“If you went to bed last night as an industrial company, you’re going to wake up today as a software and analytics company”
-Jeff Immelt, CEO of General Electric
Manufacturing industry is going through a disruption as changing customer preferences, market dynamics and technology innovations are redefining the business models. Manufacturers are no longer simply making physical products, they are bundling physical products with smart digital services and present it to the user as a unique customer experience. There are number of examples from various verticals where, manufacturers are expanding their traditional industry boundaries and ensuring they remain in ‘constant touch’ with the customer, throughout the product lifecycle. So, the focus has shifted from one time sale, which is transaction based to on-going engagement to generate stream of revenue.
With the recent technology innovations, products are becoming smarter, connected, Intelligent and responsive. The advent of 5G, data transfer speed is going to improve significantly. Here is the graph published in Economist which shows the dramatic improvement in data transfer speed from 4G to 5G. It promises a lot for manufacturing sector as it will address the limitations of current communication technologies. This will disrupt the industry structure and create more opportunities for data driven real time decision making not only on the shop floor; but also throughout the product lifecycle.
On the other hand, role of software is changing from “supporting” to “core”, as many innovations are linked to software. Furthermore by its very nature the pace of change in software is much higher than hardware. There are limitations to bring differentiation just on the basis of hardware; but software can help in bringing the required innovative edge. If you take example of a car, all key features are controlled by software like engine control, car health diagnostic, safety features, parking, navigation system etc. On the shop floor as well, software will play a key role in enabling remote maintenance, shop floor analytics, real time monitoring, seamless communication across the factories etc. With emergence of industrial IoT, machines, people and places will be connected like never before and software will continue a strong role in ‘connecting’ all these.
The journey of servitization is gaining momentum and is going to redefine the traditional industry boundaries. Manufacturers will have to revisit their value proposition and business models to respond to changing market dynamics. As this is a completely different approach, it needs manufacturers to invest in building and maintaining relationships with customers in a more “connected” manner. To get first movers advantage, manufacturers need to explore new process, experiment and take risks as never before. To bring the differentiation and innovations, they need to invest in building their software capabilities as the key driver to change while integrating this new driver with their core existing competency. It’s all very complex as suddenly the disciplined approach to manufacturers which emphasises incremental improvements in efficiency, productivity and the like, need to work with an approach where the end goal is not clear, require flexibility and willingness to change directions. Managing the two is the biggest challenge.
MD & CEO, Geometric Ltd.