How to Take Advantage Of 3D Printing Service Parts In Aerospace

Thomas Pohl

The time of 3D printing being a hobbyist’s plaything is in the past. Not only has additive manufacturing come into its own, but it is rapidly gaining ground as a more sustainable technology than centralized systems that require shipping networks to get goods to market. In the aerospace industry, we’re seeing more use of 3D printing than in the past; for example, GE has produced a 3D-printed 1,300 HP advanced turboprop engine. But one area where 3D printing technology is expected to have the largest impact on the aerospace industry is in parts printing.

The aerospace industry was one of the first adopters of 3D printing technology, beginning in 1988, only four short years from the first patent registration for the technology. At the time, it was only used for modeling and prototypes. A little over a decade later, industry leaders started to explore the full potential of the technology.

Today, it’s clear there are a number of areas where 3D printing of service parts can benefit the aerospace industry.

Increased asset uptime

Because airline fleets are always on the go, it can be difficult to anticipate in what locations and at what times specific parts may be needed. Internet of Things (IoT) technology improves inventory tracking, but that isn’t the solution when you don’t have the right part where it’s needed. Aircraft-on-ground delays can cause serious problems in a number of areas, and 3D-printed parts help avoid this issue and improve overall fleet uptime. Personnel in the hanger can simply print a new part instead of maintaining an exhaustive inventory or hoping the part comes in quickly.

Reduced cost

Beyond the problems of grounded assets, 3D-printed parts also reduce costs. When an asset is grounded, it can quickly become an expensive problem. A typical “B check” maintenance issue that grounds a plane has an average cost of $60,000. The crew must be moved to other aircraft or lodged locally; replacement parts need to be shipped in (if they’re not on location); fleet coordination is impacted; flight schedules are thrown off; and service-level agreement (SLA) compliance becomes an issue. And that’s before you deal with the resulting customer service issues.

Lighter components

In aeronautics, weight is money, and 3D-printed parts could lighten the components used in aircraft. Reducing the weight of your components means using less fuel to get off the ground. A recent contest by GE challenged designers to create an engine bracket designed for production with a 3D printer. The winning entry produced an 83.4% reduction in weight, from 2 kg to a svelte 327 grams. That may not seem like much on a 400-ton aircraft, but it’s just that much less weight to get in the air.

More durability

It’s much easier to design 3D-printed components for strength and durability versus manufacturing ease. “We get five times the durability. We have a lighter-weight fuel nozzle. And we frankly have a fuel nozzle that operates in an environment more effectively and more efficiently than previous fuel nozzles,” Greg Morris, head of GE Aviation’s additive printing division, said in an interview. The ability to design and print parts remotely makes updates to fleet assets much easier to implement.

Improved customer satisfaction

In aeronautics, customer satisfaction has a huge impact on a company’s bottom line. It’s estimated that in 2016, flight delays cost airlines $25 billion in actual expenses, and that figure does not include damage to an airline’s reputation. If an airline becomes known for flight delays and maintenance issues, it’s less likely to be used by consumers. Having 3D printing capabilities for a number of parts helps reduce flight delays and keeps cancellations to a minimum. It also helps improve overall fleet uptime and reputation for excellence.

By adding 3D printing capability, aeronautics companies can enjoy lean operations with better flexibility and resiliency. It provides a range of benefits, including avoiding aircraft-on-ground problems. By placing a 3D printer at the hanger or a nearby distribution warehouse, response time is drastically improved, costs are reduced, and excess inventory is eliminated.

Digitization and disruption require businesses to be lean and agile. This is true of all industries, including aeronautics. While 3D printing was initially used for out-of-production or slow-moving inventory parts, it’s progressing into more complex parts as the technology has improved.

As part of an overall digitization plan, 3D printing allows companies to respond faster to industry changes. Imagine a scenario where sensors in your assets sense a problem in a particular part of your aircraft. Those sensors automatically contact the arrival airport, which 3D-prints the part while the plane is still in the air. Wait time decreases and the plane gets back in the air faster. The future of aeronautics is now. Where does your business stand?

