LNS Research Principal Analyst, Andrew Hughes details how to build out your Digital Transformation with the first step-Smart Connected Operations.
Digital Transformation is hot. Everyone is talking about it in every industry. In manufacturing, the discussion often starts with references to Industrie 4.0, Smart Manufacturing, or some other next generation moniker. At LNS Research we use the term Digital Transformation and encourage manufacturers to use and adopt it, as well. Investing in new technologies like the Industrial Internet of Things (IIoT), Cloud, and Big Data is what it takes in order to change if you don’t want to be “Uber-ed”.
Industry pundits go on to talk about how Uber, Airbnb, and a host of other new consumer oriented providers are changing the economy by enabling the independent worker. Yet, in talking to our manufacturing and asset intensive industry clients they tell us they want to invest in IIoT, but don’t know where to start. I think that is because we keep talking about Uber and Airbnb and their ilk when the simple fact is they have nothing that directly relates to the needs or benefits related to Digital Transformation in manufacturing. It is time to change the dialog. I say enough with Uber when talking manufacturing Digital Transformation.
Uber Shows the Power of Digital Transformation But Is Not A Model for Manufacturers, Yet
First of all, let’s be clear – Uber was transformative. It changed the for-hire transportation industry in a very short time. But the transformation was not all that big in reality, at least as far as the product or service was concerned. What Uber did was transform the user experience, the cost model, and the labor relations model of one service industry. Users have always had the ability to call for personalized transport from one point to another. It was called a taxi service or a limousine service depending on the level of service you desired. Uber opened the service up to independent contractors and made the requesting of the service and ease of payment extremely doable. Despite the hype, Uber did not create a new industry or capability in the market. It just made it far easier to engage and far less costly.
The same is true of Airbnb. There has always been the ability to book temporary lodgings – they were called hotels, motels, and bed & breakfasts. Like the taxi services, they have existed for a long time and are relatively costly. Like Uber, Airbnb allowed the individual contractor to provide the same service and at a lower cost as the contractors in both cases have been paid less than the employees in the more tightly regulated industries. Also, by not being burdened, at least so far, with many of the same regulatory burdens of the traditional providers these companies have kept costs down.
The Uber Equivalent in Manufacturing Would Be Individuals Working at Home Shops
The one-to-one Uber equivalent transformation in manufacturing would look very different than the Digital Transformation concepts that dominate today. If one really used Uber as the model it would be individual workers in “home” (or small) shops, contracting out to perform some step in the manufacturing value chain. It would free manufacturers from having to build large manufacturing plants, invest in tooling, or be burdened with OSHA regulations around employee safety or EPA regulations regarding emissions. While 3D printing and other emerging manufacturing technologies might make it conceivable that this could be possible in the future it simply isn’t a realistic for the near future.
Digital Transformation In Manufacturing is Different than Uber
Depending on what sector of manufacturing you operate in, Digital Transformation will be different. For many discrete manufacturers it will be about concepts, such as the Digital Twin or Digital Thread. While for batch and high volume discrete manufacturers the concepts around Smart Connected Operations will dominate. Smart Connected Operation provides the capability to actually be able to manufacture efficiently for an order/lot size of one. In a digitally transformed manufacturing operation, every product can be made to meet the customers’ unique requirements, and with a profit margin that makes it a viable business model. In asset intensive, continuous process industries, and infrastructure operators it will be all about Smart Connected Assets; although the Digital Twin concepts of discrete manufacturing will play into the Smart Connected Assets model eventually.
We will see manufacturers being able to sell capacity instead of capital. That is real transformation, from being a product provider to being a service provider. That is a significant shift. So this and for some industries the ability to manufacture to-order products specific to each customer, is why we see the real visionaries in Digital Transformation in manufacturing talking not about being Ubered, but about how each type of manufacturing company can use the technologies of IIoT, Cloud and Big Data and its associated analytics to offer whole new capabilities as well as offering the evolutionary elements of smart devices in consumer’s hands.
Access the Metrics That Really Matter webinar where Andrew Hughes presents the results from the fourth iteration of the Metrics that Matter research study conducted between LNS Research and MESA International, and places particular focus on how the deployment of IIoT, Cloud, and Analytics are transforming manufacturing today.