Written by Stephanie Reshel
Originally published on May 23, 2017 at The D!gitalist Magazine by SAP
Digital technology is infiltrating almost every industry, and it’s no exception for the industrial machinery and components (IM&C) sector. Digitalization and cross-industry ecosystems are creating innovative opportunities for IM&C firms – mainly those businesses providing automation and control solutions, machinery, and equipment for industrial manufacturing, energy, and infrastructure companies.
According to the recent report “IBM and SAP in the Industrial Machinery and Components Industry,” some key trends are reshaping the IM&C industry:
- Reduction in plant and equipment size
- Localization of manufacturing
- 3D printing, robotics, and knowledge work automation
- Predictive analytics
- Rapid product development and enhancement
Digitalization: An opportunity or a threat?
These trends are seen as an opportunity for some and a threat for others. Either way, these factors are pushing many industrial companies to rethink their strategic plans in order to keep up with today’s rapidly changing digital economy.
To differentiate them from the competition, the report states that IM&C companies should focus on five strategic priorities:
- Customer focus: Consider the end customer in every decision across the organization (not just sales decisions)
- Mass customization: Serve the “segment of one” and expand customization beyond traditional engineer-to-order environments to include all manufacturing areas
- Smart products: Use digital technology to your competitive advantage; differentiate your offerings with digital capabilities such as technical and operational status or business system connectivity
- Smart factories and supply chains: Digitally connect production and logistics to the rest of the business for predictive planning and quicker responsiveness
- Business model innovation: Expand from strictly selling products to providing revenue-generating service or subscription-based business models
Change your business mindset
This all sounds good in theory, but it’s not easy to simply change your company’s strategic plans – especially in a traditional sector. It takes willingness by devoted torchbearers to get things started, extensive research and cross-industry exploration, and most likely the persuasion of some top decision makers.
It all starts with changing your business mindset from a product-based mindset to an IoT-based mindset. The Internet of Things (IoT) enables the freedom to reimagine your operations and offerings in entirely new ways. Smart, connected products require new ways of thinking about value creation, capture, and revenue generation.
Connected devices can streamline manufacturing by making the entire end-to-end production process seamless. Information can be automatically transferred back and forth from the lab to the manufacturing floor and from the business to the customer. Truly integrated manufacturing can connect the manufacturing systems with research and product development while also connecting sales, marketing, and customer service with end customers to streamline product development and enable real-time adjustments to reduce product development time.
Here’s the difference: With a traditional product mindset, the path to profit is to sell the next product. With an IoT mindset, the path to profit might be to capture recurring revenue through a service or subscription-based offering, while having the ability to adjust that offering in real time. For example, see how one company went from selling air compressors to selling air-as-a-service.
Leverage ecosystems: You can’t exist in isolation
Like most businesses, IM&C companies don’t exist in isolation. They belong to a vast business network or ecosystem that may include resource owners, exploration companies, suppliers, producers, processors, and a host of other key partners. Digitalization broadens that ecosystem to include technology companies, service providers, and other potential collaborators that you may not have previously considered.
Build the right connections and understand your partners’ capabilities in order to take advantage of dynamic business models that enable innovation. Also work toward making your business more agile in order to have the organizational flexibility to evolve and partner in new ways to capture more business value.
According to the IBM and SAP report, value can be captured in three ways in an ecosystem:
- Transactions directly between partners within the ecosystem
- Through an orchestrator that deals directly with consumers
- Using a business model that combines these two techniques
Don’t underestimate the importance of your ecosystem. The report states that 69% of global CEOs rate ecosystems as the most impactful business trend. The most successful businesses will be those that are clear about their intentions, actions, and relationships within an ecosystem.
Cognitive computing changes everything
As IM&C ecosystems expand and digital offerings evolve, a growing amount of valuable data is produced by smart products, equipment sensors, IoT operations, connected factories, and digital supply chains. We’re quickly reaching a point where the vast amount of data collected is too huge to use productively. However, cognitive computing changes all of that. It extends the human ability to sift through the information and actually gleans knowledge and expertise from the data.
Cognitive computing systems have three capabilities that differentiate them from traditional computer systems:
- Understanding: The ability to navigate the complexities of human speech and text and put content into context
- Reasoning: The ability to be presented with new information and compare it with existing data to meet objectives
- Learning: Unlike hard-wired traditional computer systems, cognitive systems progressively learn from each new piece of information, action, iteration, and outcome
Understand your strategic goals
Despite the bells and whistles of the latest technology, don’t forget your top priorities when it comes to your strategic goals. The customer experience is number one, so corporate strategies and product or service offerings should be structured around the end customer, not necessarily the technology or software capabilities. Make sure to build experiences that the customer will embrace – but ensure you have the capability to collect and curate the right data to support your corporate vision.
The combination of digital technology and cognitive computing opens the door to huge opportunities for IM&C companies to reimagine the way they operate and create an agile business that can adapt to changing industry conditions in today’s digital world. Are you ready to embrace those opportunities?
Learn more about IBM and SAP in the Industrial Machinery and Components Industry.
Find out more about Digital Transformation with IBM and SAP.
About Stephanie Reshel
Stephanie Reshel is senior director for Strategic Ecosystem Marketing at SAP. She drives joint marketing strategies globally with the top strategic services partners. Follow her on @SReshel.