Digitalization, Industry 4.0, And The Future Of Industrial Production

Bernd Leukert

I recently had the great honor to speak at EMO, the world’s premier trade fair for the metalworking sector. Under the motto “Connecting Systems for Intelligent Production,” EMO again makes Hanover the meeting place for manufacturing specialists from all over the world.

While preparing my speech, I thought a lot about what “intelligent production” means—and how this is connected to my vision of an intelligent enterprise. To me, intelligent production is a necessary consequence of the ongoing digital transformation that affects not only businesses across all industries, but society as well. Digital transformation comes with a shift in customer behavior—as consumers, we are now more informed than ever before, much more demanding, and most of us are no longer willing to adapt to a product, but rather we expect the product to adapt to us. The lot size of one, or “mass individualization,” will be topics that every manufacturer must face sooner or later.

The changing world of manufacturing

The challenge will be to provide those highly individualized products for the same price and with the same delivery time as their mass-produced equivalents. This new product individualism will appear throughout the value chain, eventually also hitting the machine industry. It demands production processes that are much more flexible as well as new machines. It’s not enough to have machines that flexibly and easily interconnect with each other; they also need to be geared towards adjusting production dynamically.

In addition, technologies like 3D printing are offering new opportunities: We can integrate manufacturing and extended supply chain with additive manufacturing by connecting a global network of intelligent 3D printers. With such an extended supply chain, we can, for example, print automobile spare parts in 3D on demand in remote locations. This not only increases customer satisfaction, but also significantly reduces spare part warehousing costs.

So, what does this mean for production processes? We are currently seeing more and more companies move away from repetitive jobs in assembly lines towards more flexible production setups. Intelligent workbenches are delivering items from one “production island” to the next. In the future, the question of the next production step will be answered by the product itself, with the help of embedded intelligence. And all of this will happen in a standardized fashion, leveraging the Platform Industry 4.0 reference architecture RAMI 4.0.

Why collaboration is key to success in Industry 4.0

Talking about the Platform Industry 4.0—one of the key learnings for me in my role as its steering committee chairman is that the fourth industrial revolution is not something a company can tackle on its own. Industry 4.0 needs collaboration, integration, and, consequently, a certain level of openness. Companies have two simple choices: They can try it on their own, or they collaborate with a technology partner.

There are some areas where collaboration is required more than in others. Customers need to cope with the complexity of connecting their systems from the shop floor to the top floor—and this needs integration, standardization, and—as mentioned before—openness. However, when it comes to the topic of open platforms, questions around data security, data protection, confidentiality, and intellectual property come up.

Companies need to be sure that connecting their machines with the machine vendor or a service provider doesn’t result in leaks of important customer or production data. A service provider does not need to know which CAD files you are running on your milling machine, but on the other hand, he needs enough information about the machines, devices, and assets to be able to provide proactive maintenance, thus avoiding costly downtimes in your production environment.

Addressing the big questions

But data protection is just one of many facets that we must deal with in this ongoing transformation. Another important aspect is the societal impact. Questions like “How does intelligent production influence the future of work?” and “How do we attract the right talents and train the existing workforce to keep up with the pace of Digital Transformation?” also need to be answered. And when considering cutting-edge modern technologies like machine learning, we need to find answers to questions like “Who in the end will be responsible for the actions of autonomous machines?”

These are all topics that we are currently working on in the many Platform Industry 4.0 workstreams. What we want is to come up with the right set of recommendations and guidelines—for the industry and for the government. In the end, the fourth industrial revolution can only be successful as a joint effort driven by industry, society, and politics together—to make sure that nobody is left behind.

For more on how advanced technology is changing manufacturing, see How To Take Advantage Of 3D Printing Service Parts In Aerospace.

This story originally appeared on Business Trends on the SAP Community.

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Bernd Leukert

About Bernd Leukert

Bernd Leukert is a member of the Executive Board of SAP SE with global responsibility for development and delivery of all products across SAP’s product portfolio.

Artificial Intelligence And Machine Learning Don’t Have To Be Creepy

Tim Clark

Over the past few years I’ve delved into the topic of customer experience, uncovering how new technologies are empowering businesses to know more about their customers than ever before.

While there’s nothing wrong with beer getting smarter at the shelf (and the data that is responsibly collected), it’s obviously not a good idea for businesses to take things too far. No one likes that “close talker” at a cocktail party. They can be downright creepy.

But avoiding the creep factor isn’t easy, especially when powerful capabilities like machine learning and artificial intelligence (AI) are on the guest list—and usually depicted as creepy forces in the world of sci-fi (I’m looking at you Blade Runner and Terminator).

