Emerson Champions Digital Transformation

Emerson Champions Digital Transformation

This week is Emerson Global Users Exchange week in San Antonio—with a quick side trip to Houston and a tour of some refineries implementing IoT applications with Hewlett Packard Enterprise. The theme of the week is Digital Transformation just where I reside—at the convergence of OT and IT.

Emerson Automation Solutions (new-ish name for Emerson Process) continues to flesh out its drive to help customers achieve “Top Quartile” performance through Digital Transformation.

It doesn’t just talk digital transformation. The company builds out its offering through product development, services / engineering, and acquisitions. Similar to other major suppliers, it has been making strategic acquisitions rather than taking minor stakes in companies.

Mike Train, Executive President, set the themes and talked about his optimism in the business and industry. Train was recently promoted to COO of Emerson Corporation and introduced Lal Karsanbhai as the new Executive President of Emerson Automation Solutions.

My friends at Putnam Publishing are doing the show daily this year. Flash back to 8 years ago when I was still at Automation World nursing a torn quadraceps muscle doing the show daily in San Antonio. You can see the news from the team here.

Peter Zornio laid out the logic of an “Actionable Roadmap” at a subsequent press conference. The company’s PlantWeb ecosystem continues to grow and develop becoming the key element of Emerson’s Digital Transformation strategy. Below is from the press release.

The Digital Transformation Roadmap includes consulting and implementation services to help companies develop and execute a tailored digital transformation plan to reach Top Quartile performance.

“Our customers have different starting points and levels of maturity when it comes to evaluating and implementing digital transformation strategies,” said Lal Karsanbhai, executive president of Emerson Automation Solutions. “Emerson’s proven digital transformation approach provides the ultimate flexibility while pinpointing the optimum path for each customer, based on their objectives, readiness and overall digital maturity.”

In an Emerson study of industry leaders responsible for digital transformation initiatives, merely 20 percent of respondents said they had a vision, plus a clear and actionable roadmap for digital transformation. Additionally, 90 percent stated that having a clear roadmap was important, very important or extremely important. Absence of a practical roadmap was also cited as the No. 1 barrier for digital transformation projects; cultural adoption and business value round out the top three barriers to progress. While all respondents were actively conducting pilot projects, only 21 percent had moved beyond that stage into new operating standards.

Leveraging customer engagements with successful digital transformation programs, Emerson defined a structured, yet flexible approach to help customers focus on priority areas with a practical roadmap tailored to their business needs and readiness. The goal is to help companies use technology to reach Top Quartile performance, measured by optimized production, improved reliability, enhanced safety and minimized energy usage.

“There is a clear global urgency among executives to harness innovation to improve performance, but many companies feel stalled for lack of a clear path,” Karsanbhai said. “Customers who engage with our operational certainty consultants quickly gain clarity on their best bets for digital transformation and a realistic implementation plan to accelerate time to results.”

Digital Roadmap Combines Technology with Industry Expertise

Emerson’s Digital Transformation Roadmap has two focus areas: business drivers and business enablers. Business drivers look at capabilities and performance relative to industry benchmarks in key areas: production management, reliability and maintenance, safety and security, and/or energy and emissions. The business enabler focus looks at capabilities in organizational effectiveness and systems and data integration. For each, Emerson has identified detailed criteria to measure customer performance along the digital journey – from conventional to best-in-class to the highest level: digitally autonomous operations.

Companies can start the digital transformation journey wherever they are, from starting small in one facility to address key issues, such as pump health or personnel safety mustering; to exploring companywide programs across an entire business driver, such as reliability of critical assets; to driving enterprise-wide adoption of cloud-based technologies and analytics for overall business transformation.

Emerson’s Operational Certainty Consulting Group provides a host of services, from Digital Transformation Jumpstart workshops to deep-dive change management to deployment and adoption of new digitally enabled toolsets. Customers partner with Emerson not only for its consulting expertise, but also to implement its Plantweb™ digital ecosystem, which offers a robust software, data analytics, and product technology and services portfolio to solve real-world problems while improving plant performance.

Emerson’s proven capability is bolstered by a global implementation team that includes more than 80 solutions architects and analytics integration engineers, backed by a project and service engineering workforce that exceeds 8,400. Important foundations for digital transformation have been established with producers around the world. For example, Emerson has collaborated with customers to deploy more than 37,000 wireless network installations and over 175 integrated reliability platforms and applications, to name a few.

