by Gary Mintchell | Jun 9, 2015 | Automation, Marketing, News
What Does It Mean When An Industry Consolidates?
For companies in the control and automation space, as well as manufacturing in general, acquisitions power growth.
Rockwell Automation became a factor in process automation through a number of strategic acquisitions. Siemens fulfills its digital manufacturing vision through acquisitions. ABB, until recently, pursued a growth by acquisition strategy. Schneider Electric, keeping pace with European rivals swallowed Invensys—and much to my surprise seems intent on not only keeping but even building its software presence.
What is the result of acquisitions in an industry? Consolidation. And the result of consolidation? Less competition.
Writing in Industry Week Michael Collins, president of MPC Consulting, asks, Is Manufacturing Industry Consolidation Stifling Competition and Innovation?
That is a fair question. I have been surveying the industry in the two years after leaving Automation World (and Maintenance Technology, where I stayed briefly) looking for what’s new and interesting. The latest cool startup was ThingWorx, which sold to PTC. There are companies doing instrumentation, control and automation well, but not much really new or innovative.
Collins tries out a definition, “Capitalism is a free market system that is supposed to promote competition. In capitalist theory, competition leads to innovation and more affordable prices for consumers. Without competition, a monopoly, oligopoly or cartel may develop.”
This statement contains an amount of belief, but it does describe a market economy in keeping with the 18th Century “liberals” who valued “liberty” over government. The economic theory superseded mercantilism where the government picked winners and losers.
Wishing for more government regulation, Collins reviews history, “This formation of monopolies and oligopolies also occurred in the Gilded Age, when the robber barons controlled entire industries, including oil, railroads, steel and the telegraph. The consolidation did not stop until President Theodore Roosevelt broke up the monopolies using antitrust legislation.”
Today’s monopolies/oligopolies
Collins then surveys today’s consolidations:
- Airlines
- Banks–“In 1995, the six biggest U.S. banks had assets equal to 18% of GDP. Today, they hold assets of about 63% of GDP.
- Search Engines–The search engine business is dominated by Google, which, according to Forbes, owns 90% of the market in non-mobile search worldwide.
- Media Companies–In 1983, 50 companies controlled the vast majority of news media including newspaper, magazines, radio and TV stations, books, movies, videos, and wire services. Consolidation reduced the original number to 24 companies by 1992 and to six companies by 2000. Today, five corporations—Time Warner, Disney, News Corp., Bertelsmann (of Germany) and Viacom control the majority of the U.S. media industry.
- Hospitals
Manufacturing industries also have consolidated:
- Meat Packers–In 1982, the five largest meatpackers controlled 16% of the meat industry. Today four firms control 85% of the beef market, an oligopoly that includes National Beef, Cargill, Tyson, and JBS (which purchased Swift).
- Microsoft
- Intel
- Beer–At that time (1970s), there were 43 firms making beer, and the largest had 25% of the market. Today two firms—Anheuser Busch and Miller/Coors—own 90% of the non-craft beer market.
- Autos–The auto industry is now a global industry where five multinational companies have 50% of the world market. The top 10 auto manufacturers control 70% of the world market. [Note: and now the Chrysler CEO is drumming up support for a merger with GM.]
- Oil and Gas–Exxon merged with Mobil Oil and Conoco merged with Phillips. Along with Chevron and Occidental Petroleum, these four giants have 70% of all oil produced in the U.S. (1,919 barrels).
Collins concludes:
I think it is in the DNA of capitalism to create oligopolies and monopolies, and they can only be restricted by government regulation.
Gary Responds
Often consolidation is a reflection of a mature industry. Not much is happening. It’s an industry ripe for disruption.
A number of entrepreneurs are trying innovative airline models. Who knows when one will “take off”, so to speak?
Doctors are forming small companies, removing outpatient surgery and other services out of the hospitals.
Brewery consolidation means companies run by finance people rather than product people. While many will buy according to price even if the taste is not there, the interesting end of the market is now wide open among small craft brewers. When I travel, I always ask for the local beer.
Microsoft is being pressured by Linux in the enterprise and smartphone and tablet products in the low end. Google docs are a viable alternative to Office.
Intel is pressured on many sides with new competition.
Software as a Service models are pressuring the major automation software companies. And open source hardware and software threaten disruption of those markets.