The reality is that AI and machine learning don’t have to be creepy, and they shouldn’t be. It’s what businesses do with their data that matters, and how mutual value and trust are created with customers.

Dealing with doomsday scenarios

So what to make of recent comments from Elon Musk who believes the “global race for A.I. will most likely be the cause of World War III?” Or the notion that Musk has embarked on a “billion dollar crusade to stop the AI apocalypse?” No doubt about it, these are bleak, doomsday predictions of the highest order, coming from a modern-day visionary with access to bleeding-edge info, and they should be taken seriously.

As for machine learning, well, it doesn’t fare much better. Google’s AI chief John Giannandrea recently said he isn’t worried so much about Musk’s warmongering bots, but he is very concerned about “the danger that may be lurking inside the machine-learning algorithms used to make millions of decisions every minute.”

Yikes.

Thankfully, other tech luminaries have a much sunnier disposition about AI and machine learning.

Bill Gates recently told CNBC, “AI will make our lives more productive and creative,” while Mark Zuckerberg believes A.I. is going to make our lives better in the future. As for the doomsday scenarios making headlines, Zuckerberg thinks they are “pretty irresponsible.”

Personalizing the shopping experience

Gates and Zuckerberg’s thoughts are backed by serious research. IDC predicts cognitive/AI capabilities will figure in to some 40 percent of digital transformation initiatives by 2019.

And at SAP’s recent TechEd event, it was revealed that machine learning can help the $2.4 trillion fashion industry with a more personalized consumer experience, according to Margaret Laffan, director of Business Development, Machine Learning at SAP.

“Static window displays of the past won’t work in today’s world of fast fashion and consumer demands for an increasingly more personalized experience,” said Laffan in a recent story, The Ultimate Personal Shopper Is A Machine. “Machine learning gives retailers the speed and intelligence to quickly match the hottest looks with every customer’s fashion style.”

As you can see from this video demo of what this level of personalization looks like, it becomes much easier to understand why AI and machine learning can improve people’s lives without being creepy.

For more on this topic, see Why The Time Is Now For AI And Machine Learning.

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Tim Clark

About Tim Clark

Tim Clark is the Head of Brand Journalism at SAP. He is responsible for evangelizing and implementing writing best practices that generate results across blog channels, integrated marketing plans and native advertising efforts.

Digitalist Flash Briefing: Answers To Two Burning Questions About Conversational AI

Bonnie D. Graham

Today’s briefing looks at a current hot topic – conversational AI and digital assistants for your business – from the perspective of another hot innovation from back in the day.

  • Amazon Echo or Dot: Enable the “Digitalist” flash briefing skill, and ask Alexa to “play my flash briefings” on every business day.
  • Alexa on a mobile device:
    • Download the Amazon Alexa app: Select Skills, and search “Digitalist.” Then, select Digitalist, and click on the Enable button.
    • Download the Amazon app: Click on the microphone icon and say “Play my flash briefing.”

Find and listen to previous Flash Briefings on Digitalistmag.com.

Read more on today’s topic

 

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Bonnie D. Graham

About Bonnie D. Graham

Bonnie D. Graham is the creator, producer and host/moderator of 29 Game-Changers Radio series presented by SAP, bringing technology and business strategy thought leadership panel discussions to a global audience via the Business Channel on World Talk Radio. A broadcast journalist with nearly 20 years in media production and hosting, Bonnie has held marketing communications management roles in the business software, financial services, and real estate industries. She calls SAP Radio her "dream job". Listen to Coffee Break with Game-Changers.

The Future Will Be Co-Created

Dan Wellers and Timo Elliott

 

Just 3% of companies have completed enterprise digital transformation projects.
92% of those companies have significantly improved or transformed customer engagement.
81% of business executives say platforms will reshape industries into interconnected ecosystems.
More than half of large enterprises (80% of the Global 500) will join industry platforms by 2018.

Link to Sources


Redefining Customer Experience

Many business leaders think of the customer journey or experience as the interaction an individual or business has with their firm.

But the business value of the future will exist in the much broader, end-to-end experiences of a customer—the experience of travel, for example, or healthcare management or mobility. Individual companies alone, even with their existing supplier networks, lack the capacity to transform these comprehensive experiences.


A Network Effect

Rather than go it alone, companies will develop deep collaborative relationships across industries—even with their customers—to create powerful ecosystems that multiply the breadth and depth of the products, services, and experiences they can deliver. Digital native companies like Baidu and Uber have embraced ecosystem thinking from their early days. But forward-looking legacy companies are beginning to take the approach.

Solutions could include:

  • Packaging provider Weig has integrated partners into production with customers co-inventing custom materials.
  • China’s Ping An insurance company is aggressively expanding beyond its sector with a digital platform to help customers manage their healthcare experience.
  • British roadside assistance provider RAC is delivering a predictive breakdown service for drivers by acquiring and partnering with high-tech companies.

What Color Is Your Ecosystem?

Abandoning long-held notions of business value creation in favor of an ecosystem approach requires new tactics and strategies. Companies can:

1.  Dispassionately map the end-to-end customer experience, including those pieces outside company control.

2.  Employ future planning tactics, such as scenario planning, to examine how that experience might evolve.

3.  Identify organizations in that experience ecosystem with whom you might co-innovate.

4.  Embrace technologies that foster secure collaboration and joint innovation around delivery of experiences, such as cloud computing, APIs, and micro-services.

5.  Hire, train for, and reward creativity, innovation, and customer-centricity.


Evolve or Be Commoditized

Some companies will remain in their traditional industry boxes, churning out products and services in isolation. But they will be commodity players reaping commensurate returns. Companies that want to remain competitive will seek out their new ecosystem or get left out in the cold.


Download the executive brief The Future Will be Co-Created.


Read the full article The Future Belongs to Industry-Busting Ecosystems.

Turn insight into action, make better decisions, and transform your business.  Learn how.

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Dan Wellers

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

About Timo Elliott

Timo Elliott is an Innovation Evangelist for SAP and a passionate advocate of innovation, digital business, analytics, and artificial intelligence. He was the eighth employee of BusinessObjects and for the last 25 years he has worked closely with SAP customers around the world on new technology directions and their impact on real-world organizations. His articles have appeared in articles such as Harvard Business Review, Forbes, ZDNet, The Guardian, and Digitalist Magazine. He has worked in the UK, Hong Kong, New Zealand, and Silicon Valley, and currently lives in Paris, France. He has a degree in Econometrics and a patent in mobile analytics. 

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Blockchain: Much Ado About Nothing? How Very Wrong!

Juergen Roehricht

Let me start with a quote from McKinsey, that in my view hits the nail right on the head:

“No matter what the context, there’s a strong possibility that blockchain will affect your business. The very big question is when.”

Now, in the industries that I cover in my role as general manager and innovation lead for travel and transportation/cargo, engineering, construction and operations, professional services, and media, I engage with many different digital leaders on a regular basis. We are having visionary conversations about the impact of digital technologies and digital transformation on business models and business processes and the way companies address them. Many topics are at different stages of the hype cycle, but the one that definitely stands out is blockchain as a new enabling technology in the enterprise space.

Just a few weeks ago, a customer said to me: “My board is all about blockchain, but I don’t get what the excitement is about – isn’t this just about Bitcoin and a cryptocurrency?”

I can totally understand his confusion. I’ve been talking to many blockchain experts who know that it will have a big impact on many industries and the related business communities. But even they are uncertain about the where, how, and when, and about the strategy on how to deal with it. The reason is that we often look at it from a technology point of view. This is a common mistake, as the starting point should be the business problem and the business issue or process that you want to solve or create.

In my many interactions with Torsten Zube, vice president and blockchain lead at the SAP Innovation Center Network (ICN) in Potsdam, Germany, he has made it very clear that it’s mandatory to “start by identifying the real business problem and then … figure out how blockchain can add value.” This is the right approach.

What we really need to do is provide guidance for our customers to enable them to bring this into the context of their business in order to understand and define valuable use cases for blockchain. We need to use design thinking or other creative strategies to identify the relevant fields for a particular company. We must work with our customers and review their processes and business models to determine which key blockchain aspects, such as provenance and trust, are crucial elements in their industry. This way, we can identify use cases in which blockchain will benefit their business and make their company more successful.

My highly regarded colleague Ulrich Scholl, who is responsible for externalizing the latest industry innovations, especially blockchain, in our SAP Industries organization, recently said: “These kinds of use cases are often not evident, as blockchain capabilities sometimes provide minor but crucial elements when used in combination with other enabling technologies such as IoT and machine learning.” In one recent and very interesting customer case from the autonomous province of South Tyrol, Italy, blockchain was one of various cloud platform services required to make this scenario happen.

How to identify “blockchainable” processes and business topics (value drivers)

To understand the true value and impact of blockchain, we need to keep in mind that a verified transaction can involve any kind of digital asset such as cryptocurrency, contracts, and records (for instance, assets can be tangible equipment or digital media). While blockchain can be used for many different scenarios, some don’t need blockchain technology because they could be handled by a simple ledger, managed and owned by the company, or have such a large volume of data that a distributed ledger cannot support it. Blockchain would not the right solution for these scenarios.