Emerson Champions Digital Transformation

Advantech Morphs Strategy for Internet of Things Development

Taiwan-based Advantech’s leaders have always been intellectual strategic thinkers. They have clued me in on several good management books. The company is an industrial computer company with industrial data acquisition and I/O devices that has successfully positioned itself as an edge device leader in the Internet of Things space.

The company has announced its strategies for entering the next phase of IoT development. To expand local operations, Advantech will fully activate the deployment of branch locations throughout various regions. In addition, a co-creation model will be adopted to construct the Industrial IoT (IIoT) ecosystem and strengthen the influence of vertical domains.

Advantech’s Executive Director of the Board, Chaney Ho, stated that since taking over as executive director last year, he has been focusing on developing regional strategies and establishing development goals and directions for each region, all of which are based on their scope.

In regions with a larger scope (Europe, United States, and China), to reinforce the Advantech brand recognition in IoT and Industry 4.0, talent cultivation and an increased presence in local sales are the company’s primary goals to actively respond to recent developments in Industry 4.0 trends in the EU, plans by the U.S. government to shift production back to America, and the China One Belt One Road policy.

For medium and small-scale regions, Mr. Ho stated that Advantech will develop Japan, South Korea, India, and Russia to generate $130 million in revenue. The company also plans to further increase investment in Malaysia and Thai IIoT organizations and new branch locations in Vietnam, Russia, and Turkey will be established through mergers and acquisitions as well as joint ventures.

Regarding developments in the European region, Miller Chang, President of Advantech’s Embedded-IoT (EIoT) Group, expressed that a sector-lead strategy has been practiced by the EIoT group since 2014. Various product divisions from headquarters have been fully connected with overseas frontline business teams and compound annual growth rate from 2014 to 2017 has reached 25%.

Key development points for the next three years in Europe are:

1. Elevating operation levels in five key regions, the UK, France, Germany, Italy, and the Netherlands.
2. Establishing branch offices in emerging European regions for conducting business and providing technical support.
3. Focusing on key industries, such as gaming, medical, transportation, and automotive, in Germany, UK, and the Netherlands.

With respect to development in the Greater China Region, Linda Tsai, President of Advantech’s IIoT Group, believes that the embedded systems/hardware from Phase I IOT development as well as IoT solutions platforms from Phase II are Advantech’s “double-growth engine” in IIoT development. Following this, three key strategies have been proposed.

1. Implement and IIoT sector-lead organizational development model expanding industry management and optimize regional resource allocations,
2. Set successful examples in the Greater China Region to accelerate the marketing of hardware/software and imaging solutions.
3. Actively cultivate local personal to become mid-to-high level supervisors to expand into the Chinese market.

Fantine Lee, Manager of Advantech’s Corporate Investment Division, pointed out that Advantech will continue to actively promote platform management during Phase II IoT development, SRP co-creation, and the co-created digital transformation of vertical industry cloud services during Phase III through the co-creation model. As for vertical industry, cloud service companies to be co-created during Phase III, Advantech plans to establish subsidiaries in Taiwan and China and will include domains such as Smart Manufacturing, Smart Environmental Protection, and Smart Retail. These companies will be managed together with Advantech’s co-creation partners. Furthermore, opportunities in other domains, such as Smart Hospitals, Smart Factories, Industrial Vision Systems, Consultant Training, and Integration Services will continue to be promoted and co-created.

Miss Lee further stated for Phase II development, Advantech’s WISE-PaaS cloud platform will serve as the foundation for building a comprehensive value chain for SRPs. This year, third-party software and WISE-PaaS platform integration with SaaS suppliers and collective sales/agents will be introduced at an accelerated pace. In addition, partnerships with software developers specializing in monitoring and diagnosing connected equipment, energy management, data analysis, machine learning, and other vertical industries will be established.

Industrial Cyber Security Holds Center Stage At Year’s End

Industrial Cyber Security Holds Center Stage At Year’s End

Last week I wrote about the cyber attack on a safety integrated system probably in Saudi Arabia. There has been another attack. When media relations people saw that I had written about cyber security, I started receiving more releases.

