Industry and manufacturing leaders recognize the trend to the next step in the evolution of enterprise effectiveness and success. The industrial digital revolution is an overnight sensation that has been 30 years in the making. We began with digital controls then adding human interface and then information handling.
Internet of Things with its proliferation of sensors and other smart edge devices, IP networking, data science, and advanced analytics (business intelligence) combined take us to a whole new level of enterprise effectiveness.
The trite question from marketing people often goes, “What’s keeping our customers awake at night?”
Well, are executive worried about the capability of technology?
No, it’s not technology that worries them. First it’s people and culture. Are there sufficient people with digital skills? Will the culture make the transition? Then, of course, they worry about how large the investment might become and what the return will be. It’s people and economics.
PwC Digital Industrial Survey
In this report, PwC shares results from a survey of global industrial products companies, shedding light on what manufacturers are doing now to build out their digital operations and what bottom-line benefits they expect to yield through those efforts.
Buying into digital: manufacturers plan to ramp up investments
In the last two years, US manufacturers invested an average 2.6% of their annual revenue in digital technologies. In the next five years, they expect to lift that investment to 4.7% of revenue—for an estimated $350 billion in investments in digital operation technologies across automotive, industrial production and manufacturing industries alone.
Venture capital funds flowing, too
Since 2011, some $3.6 billion has poured into VC-backed start-ups across a selection of digital technology sub-sectors, with investment rising at a 47% clip–more than double the annual growth of total VC funding (18%) in all sectors over the same period.
“Digital deals” have comprised 15% of all US M&A activity since 2012
According to a PwC/Strategy& analysis, more than $6.0 billion has been invested on “digital deals” in North America alone since 2012, comprising some 15% of all M&A deals over that period.
The greatest challenge to a “digital vision” is cultural
In the context of embracing digital operations technology, three of the top 10 challenge areas identified by surveyed companies relate to organizational readiness and financial concerns. Some companies anticipate high investment requirements with unclear return on investment, and lack of digital standards and issues related to data security and intellectual property are also noted.
Monetizing digital operations sought through cost reductions, revenue generation
Nearly two-thirds of manufacturers expect that adopting digital manufacturing technologies will translate into lowering operating costs by at least 11% mostly via efficiencies through automating processes and production. Meanwhile, over half of these manufacturers expect such adoption to boost revenues by at least 11%.
How digital technologies drive bottom-line results Manufacturers are just scratching the surface of monetizing digital manufacturing. Some key drivers to achieving cost-cutting and revenue uplift from digitization with the introduction of smart, connected manufacturing technologies and products and services include:
Lowered “price of variability” across production and processes
Moving from analogue products to “connected, digital products”
Manufacturing data…and new business models
Software-enabled upgrades to products
Pay-as-you-go model
Building a digital manufacturing strategy
Building a digital strategy requires a thorough self-assessment to determine a company’s “current state” of its digital evolution—and, just important, defining its “target state”. This means tailoring digital operations solutions to a business’ assets and making the right moves at the right time—from ramping up data analytics capabilities, to monetizing product data to considering a “digital deal”.
PwC concludes, “The future of digital manufacturing holds many “what-ifs”. But, if it unfolds as dramatically as our survey indicates, most all manufacturers will be altered to some degree. And, for every “what if”, there are choices manufacturers ought to consider.”
Accenture Researches Industrial Digital
Take a look at some of the results of Accenture’s research. Although the majority ofmanufacturers have implemented digital platforms, more than half (51 percent) lack the skills to operate digital factories. The more successful manufacturers have advanced talent strategies in place to digitally enable the workforce of the future.
Cracking the Code on the Digital Factory, a report based on a global study of 450 manufacturers, found that a growing skills gap is one of their biggest concerns – a situation that has worsened in recent years as manufacturers have transformed their operations using new technology, analytics and mobility capabilities.
Fifty-five percent of manufacturers, up from 38 percent in 2013, reported a skills gap among skilled trades laborers, who need to operate increasingly advanced digital machinery and equipment, such as 3D printers or modeling and simulation tools on the plant floor. Likewise, 60 percent of manufacturers, up from 31 percent in 2013, cited a shortage of maintenance workers skilled in the use of predictive maintenance analytics that leverage data from embedded sensors in a machine-to-machine environment.
“For manufacturers to realize the full potential value of digital factories, they need to redesign their workforce to include new manufacturing skills, such as analytical reasoning and data-driven decision support,” said Russ Rasmus, managing director, Accenture Strategy. “Developing a comprehensive talent strategy inclusive of new digital skills is an imperative for today’s manufacturers.”
Digital Factory Leaders
The research identified a small group of manufacturers (8 percent) that outperformed their peers by increasing production and profitability by more than 10 percent since 2013. These “leaders” are more likely than their peers to understand which new skills they need for future growth and success, and have a more effective strategy to attract, develop and retain this new breed of manufacturing talent.
