Originally posted on December 17, 2015 by Georg Kube – Global Vice President – Head of Industrial Machinery & Components Industry at Industrial Machinery &amp; Component Companies are powering the Fourth Industrial Revolution | Georg Kube | LinkedIn
Discussions about digitization today are mainly technology discussions. And while sensors, protocols and cyber-security are all important aspects, I believe that companies should shift their focus to the business-side of digitization.
It is estimated that by 2020 there will be an additional opportunity of 1 trillion $US with and through the internet of things. So the question is: Where is that opportunity? And how can Industrial Machinery & Components (IM&C) companies take their fair share?
To answer that question, let‘s take a look at what digitization really means for IM&C companies: In the world of manufacturing after mechanization, electrification and computerization, it is now the internet of things that is driving what we call the FOURTH INDUSTRIAL REVOLUTION. Putting sensors, edge computing and communication on machines, equipment and complete factories, is for ever changing how we think about the very nature of our business. And it is companies in the IM&C industry which are actually powering this revolution. Basically by doing 2 things:
- They are building the machines, equipment and automation components – digitally enabled – which companies in almost every industries use to innovate business processes and business models.
- And they are also using digitally equipped machinery themselves to pioneer innovative business processes to become more efficient and effective
So the opportunity really lies in 2 areas:
- There is top line revenue growth through better and more differentiated products and services
- And there is bottom line cost savings through more efficient and effective business processes
It is safe to say, that the digitization of business is the biggest opportunity for IM&C companies since the middle of the 20th century! But what does it take to win in the digital era and to exploit the opportunity?
After working with clients on that topic for many years I can see that there are really four patterns that are emerging – four things that successful companies do when they go down the road of digitization:
- First they look at their Business Models: How can they create and deliver more and better value to their customers?
- Then they look at their Products: Where should they add digital capabilities to enable the new business models or simply make their products better and more differentiated?
- They look at their own Business Processes: How can they become more efficient by using data from machines and equipment?
- And finally they look at the way they organize and support their own workforce.
Great examples for this type of thinking are STILL Forklifts with their new CubeXX platform. Or Harley Davidson with what they have done to their manufacturing fascility in York Pennsylvania.But doing this requires a lot of change and of “leaning into the hurricane” as one Harley executive called it.
And the natural enemy to change is complexity: Complex Organizations, complex processes and also complex IT systems. This why at SAP we believe that in order to master this change successfully, companies going down the path of digitization should also look at a simplified systems architecture that consists of five basic elements:
- The first element is to establish what we call the DIGITAL CORE. An enterprise management platform which is agile, flexible, allows real-time analytics and provides one source of the truth across the whole organization
- Connected to this will be the assets inside the own organization, but also the products deployed at customer site. Feeding operational data into the digital core and triggering core processes.
- Also connected will be the customers, who want to interact through multiple channels in a flexible way and who expect new usage based business models
- The next important element to connect to the digital core is the supplier and partner base, because in the digital era no company alone can deliver on the ever increasing customer demand. So it is key to enable a flexible collaboration from early design, through manufacturing all the way into service delivery
- And finally it is important to connect the own workers and employees, who will be mobile, require immediate insight and empowerment and sometimes are not even part of the core enterprise.
I firmly believe, that companies who transform themselves and bring all these elements together will be able to benefit from the digitization and capture new top line revenue as well as bottom line savings by running sophisticated scenarios.
What do you think? Let’s discuss.
More details in my recent WHITEPAPER