Cyber security

Here is some additional commentary by Eddie Habibi, CEO and founder of PAS Global. That company has moved strongly from alarm management investing heavily in building a cyber security practice.

“Since 2010, attackers have been intent on learning how process control networks in critical infrastructure plants work, what systems are in place, where vulnerabilities exist, and how best to manipulate these systems to affect plant safety and performance.  Attackers have now moved beyond reconnaissance and are leveraging their acquired knowledge of control networks to interrupt production and create safety incidents.  They are targeting systems that in many cases produce electricity for our businesses, gasoline for our cars, or clean water for our homes.

The TRITON (a.k.a. TRISIS) malware attack underscores the capabilities that attackers have acquired and the fact that traditional security controls – namely air gapping and security by obscurity – are no longer sufficiently effective.  As TRITON targets an integral part of the independent protection layers that keep plants safe, this should raise red flags with every critical infrastructure company in the world.

One of the first steps companies must take is to get better visibility into the cyber assets in their plants. Eighty percent of the assets in a plant are outside of traditional IT cybersecurity programs.  This is clearly unacceptable given the threat landscape we face today. Once companies gain visibility, they can begin to implement fundamental security controls such as monitoring for unauthorized change or discovering hidden vulnerabilities.  Otherwise, malware such as TRITON will continue to find fertile ground for causing production disruptions and even environmental or physical harm.”

Cyber security challenges for practitioners

Part of my daily contact with PAS Global’s PR person included this tidbit from Habibi.

With these seismic attacks looming over manufacturing plants/facilities and other critical infrastructure, PAS Global has identified the top 8 critical challenges ICS directors are facing:

  • Lack of overall visibility of ICS vulnerabilities
    Vulnerability exploits are under reported
  • False sense of security in many ICS environments
  • More disclosures than capacity to investigate
  • Limited visibility into ICS vulnerabilities and risks
  • Vulnerability investigation is manual and research-intensive
  • Limited visibility into vulnerability remediation effectiveness
  • Manual, inconsistent patch management

HatMan Malware

And this from Emily S. Miller, Director of National Security and Critical Infrastructure Programs at Mocana:

ICS-CERT’s analysis of the HatMan malware revealed some interesting and novel tidbits. Not only did the actor develop a ‘more traditional PC-based component that interacts with the safety PLC,’ but the malware also contained components specifically designed to compromise the safety device itself, which allowed changes to the device firmware. The fact that this actor has the capability to access the safety instrumentation device, and potentially make changes to the device firmware unnoticed, should make critical infrastructure owner-operators sit up and take heed. Yes, in this case the malware tripped the safety systems and was noticed, but who’s to say the actor won’t learn from its mistakes or hasn’t already? Current recommended mitigations promote defense-in-depth strategies. While these are absolutely pieces of the puzzle, things like network monitoring and segmentation alone are clearly not sufficient when the bad actors keep getting in and doing bad things to both the devices and the data contained therein. We have to do better about both defending the network AND protecting the devices themselves.”

Link to How Mocana Protects graphic on Dropbox.

Yet more cyber attacks in the news

Further communications from the agency for PAS Global. I appreciate the humor. “I didn’t want you to go a day without hearing from me. What a concerning week we are having for critical infrastructure!”

The warning is from Nyotron, which says it has spotted a threat actor with likely links to Saudi Arabia, Iran, or Algeria using a repurposed malware tool to target specific critical infrastructure organizations in the Middle East.

“We’ve seen a seven-fold increase in the number of cyberattacks on industrial control systems (ICS) since 2010. What makes this increase particularly alarming is the enhanced level of sophistication of the attacks and the success they have shown in achieving their goals.

The fact that infected USBs are behind the Copperfield attack underscores the lack of adequate, foundational security within industrial facilities. Critical infrastructure security is clearly not trending in the right direction. 

The simple fact is that 80% of cyber assets in a facility are highly proprietary, do not work with IT security controls, and are largely invisible to security personnel.  If we cannot see these assets, how can we hope to secure them?  If we cannot secure them, then we are staring at a tumultuous 2018 because the bad guys are savvy to the insecurity of these systems.”

