Live Product Innovation, Part 1: The Role Of In-Memory Computing

John McNiff

In Part 1 of this series, we look at how in-memory computing affects live product innovation. In Part 2, we’ll explore the impact of the Internet of Things (IoT) and Big Data.

In our previous series, we examined key drivers changing the way we use product data throughout the enterprise. Digitalization of customer experience, distributed manufacturing and engineering, and IoT and networked processes are transforming business processes and models. The proliferation of data – and the commoditization of technology to capture, store, share, analyze, predict, and learn from data – are enabling “live” product lifecycle management (PLM).

As a result, product data can no longer reside only in engineering systems. Instead, it must synchronize with and facilitate physical and digital twins throughout the product lifecycle. Ultimately, it must extend beyond PLM to manufacturing, cost management, order fulfillment, and service delivery. Likewise, the R&D process must leverage input from manufacturing, customer service, market trends, and more.

What makes this live product innovation possible? The answer is in-memory computing. Or I should say, the right in-memory computing, because not all in-memory platforms are created equal.

Greater volumes, greater speed

Described simply, in-memory computing processes data while the data resides in memory. This allows for orders-of-magnitude faster analysis of vast data volumes. But to extend PLM beyond R&D and engineering, in-memory platforms also must allow:

  • Real-time data access across enterprise domains, with no locking
  • Analytics directly on line-item-level data, without the need to extract to data warehouses
  • A massive reduction of data footprint – typically up to a factor of 10
  • Simplified coding through the removal of database aggregates

With these capabilities, data sets previously segmented because of volume and performance concerns can be left intact. That means data from manufacturing, maintenance, warranty, service, finance, CRM, and marketing can potentially be deployed in one architecture and analyzed in real time across functions.

It also means R&D and engineering can access previously untapped information sources in real time to support product decisions. They can achieve this without the need to pre-aggregate and assemble huge data warehouses, at least for relevant business data.

Other capabilities of an effective in-memory platform include:

  • Tight connection of manufacturing, supply chain, maintenance, and service data and processes
  • An open integration framework for cross-discipline authoring tools
  • The ability of 3D models to be part of the user interface (UI) across enterprise processes
  • The ability to manage complex integrations of CAD and authoring tools

Thanks for the in-memory

What are some outcomes of these capabilities? Product cost is increasingly important to understand early, because it dictates the profitability of a service-based contract. By leveraging the simulation and predictive capabilities of an effective in-memory platform – and by integrating business data from an EP environment – engineering can understand, simulate, and predict variations in design costs based on materials, routes, suppliers, and production techniques. It can achieve this in real time, either before the product is launched or during product redesign.

For project and program management, simulating the effect of a design initiative on an existing fleet of assets allows much better understanding of the impact on new and existing projects and programs. Will a new project delay a critical stage gate? Will a seemingly minor change in resource allocation require more labor at higher cost? These factors can significantly alter cost projections across a portfolio.

Finally, understanding system reliability in the field, as well as product quality throughout the manufacturing process, allows designers to correlate data from materials, suppliers, producers, and processes. It was extremely cumbersome to do this in the past.

All this might sound like powered-up analytics, and to some extent it is. But if you add integration of PLM, ERP, CRM, supplier relationship management (SRM), and enterprise asset management (EAM), you gain an incredible ability to rapidly move from insight to action. A common platform allows far more agile management of interactions across silos. And simplification of user interactions and the underlying data model allows massively accelerated process modifications, as well as solution development and extension.

Come to SAPPHIRE NOW 2017 in Orlando, Florida from May 16 – 18th, 2017, and check out my session “Boost Visibility into Operations for Connected Products with SAP Leonardo” on Tuesday, May 16th, 2017 from 1-1:40 p.m. in Business Application BA324, or check out our R&D sessions.

Follow the conversation on @SCMatSAP and #SAPPHIRENOW.

Comments

John McNiff

About John McNiff

John McNiff is the Vice President of Solution Management for the R&D/Engineering line-of-business business unit at SAP. John has held a number of sales and business development roles at SAP, focused on the manufacturing and engineering topics.

Five Trends Keeping Supply Chain Specialists Up At Night

Franz Hero

It’s easy to sleep with a clear mind. But with increasing supply chain pressures gnawing at your brain, it can be hard to get any shuteye.

Between meeting customers’ needs for individualized products and ensuring your partners, people, processes, and products remain connected, supply chain specialists have plenty of issues to worry about.

How can you solve your enterprise’s greatest industry challenges and finally rest easy? Technology is the answer.

Let’s examine five key trends impacting supply chain and look at how your organization can excel with innovative solutions.

Trend #1: Individualization

One-third of today’s consumers are interested in personalized products. From shampoos with specific fragrances to automobiles with uniquely tailored dashboard displays, buyers have their sights set on items that are specially designed for them.

The problem with this, of course, is twofold: The cost of manufacturing customized products can be high, and creating too many unique goods may not be commercially viable.