Innovation often comes from outside the dominant market leader group. It is difficult to predict. But there is no doubt disruption is occurring. What’s that famous phrase? “The future is here, just not evenly distributed.” Yep.
by Gary Mintchell | May 11, 2015 | Automation, Marketing, Safety, Technology
One more note from my visit with Fluke last week. The first day of meetings was devoted to a conversation/focus group with a number of customers, partners and “bloggers” (me).
Voice of Customer
We were introduced to the product development process for its latest vibration-sensing tool. Their process is iterative—discovering problems customers have, watching how people actually do things now, coming up with ideas for solutions, returning to the customers for feedback, then iterating again until the final product is released.
This “Voice of the Customer” is sacred within the company.
Fluke uses a technique called shadowing where Fluke team members follow a customer technician around and record how he/she uses the tool. They notice things like awkward angles or how they play with control buttons with their thumbs.
I’ve talked with another company in the past that sends all members of the executive team out annually to shadow a customer. It helps them see customer successes and feel customer’s pain. That was a great idea.
I’d suggest that Fluke take its shadowing methodology and expand it from development of a specific tool into a routine for senior managers as a way to get ideas and get a feel for the customers.
Otherwise, speaking as a guy with some product development experience, I like what I see.
Not every company is as sensitive to customers as Fluke.
Coffee Blunder
I’m a coffee fanatic. I buy Fair Trade beans and have invested in a coffee shop that will source beans directly from farmers that our buyer has met. In a past life, I was a volunteer coordinator for an organization called Bread for the World. I studied the impact of corporate farms in developing nations.
I say that to explain my passion for a good cup of coffee. Keurig cup-at-a-time coffee makers have swept the nation in popularity. The company also invented and patented K-cups—the single use coffee container. But, I buy my own beans. I’d rather do that than be captive to whatever companies pay Keurig for the opportunity to sell through its distribution. So, I use the reusable metal mesh filter cup.
The K-cups are wasteful, add another layer of distribution waste and expense, driving down the revenue to the farmer.
They are also more expensive to the customer. Whenever technology and marketing come together, it seems that customer lock-in is the result.
Keurig decided to add a sensor, just like the ink jet printer people, that senses the presence of “official” K cups in its latest Keurig 2 machines. This is, of course, to force people to buy coffee only from them.
Sales dropped. The CEO last week said that evidently customers didn’t like that idea. “They like to buy their own beans.” Duh! A little bit of sensitivity to customers would have told them that.
Takeaway
Take a lesson from this tale of two companies. Be more like Fluke (and in the spirit of competition improve on its system). Don’t be the other “Rob Lowe”.
And if you are asked to participate, please do. Your experience will help the entire industry improve.
by Gary Mintchell | May 6, 2015 | Automation, Internet of Things, Manufacturing IT, News, Operations Management, Technology
In the rush of a lot of news and a vacation thrown in, I’m still digesting news from Hannover Messe in April. Microsoft had called and asked if I could stop by for an interview, but unfortunately I was not at Hannover.
Below is a Microsoft blog post. The writer posits three industrial ages, and then he surprises us by announcing the arrival of a fourth. Interestingly, it is at Hannover two years ago where Industrie 4.0 sprang forth into our consciousness. Here is Microsoft’s take on the fourth generation of manufacturing along with a few specific examples of what it means in practice.
I think this is a good, though not necessarily complete, look at aspects of Industry 4.0.
From the blog
When we think about what it takes to build a successful business, there were three main eras, which characterized important shifts in the global marketplace. The first was the industrial revolution when people began to mass-produce and distribute goods with tremendous scale and efficiency. Since everyone received information at the same time and speed was not an issue, change wasn’t particularly fast.
What followed was the Information Age where people weren’t just using technology to drive production efficiencies; they were using it to drive information efficiencies. During this time, competitive advantage began to shift to our access to information.
Today, information and data are ubiquitous which has had a tremendous effect on both our digital work and life experiences. The world has formed a giant network where everyone has access to anyone and everything. Some people refer to this as the Connected Age.
However, the ubiquity of data and connected devices, coupled with important advances in machine learning, are powering a new set of capabilities called the Internet of Things (IoT). IoT is now at the forefront of a fourth era in business productivity. With IoT, companies worldwide are transforming the way they plant crops, assemble goods and maintain machinery. Now, several Microsoft customers and partners, including Fujitsu, KUKA Robotics, and Miele, are announcing IoT initiatives that will change the way people live and work.