A majority of these leaders (73 percent) more frequently reported already having the requisite digital skills, as compared to 49 percent of other manufacturers, and they were nearly 50 percent more likely to report a higher degree of visibility into what skills they needed. That has allowed most of the leaders (81 percent) to achieve greater internal workforce mobility in roles involving digital, enabling them to match employees with managers who need those skills.
Barriers to Success
While these digital factories are enabled with rapidly developing technology innovations, the technological aspect of their implementation is not the top barrier to success. Seventy-five percent of the deployment challenges cited by survey respondents are related to skills, organizational change or structure, and the talent within the organization. Chief obstacles that hinder manufacturers’ digital adoption.
“Manufacturers must aggressively manage these non-technical barriers as they deploy their digital factory capabilities. These include the ability to create new processes, lead teams made up of workers and machines, and constantly update training programs,” said Rasmus.
Industry 4.0 and Industrial Internet of Things describe manufacturing strategy as much as technology. But as I occasionally write here and write daily on my spiritual practices blog, there is a people side to all this technology and strategy.
Technologists (most people reading this site) tend to talk technology. Then they get carried away and think that technology will replace all need for people. Hence the science fiction writing and movies on that theme.
Arianna Huffington (the Huffington Post) attended the recent gathering of the world’s elite in Davos, Switzerland at the World Economic Forum. She discovered manufacturing and Industry 4.0. But she wrote a book on the power of getting enough sleep for your essential health. She managed to weave a story from both threads.
Manufacturing strategy
She writes:
The dominant topic of discussion this year — both inside the talks and panels and outside, as well — was transition. Klaus Schwab, the Forum’s founder and executive chairman, captured this sense — the possibilities as well as the challenges — with this year’s theme, the Fourth Industrial Revolution.
Schwab describes this new period as “the fusion of technologies across the physical, digital and biological worlds which is creating entirely new capabilities and dramatic impacts on political, social and economic systems.” It’s an era of automation, constant connectivity, and accelerated change, in which the Internet of Things meets the Smart Factory.
Yes, this new manufacturing strategy, which I must say seems to focus on what we call discrete manufacturing (think autos, airplanes), seeks to go deeper in employing digital technologies. In many ways it is following the lead of process industries (they hate the word manufacturing even though that is a government classification) which always seems to lead in applying math and rigor to its processes.
She continues, quoting Mark Benioff of Salesforce about people and technology:
If the Fourth Industrial Revolution will be defined by speed, connectivity, and change, there’s also a need for a countervailing force. Salesforce CEO Marc Benioff said, “Speed is the new currency of business.” But as he also said, the Fourth Industrial Revolution begins with trust, which has been at the heart of business as long as business has existed — and will only become more important in our more transparent ever-faster-moving world. Benioff’s point exemplified a larger truth of this year’s Forum, that far from being add-ons, a focus on trust, transparency, purpose, and a deeper kind of connection are central to meaningful success in the Fourth Industrial Revolution.
I’ve been writing about trust and transparency on my other blog this week. Sometimes we forget basic human values in our pursuit of either technology or profits.
Oh, yes, and she adds that we all need enough sleep each night to perform at our peak. You can go buy her book–or sleep on it.
Day 2, or my first full day in Dallas at the 2015 Schneider Electric Global Automation conference, was packed with sessions, meetings, and dinner.
Keynotes at a user conference are always a mixed bag. Usually there is a well-known author or leader to give a motivational message. Usually the CEO gives a state-of-the-company address. And then there are product announcements.
Gary Freberger, who leads the automation business, gave just a short update mostly dwelling on the market size of the business that resulted from combining the Foxboro/Triconex process automation business with the Modicon business that already existed within Schneider. Schneider Electric now has far more market clout than before. My take is that this could have a subtle change in industry dynamics in the future.
Connection and Behavior Change
Tom Koulopoulos, chairman and founder of Delphi Group, a Boston-based think tank, gave the “author/leader/motivational” keynote. He was also promoting his new book, The Gen Z Effect. Like many technologist speakers I’ve heard, he watches his kids and extrapolates to the entire generation.
However, he left us with two very important thoughts. First, it’s not about the technology. It’s about changing behaviors. And those of us who have implemented automation in our lives know that unless it changes the behaviors of the operators, it will not work.
The second thought is that beyond human behavior, it’s about connections. He posits that connections have brought us to this point over the last 300 years and connections will take us forward.
Then he left us with a little flow chart of what is happening:
This really does reflect where we are moving with Industrial Internet of Things and contemporary manufacturing strategy.
Solve World Hunger
Peter Martin, Schneider vice president (and one of several visionaries), always presents well. This year his presentation was better than usual. There were essentially two main points—let’s go back to our roots as control engineers while expanding the scope of what we’re controlling, and let’s recognize the value of control engineers and be aware of what we can contribute to the world.
He began by discussing an early science project which had way too large of a scope. The teach kept saying, “Peter, don’t try to solve world hunger.”