Read this whitepaper to understand how a digital world in aerospace and defense industry can help you to reinvent products, services, and core business processes.


Thomas Pohl

About Thomas Pohl

Thomas Pohl is a Senior Director Marketing at SAP. He helps global high tech and aerospace companies to simplify their business by taking innovative software solutions to market.

How To Conquer The Future Of Aerospace

Danielle Homer

In our recent episode of S.M.A.C. Talk Technology Podcast, Brian Fanzo and Daniel Newman discussed the future development and potential of the aerospace industry. Their guest, Torsten Welte, is a leader in SAP’s aerospace defense industry business unit. He works with a wide range of satellite, spacecraft, aircraft, and defense companies. Here’s an overview of what they discussed.

Unifying diversity

The aerospace industry unifies a very diverse range of interests. These range from the customer-focused needs of commercial aerospace, to the high levels of precision required in spacecraft, to the solid reliability required of defense systems. One aspect where these diverse interests are unified is in supply chain transparency.

New companies are bringing a wide range of new technology to the cockpit and cabin. These new products are also deepening the divide between the different sectors of the aerospace industry by increasing the specialization in each sector. However, the use of common standards and platforms are making it easier for these diverse systems to interconnect and work together for a common good. There’s been an increased interest in the industry. Nations are discussing manned missions to Mars, added flights to more points in Asia, and the need for higher security in defense.

Increased use of blockchain

One unifying theme is the use of blockchain to improve security and transparency in the system. As new technologies have come into the market, there’s been a related increase in the use of blockchain. Of the diverse areas within aerospace, the defense industry has especially embraced the security technology. This is because blockchain allows only authorized users to view the information and prevents sensitive information leaks to the outside world. But blockchain also has its place in commercial aerospace as new technologies and products need to be authenticated. This helps prevent fraud issues for export or shipping documentation.

Technologies such as blockchain are helping improve security. There is strong demand for pilots, mechanics, and other workers necessary to the flight line. Increased demand for smaller planes is hitting the supply chain hard and causing shortages. At the same time, there’s been an increased need for security measures in the nearly 17 years following the 9/11 attacks. Blockchain helps transcend these often opposing demands of maintaining security while increasing production to create a better overall commercial aerospace industry.

Rapid ramp-up of small-plane demand

But why has blockchain become so popular for supply chain transparency? The industry has seen a general downturn on the production of larger planes. At the same time, there’s incredible demand for smaller planes, especially in Asia. Torsten says, “a couple years ago, Boeing and Airbus, 737 or A320, created somewhere around 30 a month … And jumping now to a target of 60 a month.”

This growing market has created a demand for accountability and transparency. As new companies enter the market, they’re introducing new technology that may have its own issues. Blockchain can act as an authentication point to help prevent fraud. This helps ensure that the entire system works together securely. It covers everything from the supply chain to operations. The challenge is having these diverse systems work together in a unified system.

Long-term aerospace changes

Even as the industry has grown more diverse, common goals have brought it closer together. The expectation of a manned mission to Mars over the next few decades is driving long-term change in the industry. There was a push for space flight and a moon landing in the 1950s and 1960s. That same excitement over the possibilities of space exploration is driving improvement and change.

New programs, research, effort, and vision are focusing not only national aerospace efforts but international efforts as well. The advent of digitization is making it possible for people from around the world to contribute to the overall mission. This effort is creating changes closer to home. International experts can now communicate effectively. The industry as a whole is emerging with improvements. This is leading to improved flight technology, overall quality, and similar areas of interest to the entire industry.

The impact of customer experience

Customer experience has become a serious driver for many industries over the past few years. As digitization has marched forward, unspoken customer expectations have increased. The experience across multiple carriers and systems should be seamless – if your last flight had certain amenities, you should be able to enjoy those same amenities on the connecting flight. It doesn’t matter whether it’s the same carrier or a completely different service.

Changes in technology are providing differences in lighting, communications, and many other areas. Other sectors of the travel industry, such as cruise lines, are using Big Data to create an artificial-intelligence-like digital environment. This could be implemented in commercial aerospace to determine a customer’s preferences and past purchasing history, allowing available options to be customized to that individual. In turn, the interface provides the customer with a superior experience that meets or exceeds their needs. With these tools to create a better overall experience, compensation payments and outright refunds are reduced dramatically.

The aerospace industry has been at the cutting edge of technology for the past several decades. At the same time, it is currently scrambling to keep up with the demands of digitization. Internet of Things technology, Big Data, connectivity, supercomputing, and artificial intelligence are changing the way the industry operates. And as Torsten states in the podcast, “technology is the enabler.” New options and customized possibilities are providing a better user experience. Technologies such as blockchain enable better accountability and security for your business. But how do you combine these new technologies into a single cohesive system? Discover more in the S.M.A.C. Talk Technology Podcast.

Hear the full episode here. Learn how to bring new technologies and services together to power digital transformation by downloading The IoT Imperative for Discrete Manufacturers: Automotive, Aerospace and Defense, High Tech, and Industrial Machinery. Explore how to bring Industry 4.0 insights into your business today by reading Industry 4.0: What’s Next?


Danielle Homer

About Danielle Homer

Danielle Homer is a Solution and Product Marketing Specialist at SAP. After receiving her master’s degree in Innovation Management and Entrepreneurship, her affinity for innovation has led her to the exciting industries of A&D and High Tech to help customers transform and expand their business.

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


David Parrish

About David Parrish

David Parrish is the senior global director of Industrial Machinery & Components Solutions Marketing for SAP. Before joining SAP, he held various product and industry marketing positions with J.D. Edwards, PeopleSoft, and QAD going back to 1999.

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


Dr. Chakib Bouhdary

About Dr. Chakib Bouhdary

Dr. Chakib Bouhdary is the Digital Transformation Officer at SAP. Chakib spearheads thought leadership for the SAP digital strategy and advises on the SAP business model, having led its transformation in 2010. He also engages with strategic customers and prospects on digital strategy and chairs Executive Digital Exchange (EDX), which is a global community of digital innovation leaders. Follow Chakib on LinkedIn and Twitter

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


Andre Smith

About Andre Smith

Andre Smith is an Internet, marketing, and e-commerce specialist with several years of experience in the industry. He has watched as the world of online business has grown and adapted to new technologies, and he has made it his mission to help keep businesses informed and up to date.

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


Paul Dearlove

About Paul Dearlove

Paul Dearlove is General Manager - Retail, SAP ANZ based in Sydney. As a former professional athlete, Paul has a keen focus on high performance and believes there are many skills that can be transferred to the corporate environment.

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


Marina Simonians

About Marina Simonians

Marina Simonians is the Head of Global ISV GTM Strategy at SAP responsible for building new global ISV software driven initiatives for Big Data, AI/ML, Advanced analytics and IoT. With a passion for ecosystems she believes partnerships are most critical success factor in today’s software-driven market.

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


Jennifer Horowitz

About Jennifer Horowitz

Jennifer Horowitz is a journalist with over 15 years of experience working in the technology, financial, hospitality, real estate, healthcare, manufacturing, not for profit, and retail sectors. She specializes in the field of analytics, offering management consulting serving global clients from midsize to large-scale organizations. Within the field of analytics, she helps higher-level organizations define their metrics strategies, create concepts, define problems, conduct analysis, problem solve, and execute.

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


Lane Leskela

About Lane Leskela

Lane Leskela, global business development director, Finance and Risk, for SAP, is an accomplished enterprise software leader with years of experience in customer advisory, marketing, market research, and business development. He is an expert in risk and compliance management software functions, solution road maps, implementation strategy, and channel partner management.

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


Joseph Msays

About Joseph Msays

Joseph Msays is an experienced IBM global executive, currently serving as Vice President and Global Managing Partner for NextGen Enterprise Cloud Applications Center of Excellence. In this role, he is pioneering new ways of engaging CxOs in their digital reinvention agendas, and building and migrating new cloud-based business applications. Joseph has experience managing many IBM professional services units and large strategic systems, integration and outsourcing relationships, and has lived and worked in virtually every major market across the globe.

How Will The 4th Industrial Revolution Affect Your Business?

Richard Howells

Manufacturing companies are being driven by a number of impactful market trends affecting their business:

  • Expectations of global markets are causing companies to build production processes with greater agility and adaptability to respond to highly variable market demand
  • Massive amounts of data are being produced through social media channels
  • The globalization of the extended supply chain
  • Intelligence built into machines through sophisticated sensors and alert devices

In this blog, we will explore the impact of these factors as well as the evolution of technology that will fundamentally change the way manufacturing is done today and into the future.

Two major elements in the changing manufacturing widgetsmanufacturing environment — machine to machine (M2M) and Internet of Things (IOT) — will change the operational environment of the manufacturing firm. These concepts make up what is known as Industry 4.0 — the fourth Industrial Revolution, which describes the convergence of the classical manufacturing space with internet technologies and the increasing intelligence of devices.

How smart machines are affecting manufacturing

The concept of M2M integration in industrial applications shares enough similarities with IoT) that the terms are often used interchangeably, as both relate to the impact interconnected devices will have in both the industrial and consumer worlds.

A smart thermostat is a good example of how interconnected devices are gaining traction: It encompasses a number of key components, including mobility, social media, big data, cloud, and M2M self-regulation. Consumers can regulate the temperature in their residence remotely with a smartphone, link statistics to an app that calculates a green score rating, and share the results via social media. The device itself can detect and regulate anomalies, make recommendations, or send service alerts to the manufacturer.

In the industrial space, M2M is often thought of in the realm of preventive or predictive maintenance. For example, a device on a smart factory floor regulating itself for service to ensure constantly optimized production, allowing end users and process engineers to react to problems that have yet to occur.

Many companies in capital intensive manufacturing industries see the value in monitoring assets post-sale, providing feedback for internal management of the lifecycle of the product and to guarantee optimal availability and performance.

Manufacturers are embedding more intelligence and connectivity into both industrial and consumer products, allowing them to leverage their knowledge of the product to provide additional value-added services. It also enables them to transform their experience with the customer from a one-time transaction to an on-going relationship. This can provide a critical new source of revenue in aftermarket services or can completely change the manufacturers business model to one providing performance guarantees or even selling their product as a service.

Many SAP customers have teamed with us through co-innovation to engage in responsive manufacturing scenarios, so they are already familiar with M2M concepts and their promise. Their interest in Industry 4.0 is purely from a practical standpoint: How can it benefit them? What opportunities does it provide?

The tenets of Industry 4.0

Before answering those questions, let’s consider some of the key enablers and tenets of the fourth industrial revolution.Figure 1 depicts how many of the major enablers in enterprise technology today are indeed factors in creating this revolution. It is the combination of these elements that results in the massive changes we are seeing in manufacturing.

4th revolution.PNGDigging deeper, there are five main tenets of the fourth Industrial Revolution that more explicitly explain the connection between the technological enablers and their direct impact on manufacturing processes:

  1. Smart devices at every stage of manufacturing provide raw data, analysis, and closed-loop feedback that is utilized to automate and manage process control systems.
  1. These devices are connected, embedded, and widely used.
  1. As an offshoot of the proliferation of smart devices, control systems will become far more complex and widely distributed.
  1. Wireless technologies will tie these distributed control modules together to allow for dynamic reconfiguring of control system components.
  1. Actionable Intelligence will become increasingly important because it will be impossible to anticipate and account for all of the environmental changes to which control systems will need to respond.

With these ideas in mind, Industry 4.0 can be viewed as cyber-physical systems creating a new dynamic manufacturing landscape that will transform even the most traditional blue-collar manufacturers. It is, in a nutshell, smart devices turning into smart products turning into smart factories.

Preparing for a smart factory

To see how Industry 4.0 represents a progression from M2M or IoT, let’s take a look at another common use case for smart devices today.

Pirelli, a €6 billion tire company with fleet management services, mounts sensors on the tires of its fleet vehicles to record tire pressure, temperature, and mileage. Using SAP HANA, this information is recorded and analyzed to help ensure optimum performance for each tire.

In a true end-to-end Industry 4.0 scenario, this information would really be just a small piece of the puzzle. On top of aiding safety at the vehicle level, think of the possibilities if a tire sensor were connected to other smart devices on the vehicle, other vehicles in the fleet, or production devices on the manufacturing floor. In addition to optimization of the individual asset, connecting to manufacturing shop floor machines and systems could ensure optimization of future assets as well.

So, while it’s not hard to envision the benefits from such a scenario, there is an aspect of Industry 4.0 that doesn’t receive as much attention. While smart devices can in many ways optimize manufacturing, they conversely make manufacturing far more complex. In the example of tire manufacturing, processes that have been standardized for years will have to account for integrating new parts and processes in the manufacturing life cycle.

The level of complexity this creates is immense, again because this is no longer just about isolated smart devices, but about manufacturing itself being transformed with machines and devices monitoring and communicating with other machines and devices remotely all over the world.

With manufacturing having to adjust for this complexity, traceability on a global basis becomes extremely important. How can organizations prepare for this? Manufacturing processes themselves must be analyzed to determine the most efficient way to incorporate this complexity into production. There are innumerable supply chain logistics to consider, enormous compatibility details to work out, and system control questions to answer. Will organizations be able to access increasing data volumes in real time and make intelligent decisions based on this reporting?

Manufacturing at the most basic level will always retain as its primary goal producing goods at the lowest cost and highest quality possible. Using smart production creates significant challenges in both areas, and companies will be faced with some key decisions on how they plan to compete in this new marketplace that favors competing on value over price.

Industry 4.0 and SAP

At the Hannover Fair 2014, SAP and contributing partners demonstrated a realized view of a smart factory (see Figure 2). It incorporated an integrated technology approach to deliver greatly improved manufacturing processes. This helps reduce the complexity of incorporating these new smart and intelligent devices and process– internal processes and IoT activities. From energy management to production management and asset optimization, the smart factory was founded on the concepts of Industry 4.0.

industry4.PNG

With the onset of Industry 4.0, a drastic increase in manufacturing complexity is going to occur. Organizations that start to think now about how to incorporate new innovations into manufacturing will have a distinct competitive advantage in the new Industrial Revolution. To learn more, visit www.sap.com/manufacturing.

This article originally appeared in the July 2014 issue of SAP Insider and was written by Mike Lackey, the Vice President of Solution Management for Line of Business Manufacturing.


Vaag Durgaryan

About Vaag Durgaryan

Vaag Durgaryan is the commercial finance director for SAP in the Middle East and North Africa, which comprises of over 20 countries. Starting in 2017, he oversees a multinational team that provides finance expertise, knowledge, and strategy outlook for finance sales support in the region. Prior to that, Vaag was chief of staff for the CFO for SAP Global Field Finance and co-drove global transformation initiatives with focus on process simplification and people enablement. He holds an Executive MBA degree from ESSEC Business School and Mannheim Business School. Vaag has a passion in digitalization and learning culture.

Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!