So, how can your enterprise meet customers’ demands for personalized products without breaking the bank or producing a surplus of goods?

By using an integrated business planning solution – one that combines demand sensing, machine learning capabilities, and multi-tier inventory optimization – you can more accurately predict demand and lower your overall inventory levels.

With enhanced demand sensing and planning, your business can analyze demand signals – such as ordering patterns, point-of-sale data, seasonal events, and promotions – to create accurate monthly, weekly, and even daily forecasts. More accurate forecasts ensure you don’t wind up manufacturing, ordering, or carrying too much or too little of a particular product.

The ability to predict the precise number of goods required helps guarantee you have enough of a certain product available for customers, allowing you to maintain high service levels while also ensuring your distribution centers aren’t overstocked with surplus target and safety stock inventory.

Better demand sensing and planning capabilities have helped businesses improve forecast accuracy by as much as 60%.

Trend #2: Globalization

Globalization has ushered in the sharing economy. In your personal life, you’ve likely benefited from this new reality by catching a ride home with Uber after a night out or renting a vacation home through Airbnb.

But how has the sharing economy impacted your business? It’s possible it hasn’t. After all, only nine percent of companies consider themselves “fast movers” when it comes to capitalizing on the monetization opportunities presented by the sharing economy.

Still, many companies are embracing this networking idea, sharing warehouse and transportation capacity, as well as supply chain planning, execution, point-of-sale, device, and sensor data. This helps enterprises reduce costs, improve visibility, and provide customers with superior service.

By extending your company’s integrated business planning and supply chain execution to your partners, you can synchronize planning and streamline operations across your entire supply chain network. Adding these capabilities is crucial to sharing essential data and documents and orchestrating processes in real time, regardless of company, system, and geographical borders.

Deploying a business network platform is the key to achieving this. In addition to profiting from a connected community, shared content, and hosted applications, your business benefits from stronger infrastructure and operations that result in better and more secure visibility, collaboration, and business-to-business integration. For instance, a global, multi-modal logistics business network can provide your enterprise with greater end-to-end shipment visibility and help support efficient international trade collaboration.

With a business network platform easing communication and reducing costs, there’s no better way for your supply chain network to capitalize on the opportunities presented by today’s sharing economy.

Trend #3: Connectivity

Connectivity makes business partner collaboration stronger. By integrating machines, devices, and sensors – and sharing real-time data generated from your assets – you can ensure more accurate planning and digitalize your logistics processes.

In the warehouse, connectivity can help you optimize your operations through automation. You can use intelligent storage and retrieval systems, conveyor belts, sorters, and autonomous guided vehicles to radically transform your warehouse processes.

By connecting your products and transportation resources with innovative Internet of Things (IoT) technology, you can achieve real-time visibility with end-to-end, in-transit tracking and performance insight. When a truck is close to a pickup area or delivery destination, your business can automatically provide customers and business partners with just-in-time delivery notifications, gate check-in details, time-slot booking options, and outbound processing alerts.

Moreover, continuously monitoring the condition of your products and their location can help you mitigate risk. By analyzing your data with an advanced supply chain solution, you can predict delivery arrival times and delays and explore how that will impact future production and shipments.

Real-time connectivity between business partners and vehicles also equips your enterprise with the ability to resolve issues quickly and commence transportation re-planning, if necessary.

Trend #4: Mobility

By the end of 2017, more than 2 billion people will have made purchases on their mobile phones or tablets. And just as consumers are increasingly using mobile devices to buy goods, employees are using mobile devices to process, fulfill, and deliver e-commerce orders.

Connecting your mobile devices with an integrated e-commerce, warehousing, and transportation system allows you to streamline your order fulfillment processes for quick, efficient, and flexible customer delivery.

An integrated supply chain execution platform that works with your company’s mobile devices can help you achieve this, enabling you to deliver goods during customers’ preferred drop-off times and better manage order consolidation, truckload planning, routing, and outbound processing.

With handheld and hands-free devices, including pick-by-voice and augmented reality tools, you can simplify your employees’ jobs. Warehouse pickers can more efficiently process orders, while truck drivers know exactly which route to take or package to deliver. Additionally, event management software with real-time location tracking provides transportation planners, drivers, and customers with information around expected delays or delivery changes.

This is a prime example of how IoT can help you support a fully integrated, end-to-end order fulfillment process and save your company time and money with lower shipping costs and faster customer deliveries.

Trend #5: Sustainability

Sustainability has long been a key supply chain trend – and it’s an industry topic that will continue to grow in importance.

The best method for creating a sustainable supply chain organization is running your supply chain as efficiently as possible. One way your company can achieve this is by using integrated business planning and transportation management software.

These tools can help you optimize logistics, enabling you to consolidate shipments, maximize truck and container load utilization, streamline transportation routing, and support just-in-time cross-docking and delivery appointments. This results in fewer delivery vehicles on the road, a decrease in fuel consumption, and a reduced carbon footprint – not to mention considerable cost savings.

