Today, equipment manufacturers are facing another form of advancement—the rise of new digital industrial technology, referred to as “Industry 4.0.”
Industry 4.0 has arrived in the form of smart, connected machines generating prodigious amounts of data that can be analyzed to improve operations. Inexpensive sensors, ubiquitous connectivity, the ever-declining cost of microprocessors and storage, and the emergence of cloud-based storage and software have made this shift possible.
Traditional capital-equipment suppliers—which have historically focused on mechanical- and electrical-engineering disciplines—will need to rethink their business models as Industry 4.0 is transforming the way products and production systems are designed, manufactured, and operated.
As a result of this technological advancement, manufacturing will be transformed from single automated cells to fully integrated, automated, and communicating facilities that boost production performance. Equipment suppliers must shift from a business model built around engineering, product development, and manufacturing to an information-based model that leverages data, analytics, software, and services to unlock value.
In navigating this change, suppliers need to address the following questions:
Smart, connected equipment collects invaluable operational data, but the key lies in understanding how to unlock value through the collection and analysis of that data and cultivate the ability to change the operational performance of machines remotely. Suppliers can begin by optimizing their own machines—for example, by providing predictive-maintenance services—but they also need to understand what data to capture and at what resolution and frequency, as well as how to analyze that data to deliver insights that customers can act on.
The capital investment required to innovate through technology has dropped significantly, even as the sophistication of potential solutions has improved. That said, if equipment lives are long and there is no retrofit opportunity, adoption rates will be slow. The race to set global industrial standards is heating up, and venture capital firms are directing their attention—and investments—to Industrial Internet companies. Silicon Valley is increasingly focusing on creating platforms for connected smart machines. Equipment suppliers must understand the dynamics in their industry, including how fast new services will emerge, what trigger points may accelerate adoption, and who the potential disruptors are.
The high-tech industry has much shorter product life cycles and more frequent disruptive innovations that are driven by software as well as hardware. As a result, industrial-equipment suppliers now face accelerated innovation cycles, as new entrants with strong capabilities in software, data, and analytics join the market and either replace high-margin services or invent new markets. As the industry evolves, there will be more emphasis on the ability to monitor and control installed equipment and devices, and new software- and data-enabled services.
Determining how to play requires a deep understanding of the value creation potential of data across the production chain; knowledge of where the hardware, data, analytics, and software control points are; an assessment of potential business models and their economics; and an overall view of how the ecosystem of players may evolve.
Companies need to consider several critical questions. Does the organization have the agile software-development and user experience capabilities to launch high-quality customer-facing applications? What are the capabilities of the engineering team for developing embedded software? Is corporate IT the right function to support new customer-facing data services? What software product-management capabilities are needed? It’s essential that companies decide which capabilities to develop internally and which to fill through external partners, vendors, or acquisitions.
Manufacturers need to develop compelling use cases—based on real customer needs—for an integrated hardware, data, software, and services that leverage not only internal capabilities but also the full power of an ecosystem. The path involves gaining a clear understanding of the specific need that a solution will address, determining what data could be collected and how to capture the most granular data, and building the value proposition. The manufacturer should conduct a pilot, test an initiative, and get early feedback that can be applied to building out the product and service portfolio.
New digital tools are transforming industrial sorters. These disruptive tools include: