New technologies, new business models, new opportunities for digitization, new innovations – overwhelmed yet? It seems the rate of innovation is increasing exponentially, and it’s a digital-or-die type of scenario. Digital transformation is not going away anytime soon, and manufacturers are in the unique position to show others how to make the most of opportunities to move the innovation mountain and take advantage of innovative technologies like AI, blockchain, machine learning, and the Internet of Things, as well as continuously innovating and transforming business models quickly.
While intelligent technologies may be the most important tool for success, there are some fundamental shifts and worldwide megatrends that continue to impact the types of products and solutions customers and consumers are expecting.
For example, economies are becoming more circular, and manufacturers not only have to think about how their equipment is used but also its disassembly and reuse. Consumers want to buy “trusted products” so they know exactly where the components come from and what conditions the employees work under.
Further, the increase of megacities worldwide is driving the need for solutions and equipment to intelligently and sustainably manage energy, water, and waste. The expectation of sustainability is also driving demand for innovative equipment and solutions for energy generation, storage, and the need for energy efficient products.
This all means that companies (and manufacturers in particular) must innovate continuously to address these trends. The cloud will be a key enabler for companies to do that. A July 2018 commissioned study, conducted by Forrester Consulting on behalf of SAP, “Emerging Opportunities for Discrete Manufacturers To Deploy Industry Processes In The Cloud” found that 95% of discrete manufacturers believe moving end-to-end processes or business processes to an industry cloud would have notable improvement on their ability to digitally transform their whole ecosystem. Manufacturers realize that meeting their customers’ expectations in this new digital economy requires transformation and collaboration beyond just their own enterprise.
According to the study, 99% of innovative manufacturers feel it is important that the software for their business processes integrates across an end-to-end value chain in an industry cloud, more than other private industries. The conclusion is that the ability to move end-to-end processes to the cloud is the next logical step for digital transformation.
How could that be achieved? With an industry cloud that enables the intelligent enterprise. As defined in the commissioned study, an industry cloud is a platform and software solution that enables cloud adoption for a particular industry. It includes industry end-to end processes, an innovation platform, and industry-specific business insights all delivered in the cloud. In the study, manufacturers said the most important features of this industry cloud are the cloud platform followed by the system of innovation and then a consumer-grade user experience.
What are these components?
A cloud platform allows data to be managed from any source and format so it can be used to share insights across different applications. It also supports the rapid development, integration, and extension of business processes to ensure that innovation can be continuous.
A system of innovation makes intelligent technologies and services (such as IoT, machine learning, and predictive analytics) available so they can be embedded into both existing and new processes.
Finally, it includes an intuitive and consistent user experience that is available on any device, anywhere, and provides relevant and in-context information across all applications. One that can manage all business processes, customers, suppliers, employees, and products ensures adoption and productivity.
The new business processes being developed require this level of ongoing innovation, collaboration, and insight. Take a pay-for-outcome model; historically, manufacturing companies have sold only machines and equipment to their customers. Innovative manufacturing companies are now offering additional business models to differentiate themselves in the marketplace. They provide the machines and equipment bundled with services and consumables and charge for the outcome. Therefore, they need to be able to monitor the outcome at the customer site, analyze historical data, assess risks, quantify which customers would qualify, and make the data available for billing. This business model impacts R&D, sales, finance, risk management, logistics, and after-service, making it important that innovations can be implemented across end-to-end processes and not in silos.
30% of manufacturers are predicted to use innovation marketplaces by 2022 for on-demand services and software that raise margins by up to five percentage points
Manufacturing companies are also looking at monetizing data based on information from assets. Data can be used to help improve the installation processes, connecting data from different sources as well as from all involved parties. All parties can have full visibility through the cloud and can easily collaborate. Actionable insights help all parties deal with unforeseen issues that threaten the project’s success. Linking manufacturing, sales, and assets creates a fully digitized profile or digital twin, making the installation process easier and more predictive by providing real-time transparency. As more data like this becomes available, there will be even more opportunities to add value to customers.
90% of large enterprises will generate revenue from data-as-a-service by 2020 – from the sale of raw data, derived metrics, insights, and recommendations – up from nearly 50% in 2017.
— IDC, “IDC FutureScape: Worldwide IT Industry 2018 Predictions,” October 2017
The building blocks for an intelligent enterprise in an industry cloud, as an integrated suite, system of innovation (intelligent technologies), and cloud platform, allow manufacturers to move to the cloud and yet keep their competitive edge. As they extend and create applications and apply technologies to stay agile and flexible, they will be easily able to adapt to new business requirements that haven’t been considered yet.
New processes will continue to evolve, and having end-to-end processes in the cloud will enable manufacturers to support digitalization effectively.
For more information, read the white paper “The Intelligent Enterprise for the Industrial Machinery and Components Industry.”