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ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS

ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS

NOVEMBER 2017 Published: 11/2017 DANIEL NEWMAN Principal Analyst FRED MCCLIMANS Analyst ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS Truly transformative and sustainable innovation happens when technology, people, and data are combined. IN COLLABORATION WITH SAP ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 2 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH TABLE OF CONTENTS 3 7 12 14 17 The Innovation Challenge Enabling Digital Innovation The Value of Innovation The Winning Edge Taking the Next Step ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 3 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH THE INNOVATION CHALLENGE Digital Transformation is much more than a technology play. It’s a key driver for the survival of businesses across every industry in every market in the world. It’s also an opportunity to overcome barriers and challenges to innovation. To leverage innovations to improve core operations. To reimagine business and create true business value. To become a disruptor, not the disrupted. Providers of industrial machinery and components, in response to both competitive and customer pressures, are rapidly embracing the shift to digital. And while many are just beginning this journey, others are well underway in the process, experimenting with different technologies in the hope of driving innovations to be more nimble, more competitive, and more profitable within the industry. But innovation itself isn’t the entire challenge— pockets of innovation can be found in most any company, from the wildly successful to those that have failed spectacularly. The real challenge is in being able to innovate at scale across an entire organization, all while creating a mechanism for those innovations to be shared, sustained, and to drive value back into the core of the business. That is the challenge. Overcoming this challenge, and getting sustained value out of a digital transformation effort, requires the ability to select, implement, and leverage technologies that work together; an innovation culture that includes the ability to adapt corporate and team behaviors to embrace new or alternative day-to-day processes; and the ability to manage and gain value from massive amounts of real-time data, sourced (and shared) throughout the organization. The innovation challenge exists because digital transformation cannot be solved with technology alone ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 4 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH The innovation challenge exists because digital transformation cannot be solved with technology alone. It requires the confluence of people, technology and massive amounts of data. We have left the age of gut-driven decisions and have entered a world in which there is no such thing as a good decision made without data. With the maturing of technology trends, such as the rise of the Internet of Things (IoT), data creation is happening at exponential rates and companies must learn to evolve beyond systems of record and leverage the skill sets of their data analysts and scientists. This access to real-time data can allow industrial manufacturers to run their businesses live and in the moment. Unfortunately, there is often too much data, from within the organization as well as from external sources, across too many variables. With rapidly changing business requirements, employees can easily get bogged down complying with customer data security or data use requirements, leaving the organization struggling to keep pace. The answer to overcoming this data glut, and enabling innovation, can be found in the perfect orchestration of technology, such as machine learning, to create human-machine partnerships that allow companies to maximize their effective use of data to better prescribe and predict the changing customer environment, and to deliver on those more innovative experiences that customers desire. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 5 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH The State of the IM&C Industry Industrial machinery and components (IM&C) manufacturers provide the equipment that enables businesses globally to operate the industrial devices needed to operate and optimize their own businesses, across a variety of other industries, such as energy, healthcare, automotive, semiconductor, consumer products, transportation, and telecommunications. It’s a heavily B2B market, so winners in the IM&C industry are under pressure to keep pace with their rapidly innovating competitors, while juggling the need to cooperate and collaborate with players that may, in some respects, be competitors, partners, suppliers, or even customers, depending on the situation. Like many industries, individual vertical units (such as R&D, sales & marketing, supply chain management, manufacturing, and services) often operate in independent silos. More progressive firms are, however, intelligently applying technology, business process, and data insights to an increasingly complex supply chain, both vertically within the company and externally with suppliers of raw materials, component parts, subassemblies, and even completely subcontracted finished goods. IM&C is one of the longest-standing benefactors of the proliferation of the Industrial Internet of Things (IIoT). With manufacturing machinery becoming increasingly smarter and connected, the opportunity to use analytics to maximize uptime has led to a technological revolution on the shop floor. With the proliferation of embedded software, communication devices, and innovative sensors, industrial machinery and equipment is now much more dependent on robust data storage and transfer abilities such as big data, machine learning, and predictive analytics. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 6 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Industry Challenges 1. The Commoditization of Technology: The cost of technology continues to drop every year, while data performance and mobile connectivity continue to increase. This affordability is fueling both internal innovation and the demand for innovative solutions to improve business outcomes. 2. The Innovation Demand: Manufacturers are increasingly expected to adopt an “innovation ready” posture in order to be viewed as competitive, complete with digital transformation officers accountable for not only internal systems but the innovation of new, next generation products, services, and solution bundles. 3. The Seismic Subscription Shift: The emergence of the subscription as a replacement for the “product purchase” represents a total upending of basic business economics. Strict product sales (buy it, use it, depreciate it) are a thing of the past. This is also driving increased demand for end-to-end and life-cycle solutions and services. 4. The Rise of Competitive Collaboration: Collaboration with partners and suppliers (the solution provider network) is becoming more intense and more valuable as IM&C manufacturers shift from a single need/single supplier model to engage with a larger number of partners in a more dynamic and fluid model. 5. The Talent Issue: Talent acquisition represents a major challenge, as the industrial machinery market is not perceived as a growth-oriented market. Additionally, automation and contractors are perceived as taking jobs while an aging workforce is increasing the risk of losing knowledge as technical specialists retire. These trends, occurring on a global scale, will continue to shape the industry through the coming decade. From a macro perspective, there are five macro trends that are presently helping reshape the dynamics of this industry: ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 7 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH One of the biggest hurdles for any company is the development of innovation-ready cultures and ecosystems, including internal teams, partners, and customers. While innovations may be unique to individual businesses, the basic building blocks that enable transformative change are consistent and can be replicated to manage the technology, business processes, and data necessary to drive innovation to the core business. To build a culture of innovation, companies must marry the most capable of technologies with a business culture that embraces change and properly leverages technology and a wealth of data to drive better business outcomes. This requires a willingness to explore both open and closed-lab approaches that involve all employees; embracing a fast failure mentality that focuses on the rapid testing of ideas; and the desire to leverage partnerships and successful innovators to focus and drive efforts. The tools that are employed by today’s leading business cover a wide range of technologies, that when bridged together can provide business-wide value in any number of combinations. They include: Analytics: the applications that help digest massive amounts of data to provide understanding of the past and present, while driving predictive insights and actions for the future Big Data: the tools that allow for the massive collection and storing of diverse data sources from hardware to software, from supply chain to consumer Blockchain: a distributed ledger that offers the ability to bring trust, transparency, and security to transactions, from smart contracts to supply chain management ENABLING DIGITAL INNOVATION In working with leading companies across the globe, Futurum Research sees successful firms investing time and energy around five strategic priorities, all of which require a balance of technology, business processes, and data: Embracing customer centricity: Putting the end customer point of view at the center of every decision, particularly from a design thinking perspective, is a key prerequisite for success in the digital age, applying not just to sales and marketing, but to products, services, and overarching business strategies. Serving the “segment of one”: Providing solutions that precisely fit the needs of one single customer is not new in traditional engineer-to-order environments. Now, however, the ability to capture customer requirements effectively and drive mass personalization at scale is achievable. Deploying digitally smart products: Using digital capabilities like self-awareness of technical health and operational status or business system connectivity to create product differentiation and enabled valueadded services bundled with products. Digitizing the supply chain: Applying digital technologies and innovating processes to production and logistics to intelligently connect to the rest of the business to deal with unforeseen supply, demand, or manufacturing issues. Adopting new business models: Developing a strategy and uncovers and embraces new business models and revenue streams, such as combined product and datacentric service offerings designed to increase life-cycle customer touch points and improve long-term margin opportunities. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 8 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH The Cloud: the underlying platform that serves as a common foundation across applications and technology, integrating things, people, and processes into a single accessible system Design Thinking: the transformative process that places the customer first in the design of all technology and processes, through a highly collaborative and rapid iterative prototype/testing approach The Internet of Things (IoT): the connected sensor network that collects data on products, assets, software, and services from the supplier to the customer Machine Learning: the intelligent applications that learn to understand and leverage human behavior to predict and solve both business and consumer issues While many organizations have begun implementing cloud, big data or analytics, other technologies, such as machine learning, IoT, and blockchain—if they are implemented at all—are often limited to controlled pilot programs that have limited opportunity to transform the entire business. More importantly, the real value in these technologies isn’t in the tactical application, but rather the coordinated use alongside business processes driven by design thinking that, focus on priorities that collectively drive value to the customer, the core business, and the extended ecosystem. This requires a culture of innovation that can enable—and embrace—changes to basic business processes, changes that place the customer at the center of every business decision, that embrace a fast prototype/fast fail philosophy of constantly iterating to meet customer requirements, and is designed to add value to the application of technology. It also requires a willingness to embrace the value of data that can drive specific business decisions and uncover insights that lead to better, more scalable, innovations. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 9 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Industry Use Case: Enabling Aftermarket Services for Customer Assets IM&C products and technology are now mission-critical components in many businesses, and are vital to ongoing operations. As such, many customers have extremely high expectations for both asset availability and performance. Moving towards an always-on, always-available services model can be attractive for an equipment provider, bringing the ability to offer preventive, predictive, and prescriptive maintenance contracts. But for many IM&C companies, maintenance strategies are still very reactive and are unable to meet customer expectations. Leveraging the right blend of cloud and embedded IoT sensors can be the solution. With the right technology, asset data collected by IoT sensors and gathered through the cloud can be analyzed in real-time, allowing companies to monitor equipment usage and proactively advise or recommend service or maintenance activities. This can open up new services-oriented revenue streams that allow a provider to offer increased services speed, efficiency, and quality through predictive analytics and cognitive decision support. It can also allow a company to better capture and utilize expert knowledge about the asset and its operations, to be shared with other services customers and driving new business processes. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 10 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Industry Use Case: Equipment-as-a-Service The traditional model for product sales has been in place for decades, if not centuries. Buy it, use it, depreciate it, discard it. But that model no longer applies in the digital age. Driven by a push to swap capital expenditures (CAPEX) for operational expenditures (OPEX), customers are increasingly looking to products as consumption-based leased or subscription assets that are offered “asa-service” for monthly fees rather than a onetime purchase. For the purchaser, this brings the promise of higher operational efficiency, and increased flexibility in scaling demand (like with the cloud, you scale up when you need it, down when you don’t). For the manufacturer, however, this shift busts apart the whole depreciation model on which many equipment providers have based their entire revenue and business plans. But it also offers the opportunity to create and monetize new revenue streams that are fairly predictable and can result in continuous customer engagement and monitoring, which can translate into increased customer loyalty and protection from outside competitive threats. Technology is the key to offering Equipmentas-a-Service. When products are configured with IoT sensors and connected to the cloud, real-time management data streams can allow a “virtual” digital twin of the customer’s device to be available to gain real-time insights into the device’s operations. Business contracts and real-time usage and load information can be monitored, and simulated changes in usage loads or configurations can allow for proactive suggestions to the customer for cost/value optimization leading to the creation of long-term business agreements (and predictable revenue streams). ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 11 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Industry Use Case: Live Asset Monitoring and Engineering Understanding the actual use and performance of products in real life conditions, once they are in the hands of customers, is crucial for making informed engineering decisions on product upgrades, augmentations, or follow-on products. Knowing how devices are being used as well as how they are performing is critical feedback to the development teams. Aside from services, many manufacturing companies lose direct access to their products once they have been installed and are fully operational. This can serve to isolate engineers, who are constantly looking for feedback to guide them in development decisions, forcing them to rely on second-hand feedback which can result in new products not accurately meeting customer’s next generation requirements. It’s here that technologies, such as IoT and embedded sensors, can play a strong role in helping provide continuous or regular feedback on the performance of products in the field. By leveraging IoT in a cloud environment, performance and usage data can be collected, in the background or in realtime, and not interfere with user activities. This can directly inform new products, features, or upgrades that better meet customer requirements, as well as contribute to user guidelines and best practices to ensure effective use of the product and overall customer satisfaction. As an added benefit, services agreements and remote troubleshooting can be improved by predictive analytics, machine learning, and IoT-fed virtual digital twins of deployed assets to model product performance and better diagnose, or even anticipate, hardware or software problems. Summary These use cases focus heavily on the right technologies to assist the capturing and analyzing of remote asset data and the development of serviceddriven value that would not have been practical for most companies only a decade ago. In this way, they are able to leverage digital innovation to bring new revenue value to the table. The application of IoT, machine learning, the cloud, and predictive analytics are appropriately working together to provide insights that better meet the operational requirements of today’s digital customer. Takeaway: Many companies get stuck focusing on continuous improvement when true innovation is what they need most. Every company must identify those use cases core to its business and then seek ways to exponentially improve upon the status quo. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 12 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH THE VALUE OF INNOVATION The path to realizing scalable innovation can be difficult and beset with obstacles and barriers. Lessons learned in one industry, while beneficial and of use in shortening innovation cycles, may not directly translate to other industries, where unique use cases and competitive landscapes may differ considerably. However, there are lessons to be learned in common best practices and use cases that can help define digital transformation goals and shorten time to value. These lessons can also help define the value of innovation for particular companies, as well as overcome “islands of innovation” that can diminish, or mute, the value of individual innovation efforts. For the IM&C industry, visibility gleans its value from allowing a more holistic understanding of the complexity of the supply chain. Innovation gives end customers an open suggestion box through deep data, buying history, and predictive analytics. From an operational perspective, digital innovation offers a number of key value propositions to the IM&C market: R&D / Engineering: the ability to adopt a systems engineering approach that includes mechanical, software, and electronic capabilities; embed the technology foundation for equipment networks/ systems; support equipment information sharing along the value chain to help improve operational and support efficiencies; to reduce headcount and spend while greatly reducing time to market for new products. Sales & Marketing: the ability to enable collaborative solution and value selling; to generate leads through predictive product replacement and precise segmentation; to support omnichannel solution selling; to sell digital services and create new revenue streams through consumption-based billing; to improve performance benchmarking that can help improve sales collaboration and decrease cost of sales by improving revenue per sale, customer loyalty, and customer retention. Supply Chain: the ability to enable on-time delivery and advanced availability-to-promise capabilities; responsive material requirement planning; 3D-printing of spare parts; digitalize demand sensing and automate material replenishment; optimize service parts planning and logistics performance can help reduce logistics costs and increase on-time delivery performance. Manufacturing: the ability to track and trace individual products in real time; produce for a lot size of one with high asset utilization and optimal set-up times; integrate seamlessly sales orders with specific parameters with the shop floor; provide electronic work instructions; support advanced testing and connectivity management; leverage digital twins of raw materials, component parts, sub-assemblies, work-in-process inventory, and finished goods can help improve manufacturing quality, reduce defects, and reduce inventory levels by lowering time to manufacture. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 13 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Aftermarket Service: the ability to deliver an equipmentspecific service portfolio; gain full transparency into equipment lifecycle information; connect digital products in the field with a digital equipment network; handover as-built equipment information seamlessly to aftermarket services; deliver performance-based services and products as a service; monitor remote conditions and performance can help improve profit margins and increase customer satisfaction. Additionally, IM&C manufacturers can achieve business agility, create a truly integrated and optimized enterprise, and accelerate digital transformation across the business to thrive, all without the requirement of maintaining or investing in on-premises infrastructure. By quickly extending cloud applications to deliver on company goals and bringing together entire IT landscapes, building IoT or Big Data applications or mobilizing existing legacy applications, industrial manufacturers are primed for the expansion and improved business value. This is a critical step in the collaborative innovation model – sharing innovation value throughout an organization, from the smallest business unit to ongoing daily operations. In short, it’s not merely visibility within the company that creates improved resource management, but visibility from end to end that makes the difference. Operating in a cloud environment opens your company up to services- and subscription-based options that you can use to pad capital-intensive investments. The value of digital innovation for IM&C companies can be as basic as uncovering an insight that leads to a small process improvement leading to bottomline savings, or as complex as the development of new product and service top-line revenue streams. Consider this simple example. Imagine you are working for a company producing industrial robots. Your products are deployed at customer sites around the globe, and you oversee global maintenance and support. You could start by looking at your complete fleet of robots installed across the globe and immediately detect emerging problems, and identify issues on affected assets and locations. Connecting these assets through an IoT services allows operational parameters to be viewed in real-time. Mapping data streams from different sensors to the asset’s master data being able to visualize it provides a clear understanding of the problem. The use of a prediction engine can allow the determination of a probable time to failure, which can be mapped against a spare part’s availability or status in the supply chain. This can also be tied to the estimated availability of a service technician with the right skill sets. If no qualified technician is available, service partners can be queried directly. A work order can then be generated at the right time, to match the estimated time to failure with the correct part and the qualified technician. Once the work order has been generated, the status of the repair can be tracked as work in progress. With a scenario like this, a business can: l Minimize equipment downtime for its customers l Increase its service level l Ultimately create more profit and additional revenue from its service operations ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 14 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Success in establishing innovation at scale isn’t a given, and it doesn’t necessarily come easy. For enterprises with well-established infrastructure, policies, and talent, achieving break-out results from a digital transformation initiative often requires a deliberate, and proven, strategy that embraces both the right technologies and the right talent, guided by a shift in operating processes designed to leverage the initiative into a successful outcome creates a system of innovation embedded into the digital business core. This includes leveraging the right experience and partners, both within and supplemental to the ecosystem, that can drive a customer-centric, design thinking approach to core business decisions. Unfortunately, however, Futurum Research has observed that a majority of current digital transformations do not appear to be completely successful. Innovation tactics like fail fast may be widely heralded, but they are often poorly implemented, measured, and executed upon. Understanding how emerging digital technologies can be used to enhance the success of digital innovation efforts is critical. For those who are willing to implement the right technologies, embrace process innovations, and properly value data, the results can be both easily measured and offer the ability to scale innovation to drive core business value. THE WINNING EDGE ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 15 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Challenge: The semiconductor industry is complex, relying heavily on a supply chain of equipment manufacturers that provide the production tools necessary to manufacture semiconductor chips. A large provider of production equipment serving the semiconductor industry had a need to build a realtime supply chain for manufacturing equipment with a high level of digital integration. The goal was to increase information sharing between both its own business units and with supply partners, improving overall process efficiency and to use the end-to-end visibility insights to help streamline the supply chain process. How They Did It: The company started with a shift to a cloud-based platform and real-time reporting for all parties, creating a common system of record and the ability to drill down to the lowest level of details. By shifting away from batch processes to continuous process, the company created the ability to manage by exception and create a simplified user experience. Coupled with data analytics, the manufacturer was able to gather valuable insights into the supply chain and improve quality assurance. Results: The performance metrics resulting from the digital effort included a 30% reduction in quality costs, a 2-3% increase in product-test pass rates, and a 3-5% improvement in process capability and process variation, all of which improved overall company performance and customer satisfaction. By shifting to a common system of record, the ability to change data structures and process was improved, allowing it to act as a system of innovation. Case study: Breaking down Information Silos ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 16 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Challenge: One of Europe’s leading manufacturers of farming equipment wanted to offer smaller farmers the same level of supply chain and resource planning abilities as larger, more complex operations. This is a significant issue for smaller farmers. Unable to afford the costs associated with digitization themselves, they are often overlooked in the partner ecosystem when it comes to the sharing of data and information. With the number of variables facing modern farming, the company felt that IoT technology had the potential to create greater visibility for the smaller farmer, thus improving overall operations efficiency for all parties. Solution: The company began embedding IoT directly into its farming equipment. Data from multiple sources was collected in real time and stored in the cloud, where machine learning algorithms and predictive data analytics were used to provide insights at the lowest level of granularity to help these smaller farming operations run much leaner and more efficiently with an improved allocation of resources and simulation capabilities that helped make them more competitive against larger operations. Results: Efficiency isn’t just measured in terms of data or insight access, but in the outcomes that such information makes possible. In this case, the equipment manufacturer’s customers were able to achieve greater visibility into the supply chain, and a measurable reduction in the usage of fertilizers and pesticides. This resulted in more cost-efficient operations during planting and harvest seasons and the ability to run quick what if scenarios to see the impact of decisions in near real time. Case study: Improve Resource Planning Capabilities ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 17 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH Case study: Improved Management of Tool Data The Common Thread Challenge: A precision tool manufacturer had an urgent need to create a lifecycle tool data system that would link its suppliers and its customers together, allowing better tracking and utilization of the tools throughout their lifecycle. It was also hoped that this system would help reduce the costs associated with these tools, both from the supplier and to the customer. The tools, which were a low volume/high cost item, had an additional high cost of storage, setup, and maintenance, primarily due to a lack of centralized repository for tool data How They Did It: The company leveraged the cloud, with an embedded IoT and mobile app development effort, to implement a centralized “two-way data highway” where supplier and customer data was centrally located and provided a common system of record. All participants were provided improved visibility into master, transaction, process, and inventory data – all through the new mobile app, and informed by real-time data from the IoT system – which helped reduce the complexity of the system considerably. Results: Users were able to significantly improve their ability to access up-to-date information on stock and tool data, allowing more effective procurement, while suppliers were able to leverage user-generated data to develop, test, and document new tools and services. The end result has been the creation of a small ecosystem, where the suppliers are able to track usage of product by the end user and offer new services, applications, and maintenance updates directly to the user, significantly improving product utilization and helping remove both complexity and cost from the system. Each of these case studies involved an industrial manufacturer dealing with data sources that were previously isolated from parties that had a viable need to know about this data. The companies all bene tted from a common system of record, driven by real-time data at the lowest possible level of granularity, that allowed for improved what if scenarios and predictive planning. More than just spot improvements, these digital initiatives brought core value to all participants across the partner ecosystem. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 18 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH TAKING THE NEXT STEPS The most intelligent adaptations are those born not just of finding the right bundle of solutions, but of applying the most cost-effective advancements in the order in which they make sense. Even in similar industries, the solutions may be different and happen at different paces. But key to all in the digital era is the ability to integrate the right technologies, a culture of innovation and business process improvement, and massive amounts of machine, market, and customer data to drive new business priorities. With the right approach, the system of record and system of innovation can be integrated, not run as silos. As businesses begin to move forward, there are a series of questions that must be answered: l What part of the business is the most core? How can that core business be improved to better differentiate the company? l How can the business remove human bias and errors, and leverage existing data to make better products and drive smarter business decisions? l How can running a sensor-fed virtual digital twin of equipment in the field allow for more accurate maintenance and operational modeling? l How can a company apply design thinking to help determine where and how to invest to unlock business value? l How can the ability to truly understand the current and emerging behaviors of customers inform the next generation of business processes? l What is required to bring together the right mix of designers, business transformation specials, industry experts, and technology consultants to help uncover and develop strategic opportunities for business transformation? Perhaps the most significant question, however, involves the value of innovation—is there a mechanism to both leverage individual innovation project across the business and drive innovation and value within the core business itself? Getting started For digital transformation and innovation to take place, it’s critical for businesses to understand where they are on the digital innovation journey, and recognize that most innovation strategies fail if they are not on the right path at the right time. Success in digital innovation for one firm may not be the same as for another, even a direct competitor. The question may not be one of how to begin a digital innovation strategy, but rather how to ensure your current digital innovation strategy is successful. Never before have there been so many promising breakthrough technologies available — and so many businesses ready to capitalize on them. From machine learning to blockchain, from cloud to the Internet of Things, smart devices, analytics, and more, business is changing slower today than it ever will and faster than it ever has been. ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 19 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH We understand. As a first step, and for a limited time, you are invited to a one-hour conference call with a member of the SAP Industry Value Advisory (IVA) team. With an average of 20 years’ experience across 24 industries, the IVA team members are charged with engaging with customers on a case-by-case basis, devising comprehensive strategies for business development as well as strategic business model transformation and innovation. How can organizations create cultures of design-led innovation? To answer this question, we developed a framework based on our experience working closely with over 500 clients around the world on strategic design and co-innovation initiatives. From this framework, we have created an assessment that helps organizations like yours determine your innovation readiness, some barriers to innovation you face, and strategies to overcome them. Over the course of 60 minutes, one of the IVA team will work with you and up to two additional colleagues to guide you through the assessment, to help inform your own transformation journey. There is no obligation beyond the meeting. We hope you found this Accelerating Digital Transformation for Industrial Machinery & Components Manufacturers white paper valuable and informative. As you navigate through this digital renaissance, game-changing technology is evolving at an incredible pace, and the decisions you make can have a profound impact on your company’s future. But before you make these kinds of decisions, we have found that completing the workbook below is an eye-opening exercise in revealing your readiness, your priorities, and your strengths/ weaknesses. Since the answers are intended for you to discover your “industry technology profile”, there’s no need to submit them to us. These questions are not easy and will require that you look across your organization versus working within a silo. If you’re interested in taking the next step by enrolling in one of our award-winning Design Thinking Workshops, then your answers are a great first step. The workshops are a deep dive into the industry-specific technology strategies that will not only propel your company forward, but create an incredible engine for innovation. To access the workbook, please follow this link: https://fm.sap.com/Transform. Not ready to commit to a Design Thinking Workshop? From SAP ACCELERATING DIGITAL TRANSFORMATION FOR INDUSTRIAL MACHINERY & COMPONENTS MANUFACTURERS 20 TECHNOLOGY INSIGHTS FOR BUSINESS LEADERS COPYRIGHT © 2017 FUTURUM RESEARCH CONTACT INFORMATION Futurum Research, LLC futurumresearch.com 817-480-3038 info@futurumresearch.com Twitter: @futurumxyz