Meanwhile, here is another defense

Most experts I talk with discuss the need for a defense-in-depth strategy. Occasionally entrepreneurs in the field wax enthusiastically about their particular solution. Albert Rooyakkers is one of those intense entrepreneurs who has designed an industrial control product with cyber security at the heart of the design.

Here is the latest news from Bedrock Automation.

It has announced Bedrock Open Secure Automation (OSA) firmware will include intrinsic Anomaly Detection (AD).  Bedrock OSA AD will be available as standard integrated functionality that continuously monitors the controller’s network and system time t0 detect intrusions and anomalous behavior.

“Preventing control system intrusion is fundamental to holistic cyber security.  In addition, users need to know when the system security is being challenged.  This is the role of anomaly detection.  At no additional cost or complexity for the user, Bedrock’s AD delivers additional assurance that no one is tampering with your automation,” said Rooyakkers.  Bedrock Anomaly Detection includes the following functionality: 

  • Dynamic Port Connection Monitoring, which records all attempts to connect any controller or communication point and captures identifying information on the intruder
  • Network Port Scanning, which detects if hackers are scanning for open ports that might provide access to the control network
  • System Time Monitoring, which detects attempts to manipulate log files to conceal malicious activity
  • Cryptographic Controller Engineering Key Lock, which permits only users with valid user credentials to change the configuration and operation mode of the controller and records all access
  • Intrusion Event Logging, which records all detected anomalies and reports them to SCADA software through OPC UA and standard database access for historian, alarming, and trending functions.  Additionally, a tri-color status LED on the faceplate of Bedrock Controllers provides indication locally whenever an intrusion is detected.

Anomalous behavior detected at the controller level signifies a high likelihood of a cyber security event. Embedding detection into the controller provides advanced cyber defense while reducing complexity and lifecycle cost.  Bedrock AD will be standard on all Bedrock systems and is available as a free firmware upgrade to installed systems as part of Cybershield 3.0 in March 2018.

Rockwell and Emerson Head Merger and Acquisition News

Rockwell and Emerson Head Merger and Acquisition News

I was putting together this piece on mergers and acquisitions when I received word that Emerson had been in conversations to acquire Rockwell Automation. Final price was $27.5 billion. That wasn’t sweet enough. The Rockwell board turned it down.

Note: I feel vindicated. I told an investment company once that they could never touch Rockwell with their war chest of $1 billion. Figured I was safe on that one.

I don’t see Rockwell as wanting to sell. Despite a friend telling me for 15 years that it had to sell, I just never saw that necessity. But I do think that consolidation is rampant in the industry right now. Schneider Electric and ABB have been acquiring strategic companies to compete with Siemens. An Emerson / Rockwell combination would have awesome market share.

Because of weaknesses elsewhere, I’m not sure either really needs the deal to survive. But I think the industry is coming to that point. My thoughts were that the most logical suitors for Rockwell were Emerson and ABB. Sources at ABB have told me that they did the evaluation (of course) and figured that Rockwell would be hard to digest. So, it went with B+R Automation.

My feeling is that this deal is not finished. But it will settle for a while until Rockwell’s share prices stabilize. Then we’ll see. Trying to integrate that Rockwell culture would be a supreme challenge for the best managers, though. It’ll be interesting.

Meanwhile, I received a quarterly update from PwC regarding global industrial manufacturing deals with disclosed values greater than $50 million.

What follows is from the PwC report.

Industrial manufacturing M&A results for Q3 2017 displayed much of the same as the previous quarter with relatively flat value and volume levels. Deal value came in at $16.5 billion while the number of deals announced were 57 compared to 55 in Q2 2017.

Cross sector global and US deal volume has modestly increased for the third consecutive quarter indicating the appetite to seek out M&A plays is still active and healthy. US cross-sector deal volume is substantially up for the first nine months of 2017 vs. 2016 which correlates with
the double digit volume increases seen in the industrial manufacturing sector over the same period.

Although there is an eagerness to investment in technology and innovation, industrial manufacturing remains somewhat risk-averse, especially as it relates to targeting larger size investments. As highlighted in our second quarter report, the slowness of implementing
trade, regulatory and tax reform in the US and the uncertainty of its implications continues to be a barrier to some. Conversely, others have accepted its existence and shifted their investment strategies to mitigate against these uncertainties.

• Deal value for the first nine months of 2017 was $52.6 billion, 18% lower than the first nine months of 2016, while deal volume saw an increase from 150 deals to 170 deals from the first nine months of 2017 vs. 2016.
• Deal value for Q3 2017 was $16.5 billion compared with $16 billion in Q2 2017. Deal volume increased slightly from 55 deals in Q2 2017 to 57 deals in Q3 2017, a 4% increase.
• The average deal size in Q3 2017 was 21% lower than the 2017 YTD quarterly average of $367 million, indicating a preference towards smaller transactions.
• There were four megadeals (deals greater than $1 billion) in Q3 2017 with an aggregate transaction value of $7.7 billion. Three of the deals were crossborder deals.
• The largest deal announced in Q3 2017 was the Swiss firm ABB acquisition of US-based GE Industrial Solutions for $2.6 billion.
• Asia and Oceania remains the most active region, accounting for 56% and 35% of M&A deal volume and value during Q3 2017.
• There were 14 megadeals announced in the first nine months of 2017 ($24.3 billion) compared to 17 in the same period of 2016 ($55.9 billion).
• Seven of the top ten megadeals in the first nine months of 2017 include China or the US as a part of the transaction vs. four over the same period in 2016.

Strategic investors continue to account for the largest share of deal activity in the sector with $12.9 billion of value and 27 deals for the quarter. As shown below, this reflects 78% of value and 65% of volume. Financial investor deal value for the first nine months of 2017 was $15.9 billion vs. $12.8 billion over the same period in 2016. This contribution is consistent with previous quarters and implies the market is more attractive for companies who can create synergies.

Deal value in the industrial manufacturing sector continues to be constrained as deal makers are still wary of the current investment playing field. Many of the same political uncertainties, particularly in the US and Europe, linger and have been the primary influence in declining average deal size over the last three quarters of 2017.

For foreign investors looking to capitalize on attractive businesses in the US there are positive and negative factors simultaneously working against one another. On the positive side, the Federal Reserve sees confidence in the US economy and plans to gradually continue to increase the federal funds rate. However, negative influencing the deals environment is the current administration’s inability to progress its agenda related to tax, trade, and healthcare.

We project the industry will close out the year in similar fashion to each of the three quarters of 2017 unless we see a catalyst event in the market such as tax reform.

Authors
Paul Elie, US Industrial Manufacturing Deals Leader

Bobby Bono, US Industrial Manufacturing Leader

Barry Misthal,Global Industrial Manufacturing Leader

 

Rockwell and Emerson Head Merger and Acquisition News

People Are The Key to Digital Transformation According to Emerson

The era of improving plant performance and profitability through efficiency—that is by cutting costs—is over. So stated Emerson Automation Solutions executive president Mike Train while kicking off the 2017 edition of Emerson Global Users Exchange in Minneapolis.

“The past 30 years have brought us fantastic advances in the manufacturing sector, including greater operating efficiencies enabled by automation,” said Train. “But the incremental benefits gained are diminishing. The pressure is on industry leaders to take the next step to the game-changing performance made possible by digitally empowering the workforce.”

Emerson has researched industry performance and drew a profile of Top Quartile industry performers – those in the top 25 percent of performance among their peers – Emerson has identified five essential competencies as critical to realize the value of “digital transformation”:

• Automated Workflow: Eliminate repetitive tasks and streamline standard operations to focus personnel on exceptions and other opportunities that require human intervention

• Decision Support: Leverage analytics and embedded expertise to provide actionable insights that reduce complexity and enable higher quality, faster decision-making

• Workforce Upskilling: Identify approaches that empower workers to acquire knowledge or experience faster and more effectively, to support higher-level and collaborative decision-making

• Mobility: Provide secure, on-demand access to information and expertise regardless of location, enabling collaborative workflows

• Change Management: Combine strategies, processes, tools and expertise that, in the right combination, simplify and accelerate the institutionalization of operational best practices

As always, this is a huge customer conference. There is abundant energy. Informal networking occurred all over the place. At this time, Emerson is the most vibrant of the companies in this area. It’ll be interesting to watch how, or if, business continues to grow from the company’s continued vision of industry.

More coming. Gotta listen to the next speaker.

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