Well…fast forward to today. Martin also left us with a little flow chart of sorts:
Use our control expertise to solve problems of energy generation and transmission –>
Half-a-million children die each year due to tainted water; desalination is an energy problem; solve energy problem leads to solving water problem –>
If we can build a PGA golf course in Dubai through solving the water problem, we can build gardens in Africa. So we could solve world hunger –>
We can also solve environment by solving energy. In India, a petrochemical plant grew a mango forest to absorb carbons –>
Solve environment problem leads to solving world health.
I have known Peter for more than 10 years. One of his consistent themes is that engineers are undervalued—and they often under value themselves.
By golly, we could solve world hunger. We could miss the opportunity of a lifetime by thinking too narrowly.
Our day jobs
Automation is the platform upon which we build control. We need to do a few things.
Plants organize with an asset topology. Automation uses a technological topology. We need to reduce the complexity of the automation topology and make it align better with the plant topology. But the installed base is an anchor holding us back. “So, migration becomes really exciting.”
By enabling personalized automation, we no longer eliminate people. We begin to use people to their fullest extent. Forget the lights-out industry talk.
“Have we pushed the limits of control to the furthest extent? We have a long way to go. Discipline of control engineering is just beginning. We must improve efficiency in a safe manner. Business has shifted from highly transactional to real-time. And historically we have separated plant floor from business. Business results get to operations too late to react. We have moved to a real-time control problem because the time constraints of business have shrunk. We need real-time business control as well as real-time process control.”
“I’ve been told that the age of the control engineer is over; No, the age of the control engineer is just beginning. We’ve just changed what we’re controlling. Look at maintenance, asset performance, reliability, it’s all changing in real-time. If we measure in real time and apply real-time control, then we can manage it. Efficiency, reliability, profitability, security, safety, environment. And forget calling people ‘labor,’ but instead call them ‘production managers’ for that is what they really are. Let’s just enable them.”
Martin concluded, “Challenge us to create value-driven innovation across all domains. Keep our eye on our value.”
During my continuous research for topics such as Industry 4.0, digital manufacturing, smart manufacturing and the industrial Internet of things, I came across this Siemens PLM software blog.
In it, Zvi Feuer, Siemens PLM Software’s Senior Vice President, Digital Factory, Manufacturing Engineering Software, shares his perspective on “how Siemens helps companies worldwide to realize innovation in manufacturing.”
Feuer says, “I want to be able to offer our customers industry solutions which provide the means to turn any manufacturing operation into a high tech manufacturer. In order for us to sell not only the software but also usage methodologies And, in fact, to increase productivity with the customer and to help the customer deliver to his customers in a better and faster shape. This will obviously create opportunities for people, opportunities for jobs.”
Siemens executives have explained its digital manufacturing strategy to me for more than 10 years. And the vision has been remarkably consistent. The first conversations were even before the UGS acquisition that led to the Siemens PLM business.
PLM As ERP for Manufacturing
The blog refers to a white paper, PLM For Manufacturing, “If you are looking for ways to connect all domains of the design/build lifecycle, consider a manufacturing process management (MPM) solution. This provides an enterprise-scalable foundation that allows you to perform product design, while simultaneously optimizing manufacturing processes. This means that you can better manage lifecycle cost, meet launch dates and maintain product quality targets.”
That statement reflects Siemens thinking even before the acquisition. Is it possible to design not only the product but the manufacturing digitally, and then proof it all out digitally before even cutting the first steel.
“We believe that an MPM system that is part of an enterprise PLM system is the best way to move
forward. This will provide an environment that supports a flexible process plan capable of reflecting any changes to the product design or requirements. This might be called a single window for enterprise data management – a single application that supports the complete lifecyle of product data in an enterprise environment. The main idea is to provide users with one platform for all their data management needs. Teamcenter PLM software is the only comprehensive system that provides a platform in which users can conduct all their data management needs from engineering to manufacturing to execution.”
Is it sustainable?
This is a grand vision. It reads like Goldratt’s “The Goal” coming to life totally automated. But, there are inherent problems to the grand scheme. I have witnessed and otherwise seen the benefits of more and better information informing production/maintenance teams enabling better decisions and improvements. But to think that this could eventually happen without human intervention–I doubt that ever happens effectively.
The white paper also talks about complexities of manufacturing and software, then it argues that it would be better to put everything into one overarching software application. I would argue, along with my Lean friends, that this would just make for one very complex software application.
Any of us who have actually done automation know that when the application gets too complex, then it doesn’t work. It is not maintained. It is not understood. People begin developing their more simplified (and understandable) workarounds.
The vision is like most things I have witnessed over the past 40 years of applying technology. We develop something. We get benefits. We get over ambitious and build something cumbersome. People stop using it. We develop something simpler. People use it. And so on.
Digital manufacturing and Industrie 4.0? Interesting. The jury is still deliberating as to whether it is giving Germany the desired competitive edge in manufacturing.
Are you interested in improving your manufacturing operations? Looking for a manufacturing strategy? Here is a video essay (with a companion podcast downloadable on iTunes) where I compare two dominant manufacturing strategies of today.