Avoid becoming a supply chain insomniac

The five trends impacting today’s supply chain industry – individualization, globalization, connectivity, mobility, and sustainability – present myriad challenges. And while they can be cause for concern, they don’t have to keep you up at night.

After all, now that you understand how the latest technologies can help you navigate these waters, you can gain the agility and responsiveness you need to elevate your enterprise to new heights.

This should help you rest easy – and avoid becoming a supply chain insomniac.

The supply chain is evolving at an unprecedented pace. SAP solutions help you to connect people and processes to optimize efficiency and delight customers. To find out more, download our white paper “Transform the Supply Chain and Logistics into Demand Networks: How SAP Solutions Enable Next-Generation, Real-Time Demand Networks.”

Comments

Franz Hero

About Franz Hero

Franz Hero is Senior Vice President of Supply Chain and Logistics Development at SAP.

Four Steps To Prepare For Industry 4.0

Bruce Mckinnon

As Industry 4.0 is poised to disrupt all sectors of the global economy, companies must stay innovative by investigating the trend and ways they can integrate with it. In Australia, efforts to bring manufacturing into this new era are being driven by the government through partnerships with Germany; a leader in Industry 4.0. Clearly this trend is being recognised for its importance to the future of industry. If you wish to future-proof your company in the face of Industry 4.0, follow these four steps:

1. Assess your company’s needs

Do you need to manufacture more product in less time? Is your business being slowed down by the need to communicate between each stage of your production cycle? As we enter the era of Industry 4.0, identifying areas of improvement is the first step to accessing the benefits of the fourth industrial revolution.

2. Identify how smart factory technology could better meet those needs

If you’re part of an SME, you probably feel as though Industry 4.0 can’t meet your organisation’s needs. But before you reject the future, consider the benefits of the fourth industrial revolution:

  • Responsive shipping and manufacturing driven by real-time cloud data
  • Real-time information on all stages of product development delivered by the Internet of Things
  • Predictive optimisation of business operation through machine learning

If you’ve ever had to put your business on hold while waiting for a vital shipment, or wanted advice tailored to your everyday operations, you should consider integrating with Industry 4.0.

3. Create a five-year plan for meeting those needs through new technology

By the mid 2020’s, many major industrialised nations will have adapted the mass market to Industry 4.0 technology. For instance, the Chinese government is investing more than $1.5 billion into such sectors as the Internet ofThings as part of its “Made in China 2025” strategy. This gives Australian companies roughly five years to ensure they’ll be caught up.

You must begin approaching local technology firms and formulating plans to integrate these new solutions. As you do, ensure you remain aware of developments related to international standards regarding Industry 4.0 technology. In addition, insist on modular technological solutions to remain open to new developments during this exciting period of innovation.

4. Begin educating your workforce in the operation of this new technology

For each phase of integration, ensure employees across your organisation are educated in the operations of new technology. This will ensure a smooth transition while reducing the anxiety and Luddism that accompanies every new era of industry.

At SAP, we believe collaboration is key to success in Industry 4.0. If you’d like to know more, investigate how your industry could benefit from Industry 4.0 solutions.

Comments

Bruce Mckinnon

About Bruce Mckinnon

Bruce is the Head of Digital Business Services for SAP ANZ. He is responsible for the delivery and support of SAP related business transformation for our customers across Australia and New Zealand. Bruce is Responsible for approximately 450 people within our A/NZ team, we look to deliver business outcomes based on SAP technology to help our customers digitally transform their organisations.

Tick Tock: Start Preparing for Resource Disruption

By Maurizio Cattaneo, Joerg Ferchow, Daniel Wellers, and Christopher Koch

Businesses share something important with lions. When a lion captures and consumes its prey, only about 10% to 20% of the prey’s energy is directly transferred into the lion’s metabolism. The rest evaporates away, mostly as heat loss, according to research done in the 1940s by ecologist Raymond Lindeman.

Today, businesses do only about as well as the big cats. When you consider the energy required to manage, power, and move products and services, less than 20% goes directly into the typical product or service—what economists call aggregate efficiency (the ratio of potential work to the actual useful work that gets embedded into a product or service at the expense of the energy lost in moving products and services through all of the steps of their value chains). Aggregate efficiency is a key factor in determining productivity.

After making steady gains during much of the 20th century, businesses’ aggregate energy efficiency peaked in the 1980s and then stalled. Japan, home of the world’s most energy-efficient economy, has been skating along at or near 20% ever since. The U.S. economy, meanwhile, topped out at about 13% aggregate efficiency in the 1990s, according to research.

Why does this matter? Jeremy Rifkin says he knows why. Rifkin is an economic and social theorist, author, consultant, and lecturer at the Wharton School’s Executive Education program who believes that economies experience major increases in growth and productivity only when big shifts occur in three integrated infrastructure segments around the same time: communications, energy, and transportation.

But it’s only a matter of time before information technology blows all three wide open, says Rifkin. He envisions a new economic infrastructure based on digital integration of communications, energy, and transportation, riding atop an Internet of Things (IoT) platform that incorporates Big Data, analytics, and artificial intelligence. This platform will disrupt the world economy and bring dramatic levels of efficiency and productivity to businesses that take advantage of it, he says.

Some economists consider Rifkin’s ideas controversial. And his vision of a new economic platform may be problematic—at least globally. It will require massive investments and unusually high levels of government, community, and private sector cooperation, all of which seem to be at depressingly low levels these days.

However, Rifkin has some influential adherents to his philosophy. He has advised three presidents of the European Commission—Romano Prodi, José Manuel Barroso, and the current president, Jean-Claude Juncker—as well as the European Parliament and numerous European Union (EU) heads of state, including Angela Merkel, on the ushering in of what he calls “a smart, green Third Industrial Revolution.” Rifkin is also advising the leadership of the People’s Republic of China on the build out and scale up of the “Internet Plus” Third Industrial Revolution infrastructure to usher in a sustainable low-carbon economy.

The internet has already shaken up one of the three major economic sectors: communications. Today it takes little more than a cell phone, an internet connection, and social media to publish a book or music video for free—what Rifkin calls zero marginal cost. The result has been a hollowing out of once-mighty media empires in just over 10 years. Much of what remains of their business models and revenues has been converted from physical (remember CDs and video stores?) to digital.

But we haven’t hit the trifecta yet. Transportation and energy have changed little since the middle of the last century, says Rifkin. That’s when superhighways reached their saturation point across the developed world and the internal-combustion engine came close to the limits of its potential on the roads, in the air, and at sea. “We have all these killer new technology products, but they’re being plugged into the same old infrastructure, and it’s not creating enough new business opportunities,” he says.

All that may be about to undergo a big shake-up, however. The digitalization of information on the IoT at near-zero marginal cost generates Big Data that can be mined with analytics to create algorithms and apps enabling ubiquitous networking. This digital transformation is beginning to have a big impact on the energy and transportation sectors. If that trend continues, we could see a metamorphosis in the economy and society not unlike previous industrial revolutions in history. And given the pace of technology change today, the shift could happen much faster than ever before.

The speed of change is dictated by the increase in digitalization of these three main sectors; expensive physical assets and processes are partially replaced by low-cost virtual ones. The cost efficiencies brought on by digitalization drive disruption in existing business models toward zero marginal cost, as we’ve already seen in entertainment and publishing. According to research company Gartner, when an industry gets to the point where digital drives at least 20% of revenues, you reach the tipping point.

“A clear pattern has emerged,” says Peter Sondergaard, executive vice president and head of research and advisory for Gartner. “Once digital revenues for a sector hit 20% of total revenue, the digital bloodbath begins,” he told the audience at Gartner’s annual 2017 IT Symposium/ITxpo, according to The Wall Street Journal. “No matter what industry you are in, 20% will be the point of no return.”

Communications is already there, and energy and transportation are heading down that path. If they hit the magic 20% mark, the impact will be felt not just within those industries but across all industries. After all, who doesn’t rely on energy and transportation to power their value chains?

The eye of the technology disruption hurricane has moved beyond communications and is heading toward … the rest of the economy.

That’s why businesses need to factor potentially massive business model disruptions into their plans for digital transformation today if they want to remain competitive with organizations in early adopter countries like China and Germany. China, for example, is already halfway through an US$88 billion upgrade to its state electricity grid that will enable renewable energy transmission around the country—all managed and moved digitally, according to an article in The Economist magazine. And it is competing with the United States for leadership in self-driving vehicles, which will shift the transportation process and revenue streams heavily to digital, according to an article in Wired magazine.

Once China’s and Germany’s renewables and driverless infrastructures are in place, the only additional costs are management and maintenance. That could bring businesses in these countries dramatic cost savings over those that still rely on fossil fuels and nuclear energy to power their supply chains and logistics. “Once you pay the fixed costs of renewables, the marginal costs are near zero,” says Rifkin. “The sun and wind haven’t sent us invoices yet.”

In other words, zero marginal cost has become a zero-sum game.

To understand why that is, consider the major industrial revolutions in history, writes Rifkin in his books, The Zero Marginal Cost Society and The Third Industrial Revolution. The first major shift occurred in the 19th century when cheap, abundant coal provided an efficient new source of power (steam) for manufacturing and enabled the creation of a vast railway transportation network. Meanwhile, the telegraph gave the world near-instant communication over a globally connected network.

The second big change occurred at the beginning of the 20th century, when inexpensive oil began to displace coal and gave rise to a much more flexible new transportation network of cars and trucks. Telephones, radios, and televisions had a similar impact on communications.

Breaking Down the Walls Between Sectors

Now, according to Rifkin, we’re poised for the third big shift. The eye of the technology disruption hurricane has moved beyond communications and is heading toward—or as publishing and entertainment executives might warn, coming for—the rest of the economy. With its assemblage of global internet and cellular network connectivity and ever-smaller and more powerful sensors, the IoT, along with Big Data analytics and artificial intelligence, is breaking down the economic walls that have protected the energy and transportation sectors for the past 50 years.

Daimler is now among the first movers in transitioning into a digitalized mobility internet. The company has equipped nearly 400,000 of its trucks with external sensors, transforming the vehicles into mobile Big Data centers. The sensors are picking up real-time Big Data on weather conditions, traffic flows, and warehouse availability. Daimler plans to establish collaborations with thousands of companies, providing them with Big Data and analytics that can help dramatically increase their aggregate efficiency and productivity in shipping goods across their value chains. The Daimler trucks are autonomous and capable of establishing platoons of multiple trucks driving across highways.

It won’t be long before vehicles that navigate the more complex transportation infrastructures around the world begin to think for themselves. Autonomous vehicles will bring massive economic disruption to transportation and logistics thanks to new aggregate efficiencies. Without the cost of having a human at the wheel, autonomous cars could achieve a shared cost per mile below that of owned vehicles by as early as 2030, according to research from financial services company Morgan Stanley.

The transition is getting a push from governments pledging to give up their addiction to cars powered by combustion engines. Great Britain, France, India, and Norway are seeking to go all electric as early as 2025 and by 2040 at the latest.

The Final Piece of the Transition

Considering that automobiles account for 47% of petroleum consumption in the United States alone—more than twice the amount used for generators and heating for homes and businesses, according to the U.S. Energy Information Administration—Rifkin argues that the shift to autonomous electric vehicles could provide the momentum needed to upend the final pillar of the economic platform: energy. Though energy has gone through three major disruptions over the past 150 years, from coal to oil to natural gas—each causing massive teardowns and rebuilds of infrastructure—the underlying economic model has remained constant: highly concentrated and easily accessible fossil fuels and highly centralized, vertically integrated, and enormous (and enormously powerful) energy and utility companies.

Now, according to Rifkin, the “Third Industrial Revolution Internet of Things infrastructure” is on course to disrupt all of it. It’s neither centralized nor vertically integrated; instead, it’s distributed and networked. And that fits perfectly with the commercial evolution of two energy sources that, until the efficiencies of the IoT came along, made no sense for large-scale energy production: the sun and the wind.

But the IoT gives power utilities the means to harness these batches together and to account for variable energy flows. Sensors on solar panels and wind turbines, along with intelligent meters and a smart grid based on the internet, manage a new, two-way flow of energy to and from the grid.

Today, fossil fuel–based power plants need to kick in extra energy if insufficient energy is collected from the sun and wind. But industrial-strength batteries and hydrogen fuel cells are beginning to take their place by storing large reservoirs of reserve power for rainy or windless days. In addition, electric vehicles will be able to send some of their stored energy to the digitalized energy internet during peak use. Demand for ever-more efficient cell phone and vehicle batteries is helping push the evolution of batteries along, but batteries will need to get a lot better if renewables are to completely replace fossil fuel energy generation.

Meanwhile, silicon-based solar cells have not yet approached their limits of efficiency. They have their own version of computing’s Moore’s Law called Swanson’s Law. According to data from research company Bloomberg New Energy Finance (BNEF), Swanson’s Law means that for each doubling of global solar panel manufacturing capacity, the price falls by 28%, from $76 per watt in 1977 to $0.41 in 2016. (Wind power is on a similar plunging exponential cost curve, according to data from the U.S. Department of Energy.)

Thanks to the plummeting solar price, by 2028, the cost of building and operating new sun-based generation capacity will drop below the cost of running existing fossil power plants, according to BNEF. “One of the surprising things in this year’s forecast,” says Seb Henbest, lead author of BNEF’s annual long-term forecast, the New Energy Outlook, “is that the crossover points in the economics of new and old technologies are happening much sooner than we thought last year … and those were all happening a bit sooner than we thought the year before. There’s this sense that it’s not some distant risk or distant opportunity. A lot of these realities are rushing toward us.”

The conclusion, he says, is irrefutable. “We can see the data and when we map that forward with conservative assumptions, these technologies just get cheaper than everything else.”

The smart money, then—72% of total new power generation capacity investment worldwide by 2040—will go to renewable energy, according to BNEF. The firm’s research also suggests that there’s more room in Swanson’s Law along the way, with solar prices expected to drop another 66% by 2040.

Another factor could push the economic shift to renewables even faster. Just as computers transitioned from being strictly corporate infrastructure to becoming consumer products with the invention of the PC in the 1980s, ultimately causing a dramatic increase in corporate IT investments, energy generation has also made the transition to the consumer side.

