Industry 4.0 Week partner Accenture offers some practical advice on how manufacturers can use digital technologies to become more agile
Nowadays, being a digital business is the price of admission. We’re entering the post-digital era and to stand out takes something extra. From now on, the leading industrial companies will be the ones that can use technology to meet consumer and client needs at the time when they’re most pressing.
To be able to respond rapidly to such short-term markets and opportunities, manufacturing must become more flexible. As the made-to-measure economy expands, we’ll see smart connected products being assembled exclusively to order, at the closest possible location to each customer. Developing this agility is the next essential step for industrial companies.
What is Industry X.0?
Industry X.0 businesses move beyond experimenting with new digital technologies like social, mobile, analytics and cloud. They understand how to combine them to drive growth, create new, hyper-personalised B2B and B2C experiences, and deliver outcomes. These businesses share four key characteristics. They’re smart, every one of their products and production processes is self-monitoring and data-generating. They’re connected, with seamless real-time communication and data-sharing between their people, products, systems, assets and machines. They’re living, with the ability, as organisations, to act with speed, focus, and agility. And they’re learning, always adapting to create relevant and differentiated user experiences
The IX.0 revolution: already underway
With the latest industrial revolution now underway, business models in some companies are already evolving in this direction. For example, maturing digital twin and digital thread technologies promise to deliver completely new after-market service wraps for aeronautical engines. By digitally linking an engine in-flight to its digital twin, manufacturers can run models on the engine and provide the operator with real-time intelligence on which route to fly, and at what altitude, to optimise efficiency. This approach not only brings in new revenue for the engine manufacturer, but improves margin for the operator as well.
That’s not all. Using IoT and advanced analytics technologies, manufacturers can monitor performance and run predictive failure models. Because this means maintenance can be planned, instead of being reactive, airlines run more predictably and their customers benefit from fewer delays. Elsewhere, GE is selling customers a permanent guarantee of a working motor; Michelin is replacing its traditional tyre sales models with a price-per-kilometre offer, along with an assurance to reduce the fuel consumption of heavy goods vehicles. And several electrical equipment manufacturers now rely on their products’ abilities to guarantee lowered fire insurance premiums for customers.
A complex transition, with challenges along the way
However, while most business leaders understand that the outcome economy will soon be the norm, the complexity of the transition from the product economy gives many of them cause for caution.
That’s no surprise. The pace of innovation is so rapid that it’s now often impossible to distinguish between different technological waves, which often overlap or combine with one another. What’s more, the transition to the outcome economy impacts on revenue streams and cash flows (by moving from a CAPEX to an OPEX cost model).
What’s the solution? Make ‘Core’ and ‘New’ businesses coexist
The road ahead is challenging, but industrial companies can be successful in the Industry X.0 era by achieving a balance between three priorities:
- Digitise processes and improve the efficiency of the historic core business (the Core)
- Grow that core business
- Use new efficiencies to invest more in innovation and develop new business models (the New).
It’s a simple enough formula: by improving and growing their existing business, companies will generate financial capacity to invest in innovation and new outcome-based customer relationships. Because Core and New will have to coexist for a few years, it’s vital to get the right mix between them.
But beyond the medium-term, focusing on products is a risky move. Only industrial companies that can offer a unique, personalised and differentiated customer experience will secure their place in the outcome economy. It’s why data, analytics and AI capabilities are so important. Implemented in the right way, these technologies create ultra-fast feedback loops on the performance and usage of products and services, so companies and customers can get relevant data in real time.
The value deposit of digital differs strongly from one sector to another
To move ahead decisively on their Industry X.0 journeys, industrial companies must first understand and identify the value that digital transformation brings to their business. This is essential not only to set realistic goals, but also to justify the substantial digital investment that could be needed.
Depending on sector, function and market, the nature of this value will vary greatly. Within the automotive industry, for example, internal operations and customer management hold out the greatest potential. For industrial equipment manufacturers, functions like R&D, manufacturing, supply chain and after-sales offer rich opportunities. Marketing holds out the most promise for the consumer goods sector.
But while the value varies, the approach remains the same: release the financial resources needed to fuel their innovation engines and invent new business models based on connected and intelligent products. For more information get in touch with DigitalUKIMarketing@accenture.com
Are you at Hannover Messe April 1-5? Come swing by our Accenture booth in Hall 6, Booth H46 to see Industry X.0 in action, have a chat and register for some panel sessions.
Accenture is the partner of The Engineer’s 2019 Industry 4.0 week