ABB Ability is essentially a platform with APIs connecting field, edge, and cloud with Analytics as a Service built in.
Spiesshofer noted 2014 business plan for ABB was to No. 1 or 2 in the world in each of its businesses. With move of power grid business with Hitachi, by 2018 the goal had been accomplished.
ABB took three action steps in its latest corporate makeover—Focus on digital business, Simplify organization, and Shape four leading businesses that include power, electrification, industrial automation, motion, robotics and discrete automation. The simplified organization took the company from its historic matrix structure to solidify four business units with strong leadership. The move also reduced corporate overhead.
The recent partnership with Dassault adds digital twin capability enhancing digitalization. Later discussions talked about how this capability helps ABB have customer conversations earlier in the project lifecycle.
The featured partnership at ABB Customer World was with HPE with President and CEO Anthony Neri speaking. Neri says HPE is built with partnerships—some 70% of the business. He told the approximately 11,000 attendees that the partnership of the two companies was a great blending of IT and OT for the benefit of customers.
Neri discussed the importance of Edge to Cloud. The Edge defined as “places where we live and work” is also the primary source of data only 6% of which is utilized right now.
He concluded saying HPE wants to work for solutions to the world’s biggest problems. “We have an insatiable desire to understand everything.”
Rockwell Automation has been busy since its rejection of a take over offer by Emerson some 15 months ago—something that sent its stock price into a bit of a dive. It made a major investment in PTC in order to have some say and a close relationship to its Internet of Things developments. Then it acquired Emulate3D to enhance its digital twin offering give the inability to form a solid alliance with Dassault Systemes.
Now, bolstering its lagging process automation business, it has formed a joint venture company with Schlumberger. This is very interesting and could stir up a little competition in the oil & gas automation sector.
The companies have entered into an agreement to create a new joint venture, Sensia, the first fully integrated digital oilfield automation solutions provider.
The transaction is expected to close, and the joint venture is expected to begin serving customers, in the summer of 2019, subject to regulatory approvals and other customary conditions.
The Sensia joint venture will be the first fully integrated provider of measurement solutions, domain expertise, and automation to the oil and gas industry. It will offer scalable, cloud and edge-enabled process automation, including information and process safety solutions. From intelligent systems to fully engineered life-cycle management automation solutions, the joint venture will help customers drive efficiency gains through measurement and data driven intelligent automation.
“Oilfield operators strive to maximize the value of their investments by safely reducing the time from drilling to production, optimizing output of conventional and unconventional wells, and extending well life,” said Blake Moret, Chairman and CEO, Rockwell Automation. “Currently, no single provider exists that offers the end-to-end solutions and technology platform that address these challenges. Sensia will be uniquely positioned to connect disparate assets and reduce manual processes with secure, scalable solutions that are integrated into one technology platform.
“As oil and gas producers strive to improve productivity, we will bring the value of the Connected Enterprise to life for them. Sensia will provide complete lifecycle and process automation solutions from well to terminal, including industry-leading oilfield technology and expertise,” said Moret.
“Sensia will create a leading technology provider that will further drive optimization of E&P oilfield assets,” said Paal Kibsgaard, Chairman and CEO, Schlumberger. “This joint venture is the next step in our vision to offer our customers smart, connected devices with rich diagnostic capabilities, coupled with measurement, automation and analytics that improve oilfield operations, facilitate business decisions and reduce total cost of ownership throughout the life of a field.”
Under the terms of the agreement, Sensia will operate as an independent entity, with Rockwell Automation owning 53% and Schlumberger owning 47% of the joint venture. Sensia is expected to generate annual revenue of $400 million, and will employ approximately 1,000 team members serving customers in more than 80 countries, with global headquarters in Houston, Texas. The management team will be led by Allan Rentcome, who will serve as Chief Executive Officer. He is currently Director Global Technology – Systems and Solutions Business at Rockwell Automation.
As part of the transaction, Rockwell Automation will make a $250 million payment to Schlumberger at closing, which will be funded by cash on hand. Following this investment, Rockwell Automation will maintain its strong financial flexibility and continue to support its capital allocation priorities, including organic growth and acquisitions, dividends, and share repurchases, and Rockwell Automation reaffirms its $1 billion share repurchase target for fiscal 2019.