Thanks to future tech media star Elon Musk, consumers can go to his Tesla Energy company website and order tempered glass solar panels that look like chic, designer versions of old-fashioned roof shingles. Models that look like slate or a curved, terracotta-colored, ceramic-style glass that will make roofs look like those of Tuscan country villas, are promised soon. Consumers can also buy a sleek-looking battery called a Powerwall to store energy from the roof.

The combination of solar panels, batteries, and smart meters transforms homeowners from passive consumers of energy into active producers and traders who can choose to take energy from the grid during off-peak hours, when some utilities offer discounts, and sell energy back to the grid during periods when prices are higher. And new blockchain applications promise to accelerate the shift to an energy market that is laterally integrated rather than vertically integrated as it is now. Consumers like their newfound sense of control, according to Henbest. “Energy’s never been an interesting consumer decision before and suddenly it is,” he says.

As the price of solar equipment continues to drop, homes, offices, and factories will become like nodes on a computer network. And if promising new solar cell technologies, such as organic polymers, small molecules, and inorganic compounds, supplant silicon, which is not nearly as efficient with sunlight as it is with ones and zeroes, solar receivers could become embedded into windows and building compounds. Solar production could move off the roof and become integrated into the external facades of homes and office buildings, making nearly every edifice in town a node.

The big question, of course, is how quickly those nodes will become linked together—if, say doubters, they become linked at all. As we learned from Metcalfe’s Law, the value of a network is proportional to its number of connected users.

The Will Determines the Way

Right now, the network is limited. Wind and solar account for just 5% of global energy production today, according to Bloomberg.

But, says Rifkin, technology exists that could enable the network to grow exponentially. We are seeing the beginnings of a digital energy network, which uses a combination of the IoT, Big Data, analytics, and artificial intelligence to manage distributed energy sources, such as solar and wind power from homes and businesses.

As nodes on this network, consumers and businesses could take a more active role in energy production, management, and efficiency, according to Rifkin. Utilities, in turn, could transition from simply transmitting power and maintaining power plants and lines to managing the flow to and from many different energy nodes; selling and maintaining smart home energy management products; and monitoring and maintaining solar panels and wind turbines. By analyzing energy use in the network, utilities could create algorithms that automatically smooth the flow of renewables. Consumers and businesses, meanwhile, would not have to worry about connecting their wind and solar assets to the grid and keeping them up and running; utilities could take on those tasks more efficiently.

Already in Germany, two utility companies, E.ON and RWE, have each split their businesses into legacy fossil and nuclear fuel companies and new services companies based on distributed generation from renewables, new technologies, and digitalization.

The reason is simple: it’s about survival. As fossil fuel generation winds down, the utilities need a new business model to make up for lost revenue. Due to Germany’s population density, “the utilities realize that they won’t ever have access to enough land to scale renewables themselves,” says Rifkin. “So they are starting service companies to link together all the different communities that are building solar and wind and are managing energy flows for them and for their customers, doing their analytics, and managing their Big Data. That’s how they will make more money while selling less energy in the future.”

The digital energy internet is already starting out in pockets and at different levels of intensity around the world, depending on a combination of citizen support, utility company investments, governmental power, and economic incentives.

China and some countries within the EU, such as Germany and France, are the most likely leaders in the transition toward a renewable, energy-based infrastructure because they have been able to align the government and private sectors in long-term energy planning. In the EU for example, wind has already overtaken coal as the second largest form of power capacity behind natural gas, according to an article in The Guardian newspaper. Indeed, Rifkin has been working with China, the EU, and governments, communities, and utilities in Northern France, the Netherlands, and Luxembourg to begin building these new internets.

Hauts-de-France, a region that borders the English Channel and Belgium and has one of the highest poverty rates in France, enlisted Rifkin to develop a plan to lift it out of its downward spiral of shuttered factories and abandoned coal mines. In collaboration with a diverse group of CEOs, politicians, teachers, scientists, and others, it developed Rev3, a plan to put people to work building a renewable energy network, according to an article in Vice.

Today, more than 1,000 Rev3 projects are underway, encompassing everything from residential windmills made from local linen to a fully electric car–sharing system. Rev3 has received financial support from the European Investment Bank and a handful of private investment funds, and startups have benefited from crowdfunding mechanisms sponsored by Rev3. Today, 90% of new energy in the region is renewable and 1,500 new jobs have been created in the wind energy sector alone.

Meanwhile, thanks in part to generous government financial support, Germany is already producing 35% of its energy from renewables, according to an article in The Independent, and there is near unanimous citizen support (95%, according to a recent government poll) for its expansion.

If renewables are to move forward …, it must come from the ability to make green, not act green.

If renewable energy is to move forward in other areas of the world that don’t enjoy such strong economic and political support, however, it must come from the ability to make green, not act green.