IoT’s influence on those companies and many others is on display this week at the large industry fair Hannover Messe, where the term “Industry 4.0” was first coined. Everywhere we look there are examples of physical assets integrated with processes, systems and people, and exciting possibilities are being fueled by this transformation.
At this event, Microsoft is showing how we’re helping manufacturers innovate, bring products to market more quickly and transform into digital businesses. Aided by unlimited compute power and rich data platforms, the creation of “systems of intelligence” that enable reasoning over vast amounts of data are empowering individuals and organizations with actionable insights.
Blending physical with digital
Fujitsu is bringing together its Eco-Management Dashboard, IoT/M2MP platform, Microsoft cloud services, and Windows tablets in a way that can enable managers, engineers, and scientists to improve product quality, streamline systems, and enhance functionality while reducing costs. For example, at its facility in Aizu Wakamatsu, Japan, Fujitsu is able to grow lettuce that is both delicious and low in potassium so that it can be consumed by dialysis patients and people with chronic kidney disease. They can track all of the plant info from their Windows tablets through the cloud. These solutions will also be able to help other agriculture and manufacturing companies transform their businesses through innovation.
Artificial intelligence is no longer a fantastic vision for the future—it is happening today. KUKA, a manufacturer of industrial robots and automation solutions, is using the Microsoft IoT platform to create one of the world’s first showcases that blends IT with robotic technologies into a smart manufacturing solution with new capabilities.
Intelligent Industrial Work Assistant (LBR iiwa), a sensitive and safe lightweight robot, uses precise movements and sensor technology to perceive its surroundings around a complex task like performing the delicate action of threading a tube into a small hole in the back of a dishwasher. Errors in the supply chain are addressed in real time through Windows tablets, making the automated process faster and easier. Through this demonstration, KUKA is highlighting how its LBR iiwa can collaborate with humans to jointly perform the task as peers working together without being controlled by a human or using a vision system.
Eyeing physical assets through a digital lens
For companies trying to understand how this approach can help, look at the infrastructure you already have. How can these assets become connected and intelligent? What kind of data would help to reduce cost, or increase agility? How can you use insights to grow revenue in existing operations, or offer those insights to customers and create new revenue streams?
The focus here is on transforming existing business models and adding cloud-connected services. In the age of Industry 4.0, manufacturing and resource companies will no longer compete over the products and features they offer, but on new business models they can either pursue themselves or offer to customers.
by Gary Mintchell | May 4, 2015 | Automation, Data Management, Internet of Things, Manufacturing IT, Networking, News, Operations Management, Technology
For being so quiet for so long, the OPC Foundation is certainly hitting the news often lately. There was news about a couple of open-source initiatives. Then the Foundation itself opened up a little with an “open-shared” program.
Then it was announced as the communication platform of Industry 4.0 in Germany.
Now a couple European automation rivals—Beckhoff Automation (Germany) and B&R Automation (Austria)—have made OPC news.
Taken in sum, these announcements plus the earlier ones reveal the importance of OPC to industrial communication. It became a standard for moving important data from control systems to human-machine interface systems and then on to SCADA and MES systems.
With the introduction of UA built on modern software technologies including built-in security and embeddable format, the technology everyone used but also everyone dissed finds itself on the cutting edge of modern connected industrial Internet strategies.
OPC and Beckhoff
News coming from last month’s Hannover Messe included this joint announcement from OPC and Beckhoff.
OPC UA is about scalable communication with integrated security by design up to MES / ERP systems and into the cloud, EtherCAT is about hard real-time capability in machines and factory control systems. Both technologies complement each other perfectly.
Industrie 4.0 and Internet of Things (IoT) architectures require consistent communication across all levels while using Internet technologies: both in as well as outside of the factory, for example to cloud-based services. That exactly is what the OPC Foundation and the EtherCAT Technology Group (ETG) want to account for by defining a common definition of open interfaces between their respective technologies.
At the Hanover Fair Thomas J. Burke, President and Executive Director of the OPC Foundation and Martin Rostan, Executive Director of the ETG signed a Memorandum of Understanding in which both organizations agree to closely co-operate developing these interfaces.