Here are some common factors that can help identify potential blockchain use cases:

  • Multiparty collaboration: Are many different parties, and not just one, involved in the process or scenario, but one party dominates everything? For example, a company with many parties in the ecosystem that are all connected to it but not in a network or more decentralized structure.
  • Process optimization: Will blockchain massively improve a process that today is performed manually, involves multiple parties, needs to be digitized, and is very cumbersome to manage or be part of?
  • Transparency and auditability: Is it important to offer each party transparency (e.g., on the origin, delivery, geolocation, and hand-overs) and auditable steps? (e.g., How can I be sure that the wine in my bottle really is from Bordeaux?)
  • Risk and fraud minimization: Does it help (or is there a need) to minimize risk and fraud for each party, or at least for most of them in the chain? (e.g., A company might want to know if its goods have suffered any shocks in transit or whether the predefined route was not followed.)

Connecting blockchain with the Internet of Things

This is where blockchain’s value can be increased and automated. Just think about a blockchain that is not just maintained or simply added by a human, but automatically acquires different signals from sensors, such as geolocation, temperature, shock, usage hours, alerts, etc. One that knows when a payment or any kind of money transfer has been made, a delivery has been received or arrived at its destination, or a digital asset has been downloaded from the Internet. The relevant automated actions or signals are then recorded in the distributed ledger/blockchain.

Of course, given the massive amount of data that is created by those sensors, automated signals, and data streams, it is imperative that only the very few pieces of data coming from a signal that are relevant for a specific business process or transaction be stored in a blockchain. By recording non-relevant data in a blockchain, we would soon hit data size and performance issues.

Ideas to ignite thinking in specific industries

  • The digital, “blockchained” physical asset (asset lifecycle management): No matter whether you build, use, or maintain an asset, such as a machine, a piece of equipment, a turbine, or a whole aircraft, a blockchain transaction (genesis block) can be created when the asset is created. The blockchain will contain all the contracts and information for the asset as a whole and its parts. In this scenario, an entry is made in the blockchain every time an asset is: sold; maintained by the producer or owner’s maintenance team; audited by a third-party auditor; has malfunctioning parts; sends or receives information from sensors; meets specific thresholds; has spare parts built in; requires a change to the purpose or the capability of the assets due to age or usage duration; receives (or doesn’t receive) payments; etc.
  • The delivery chain, bill of lading: In today’s world, shipping freight from A to B involves lots of manual steps. For example, a carrier receives a booking from a shipper or forwarder, confirms it, and, before the document cut-off time, receives the shipping instructions describing the content and how the master bill of lading should be created. The carrier creates the original bill of lading and hands it over to the ordering party (the current owner of the cargo). Today, that original paper-based bill of lading is required for the freight (the container) to be picked up at the destination (the port of discharge). Imagine if we could do this as a blockchain transaction and by forwarding a PDF by email. There would be one transaction at the beginning, when the shipping carrier creates the bill of lading. Then there would be look-ups, e.g., by the import and release processing clerk of the shipper at the port of discharge and the new owner of the cargo at the destination. Then another transaction could document that the container had been handed over.

The future

I personally believe in the massive transformative power of blockchain, even though we are just at the very beginning. This transformation will be achieved by looking at larger networks with many participants that all have a nearly equal part in a process. Today, many blockchain ideas still have a more centralistic approach, in which one company has a more prominent role than the (many) others and often is “managing” this blockchain/distributed ledger-supported process/approach.

But think about the delivery scenario today, where goods are shipped from one door or company to another door or company, across many parties in the delivery chain: from the shipper/producer via the third-party logistics service provider and/or freight forwarder; to the companies doing the actual transport, like vessels, trucks, aircraft, trains, cars, ferries, and so on; to the final destination/receiver. And all of this happens across many countries, many borders, many handovers, customs, etc., and involves a lot of paperwork, across all constituents.

“Blockchaining” this will be truly transformational. But it will need all constituents in the process or network to participate, even if they have different interests, and to agree on basic principles and an approach.

As Torsten Zube put it, I am not a “blockchain extremist” nor a denier that believes this is just a hype, but a realist open to embracing a new technology in order to change our processes for our collective benefit.

Turn insight into action, make better decisions, and transform your business. Learn how.

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Juergen Roehricht

About Juergen Roehricht

Juergen Roehricht is General Manager of Services Industries and Innovation Lead of the Middle and Eastern Europe region for SAP. The industries he covers include travel and transportation; professional services; media; and engineering, construction and operations. Besides managing the business in those segments, Juergen is focused on supporting innovation and digital transformation strategies of SAP customers. With more than 20 years of experience in IT, he stays up to date on the leading edge of innovation, pioneering and bringing new technologies to market and providing thought leadership. He has published several articles and books, including Collaborative Business and The Multi-Channel Company.