Not everyone agrees that renewables will produce cost savings sufficient to cause widespread cost disruption anytime soon. A recent forecast by the U.S. Energy Information Administration predicts that in 2040, oil, natural gas, and coal will still be the planet’s major electricity producers, powering 77% of worldwide production, while renewables such as wind, solar, and biofuels will account for just 15%.

Skeptics also say that renewables’ complex management needs, combined with the need to store reserve power, will make them less economical than fossil fuels through at least 2035. “All advanced economies demand full-time electricity,” Benjamin Sporton, chief executive officer of the World Coal Association told Bloomberg. “Wind and solar can only generate part-time, intermittent electricity. While some renewable technologies have achieved significant cost reductions in recent years, it’s important to look at total system costs.”

On the other hand, there are many areas of the world where distributed, decentralized, renewable power generation already makes more sense than a centralized fossil fuel–powered grid. More than 20% of Indians in far flung areas of the country have no access to power today, according to an article in The Guardian. Locally owned and managed solar and wind farms are the most economical way forward. The same is true in other developing countries, such as Afghanistan, where rugged terrain, war, and tribal territorialism make a centralized grid an easy target, and mountainous Costa Rica, where strong winds and rivers have pushed the country to near 100% renewable energy, according to The Guardian.

The Light and the Darknet

Even if all the different IoT-enabled economic platforms become financially advantageous, there is another concern that could disrupt progress and potentially cause widespread disaster once the new platforms are up and running: hacking. Poorly secured IoT sensors have allowed hackers to take over everything from Wi-Fi enabled Barbie dolls to Jeep Cherokees, according to an article in Wired magazine.

Humans may be lousy drivers, but at least we can’t be hacked (yet). And while the grid may be prone to outages, it is tightly controlled, has few access points for hackers, and is physically separated from the Wild West of the internet.

If our transportation and energy networks join the fray, however, every sensor, from those in the steering system on vehicles to grid-connected toasters, becomes as vulnerable as a credit card number. Fake news and election hacking are bad enough, but what about fake drivers or fake energy? Now we’re talking dangerous disruptions and putting millions of people in harm’s way.

The only answer, according to Rifkin, is for businesses and governments to start taking the hacking threat much more seriously than they do today and to begin pouring money into research and technologies for making the internet less vulnerable. That means establishing “a fully distributed, redundant, and resilient digital infrastructure less vulnerable to the kind of disruptions experienced by Second Industrial Revolution–centralized communication systems and power grids that are increasingly subject to climate change, disasters, cybercrime, and cyberterrorism,” he says. “The ability of neighborhoods and communities to go off centralized grids during crises and re-aggregate in locally decentralized networks is the key to advancing societal security in the digital era,” he adds.

Start Looking Ahead

Until today, digital transformation has come mainly through the networking and communications efficiencies made possible by the internet. Airbnb thrives because web communications make it possible to create virtual trust markets that allow people to feel safe about swapping their most private spaces with one another.

But now these same efficiencies are coming to two other areas that have never been considered core to business strategy. That’s why businesses need to begin managing energy and transportation as key elements of their digital transformation portfolios.

Microsoft, for example, formed a senior energy team to develop an energy strategy to mitigate risk from fluctuating energy prices and increasing demands from customers to reduce carbon emissions, according to an article in Harvard Business Review. “Energy has become a C-suite issue,” Rob Bernard, Microsoft’s top environmental and sustainability executive told the magazine. “The CFO and president are now actively involved in our energy road map.”

As Daimler’s experience shows, driverless vehicles will push autonomous transportation and automated logistics up the strategic agenda within the next few years. Boston Consulting Group predicts that the driverless vehicle market will hit $42 billion by 2025. If that happens, it could have a lateral impact across many industries, from insurance to healthcare to the military.

Businesses must start planning now. “There’s always a period when businesses have to live in the new and the old worlds at the same time,” says Rifkin. “So businesses need to be considering new business models and structures now while continuing to operate their existing models.”

He worries that many businesses will be left behind if their communications, energy, and transportation infrastructures don’t evolve. Companies that still rely on fossil fuels for powering traditional transportation and logistics could be at a major competitive disadvantage to those that have moved to the new, IoT-based energy and transportation infrastructures.

Germany, for example, has set a target of 80% renewables for gross power consumption by 2050, according to The Independent. If the cost advantages of renewables bear out, German businesses, which are already the world’s third-largest exporters behind China and the United States, could have a major competitive advantage.

“How would a second industrial revolution society or country compete with one that has energy at zero marginal cost and driverless vehicles?” asks Rifkin. “It can’t be done.” D!


About the Authors

Maurizio Cattaneo is Director, Delivery Execution, Energy and Natural Resources, at SAP.

Joerg Ferchow is Senior Utilities Expert and Design Thinking Coach, Digital Transformation, at SAP.

Daniel Wellers is Digital Futures Lead, Global Marketing, at SAP.