OPC and B&R
Not to be outdone, B&R Automation issued a press release announcing it will be supporting the OPC Foundation’s new real-time technology working groups, whose goal is to add real-time capability to the OPCUA communication standard. This will involve two key additions to the OPCUA standard. The first is a publisher-subscriber model; the other is utilization of the IEEE 802.1 standard for time-sensitive networking (TSN).
B&R will be contributing its real-time expertise to the working groups. “The updates to the OPC UA standard will benefit from our years of experience in developing real-time solutions,” says Stefan Schönegger, marketing manager at B&R.
OPC UA uses a publish/subscribe network model. B&R is the main proponent of PowerLink. PowerLink uses publish/subscribe technology, too. So, B&R wants to show compatibility.
“This is a fundamental requirement for the M2M communication you find in integrated systems such as packaging lines,” explains Schönegger.
In order to fulfill real-time requirements, the OPC UA standard will make use of the IEEE 802.1 TSN standard. “At the moment, TSN is still a working title for a group of new IEEE standards designed to provide native real-time capability for the IEEE 802 Ethernet standard,” says Schönegger. This would allow for a seamless transition to substantially faster Ethernet standards such as POWERLINK for field-level communication and demanding motion control tasks.
Beyond the automation industry, TSN is currently also being evaluated by the automotive and telecommunications industries. “The first cars based on TSN are expected to hit the market in the very near future,” reports Schönegger. This would help secure the widespread availability of this technology. In addition to B&R, the new OPC working groups will be also supported by other leaders in the field of automation, as was announced by KUKA on April 13, 2015.
OPC UA already plays a central role in the IT-related areas of modern production systems. “The addition of TSN and the publisher-subscriber model will greatly expand the range of potential OPC UA applications,” says Schönegger.
Takeaway
What all this means is that OPC can now become even faster and more usable than before. The little protocol that everyone uses and everyone complains about is getting cred as it becomes more modern. These technological advances should make it more valuable. And that will be significant in this new connected enterprise era.
by Gary Mintchell | Apr 10, 2015 | Automation, Operations Management, Software, Technology
Tim Sowell, VP and Fellow at Schneider Electric Software, always writes thoughtful and forward-looking blogs about the state of manufacturing software. In this one, he discusses taking a lead from the human body “with reducing risk through an enterprise nervous system for industrial architectures.”
He says, “If we think about it – the human nervous system has over a billion neurons spread throughout the body to help control its various functions. If the brain had to deal constantly with a billion signals, it would “crash” the system. Thus, nature has designed a system where functions are layered in an architecture that helps create a robust sense-and-response mechanism.”
I’ve added a few books for your intellectual broadening about brain science. More and more, those of us in the more “physical” systems business are getting metaphors from biological systems. The human system is a great metaphor.
On Intelligence, Jeff Hawkins (founder of Palm)
Decartes’ Error, Antonio Damasio
The Feeling of What Happens, Antonio Damasio
And while I’m at it, Loosely Coupled, Doug Kaye, regarding Sowell’s later statements.
Sowell has lately been asked about flat vs. layered architecture, and a similar question around one platform vs. multiple platforms. Here are his points:
• Layers allow me to contain change
• Layers allow me to manage complexity, divide and conquer
• Inter-operable layers reduce technology lock-in and increase options for clients
• Federated means lower level has autonomy but cannot violate higher level rules and principles .
He continues, “The world is made up of layers of information, interaction, and decisions . It is important to optimize across a layer, so interaction with the “things” at that layer is focused, efficient, and in context of that layer in content and time. As you transverse layers so does the context of information, the interaction between different “things” and complexity or focus change.”
Further, “In the industrial automation/ operations control has it’s layers of executing with the different equipment components in the process unit, requiring speed and tight coupling. As we go up the layers to supervisory then MES and Information, the context changes, responsibility for decisions increases, but time context changes. The “things” interacting change, combined with more complex messages with more context.”
And here is Sowell’s conclusion. This is very much in tune with what I see as the direction software is going. Interoperability being the key.
“Autonomous functions (layers) which have Interoperability is key for fast relevant actionable decisions to take place with the most efficiency. So why do we ask about one, when we should design in layers but understand the layers the context, things, and actions. But understand how the layers must be “loosely coupled but aligned” so that operational execution aligns with business strategy in near real time.”