About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

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

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Survey: Four Ways Machine Learning Will Disrupt Your Business

Dan Wellers and Dirk Jendroska

We are entering the era of the machine learning enterprise, in which this subset of artificial intelligence (AI) capabilities will revolutionize operating models, shake up staffing methods, upend business models, and potentially alter the nature of competition itself. The adoption of machine learning capabilities will be limited only by an organization’s ability to change – but not every company will be willing or able to make such a radical shift.

Very soon, the difference between the haves and the have-nots of machine learning will become clear. “The disruption over the next three to five years will be massive,” says Cliff Justice, principal in KPMG’s Innovation and Enterprise Solutions team. Companies hanging onto their legacy processes will struggle to compete with machine learning enterprises able to compete with a fraction of the resources and entirely new value propositions.

For those seeking to be on the right side of the disruption, a new survey, conducted by SAP and the Economist Intelligence Unit (EIU), offers a closer look at organizations we’ve identified as the Fast Learners of machine learning: those that are already seeing benefits from their implementations.

Machine learning is unlike traditional programmed software. Machine learning software actually gets better – autonomously and continuously – at executing tasks and business processes. This creates opportunities for deeper insight, non-linear growth, and levels of innovation previously unseen.

Given that, it’s not surprising that machine learning has evolved from hype to have-to-have for the enterprise in seemingly record time. According to the SAP/EIU survey, more than two-thirds of respondents (68%) are already experimenting with it. What’s more, many of these organizations are seeing significantly improved performance across the breadth of their operations as a result, and some are aiming to remake their businesses on the back of these singular, new capabilities.

So, what makes machine learning so disruptive? Based on our analysis of the survey data and our own research, we see four primary reasons:

1. It’s probabilistic, not programmed

Machine learning uses sophisticated algorithms to enable computers to “learn” from large amounts of data and take action based on data analysis rather than being explicitly programmed to do something. Put simply, the machine can learn from experience; coded software does not. “It operates more like a human does in terms of how it formulates its conclusions,” says Justice.

That means that machine learning will provide more than just a one-time improvement in process and productivity; those improvements will continue over time, remaking business processes and potentially creating new business models along the way.

2. It creates exponential efficiency

When companies integrate machine learning into business processes, they not only increase efficiency, they are able to scale up without a corresponding increase in overhead. If you get 5,000 loan applications one month and 20,000 the next month, it’s not a problem, says Sudir Jha, head of product management and strategy for Infosys; the machines can handle it.

3. It frees up capital – financial and human

Because machine learning can be used to automate any repetitive task, it enables companies to redeploy resources to areas that make the organization more competitive, says Justice. It also frees up the employees within an organization to perform higher-value, more rewarding work. That leads to reduced turnover and higher employee satisfaction. And studies show that happier employees lead to higher customer satisfaction and better business results.

4. It creates new opportunities

AI and machine learning can offer richer insight, deeper knowledge, and predictions that would not be possible otherwise. Machine learning can enable not only new processes, but entirely new business models or value propositions for customers – “opportunities that would not be possible with just human intelligence,” says Justice. “AI impacts the business model in a much more disruptive way than cloud or any other disruption we’ve seen in our lifetimes.”

Machine learning systems alone, however, will not transform the enterprise. The singular opportunities enabled by these capabilities will only occur for companies that dedicate themselves to making machine learning part of a larger digital transformation strategy. The results of the SAP/EIU survey explain the makeup of the evolving machine learning enterprise. We’ve identified key traits important to the success of these machine-learning leaders that can serve as a template for others as well as an overview of the outcomes they’re already seeing from their efforts.

Learn more and download the full study here.  

 


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.

Dirk Jendroska

About Dirk Jendroska

Dr. Dirk Jendroska is Head of Strategy and Operations Machine Learning at SAP. He supports the vision of SAP Leonardo Machine Learning to enable the intelligent enterprise by making enterprise applications intelligent. He leads a team working on machine learning strategy, marketing and communications.