Christopher Koch is Editorial Director, SAP Center for Business Insight, at SAP.


Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.

Comments

Tags:

Human Is The Next Big Thing

Traci Maddox

One of my favorite movies of 2016 was Hidden Figures. The main character, Katherine Johnson, and her team of colleagues had an interesting job title: Computer. Here’s what Katherine said about her job: “On any given day, I analyze the binomial levels of air displacement, friction, and velocity. And compute over 10 thousand calculations by cosine, square root, and lately analytic geometry. By hand.”

That was the 1960s. It was amazing work, but work that took hours to complete – and something an in-memory computer could do in a fraction of a second today.

Just as in-memory computing transformed calculating by hand (and made jobs like Katherine’s much easier), digital technologies are transforming the way we work today – and making our day-to-day activities more efficient.

What’s the real impact of technology in today’s workplace?

We are surrounded by technology, both at home and at work. Machine learning and robotics are making their way into everyday life and are affecting the way we expect to engage with technology at work. That has a big impact on organizations: If a machine can do a job safely and more efficiently, a company, nonprofit, or government – and its employees – will benefit. Digital technologies are becoming increasingly more feasible, affordable, and desirable. The challenge for organizations now is effectively merging human talent and digital business to harness new capabilities.

How will jobs change?

What does this mean for humans in the workplace? In a previous blog, Kerry Brown showed that as enterprises continue to learn, human/machine collaboration increases. People will direct technology and hand over work that can be done more efficiently by machine. Does that mean people will go away? No – but they will need to leverage different skills than they have today.

Although we don’t know exactly how jobs will change, one thing is for sure: Becoming more digitally proficient will help every employee stay relevant (and prepare them to move forward in their careers). Today’s workforce demographic complicates how people embrace technology – with up to five generations in the workforce, there is a wide variety in digital fluency (i.e., the ability to understand which technology is available and what tools will best achieve desired outcomes).

What is digital fluency and how can organizations embrace it?

Digital fluency is the combination of several capabilities related to technology:

  • Foundation skills: The ability to use technology tools that enhance your productivity and effectiveness
  • Information skills: The ability to research and develop your own perspective on topics using technology
  • Collaboration skills: The ability to share knowledge and collaborate with others using technology
  • Transformation skills: The ability to assess your own skills and take action toward building your digital fluency

No matter how proficient you are today, you can continue to build your digital IQ by building new habits and skills. This is something that both the organization and employee will have to own to be successful.

So, what skills are needed?

In a Technical University of Munich study released in July 2017, 64% of respondents said they do not have the skills necessary for digital transformation.

Today's workplace reality

These skills will be applied not only to the jobs of today, but also to the top jobs of the future, which haven’t been imagined yet! A recent article in Fast Company mentions a few, which include Digital Death Manager, Corporate Disorganizer, and 3D Printing Handyman.

And today’s skills will be used differently in 2025, as reported by another Fast Company article:

  • Tech skills, especially analytical skills, will increase in importance. Demand for software developers, market analysts, and computer analysts will increase significantly between now and 2025.
  • Retail and sales skills, or any job related to soft skills that are hard for computers to learn, will continue to grow. Customer service representatives, marketing specialists, and sales reps must continue to collaborate and understand how to use social media effectively to communicate worldwide.
  • Lifelong learning will be necessary to keep up with the changes in technology and adapt to our fast-moving lives. Teachers and trainers will continue to be hot jobs in the future, but the style of teaching will change to adapt to a “sound bite” world.
  • Contract workers who understand how businesses and projects work will thrive in the “gig economy.” Management analysts and auditors will continue to be in high demand.

What’s next?

How do companies address a shortage of digital skills and build digital fluency? Here are some steps you can take to increase your digital fluency – and that of your organization:

  • Assess where you are today. Either personally or organizationally, knowing what skills you have is the first step toward identifying where you need to go.
  • Identify one of each of the skill sets to focus on. What foundational skills do you or your organization need? How can you promote collaboration? What thought leadership can your team share – and how can they connect with the right information to stay relevant?
  • Start practicing! Choose just one thing – and use that technology every day for a month. Use it within your organization so others can practice too.

And up next for this blog series – a look at the workplace of the future!

The computer made its debut in Hidden Figures. Did it replace jobs? Yes, for some of the computer team. But members of that team did not leave quietly and continue manual calculations elsewhere. They learned how to use that new mainframe computer and became programmers. I believe humans will always be the next big thing.

If we want to retain humanity’s value in an increasingly automated world, we need to start recognizing and nurturing Human Skills for the Digital Future.

Comments

Traci Maddox

About Traci Maddox

Traci Maddox is the Director of the North America Customer Transformation Office at SAP, where she is elevating customer success through innovation and digital transformation. Traci is also part of the Digital Workforce Taskforce, a team of SAP leaders whose mission is to help companies succeed by understanding and addressing workforce implications of digital technology.