Digital Manufacturing: How Digital Twins Enable New Business Models

Zach van der Walt

Digitization, personalization, the endless possibilities of emerging technologies and offering your product as a service.

It is just a sampling of the trends that dominate the manufacturing industry. For producers, the following applies: stay on track or get off.

Of course, there is only one realistic option. If you want to keep your company healthy and future-proof, you need to develop a new strategy aimed at making your production smarter. That requires more than a long-term vision.

You will also have to charter the course to your intelligent enterprise through a digital road map. It is, therefore, the question that currently dominates the boardrooms of production companies around the world: Which technologies do you benefit from, how do you create a future vision, and how do you implement this strategy successfully?

Break the silos with a digital twin

One of the biggest stumbling blocks in production companies is the various islands in which work is being performed. When an R & D department puts a product forward to be placed on the market, it goes through various processes in which employees primarily work from within their own discipline. As soon as it goes into or leaves the factory, the product is more or less lost sight of.

The biggest wish? All these islands of data interlock, so that all data comes together so that a full 360-degree view of a product is created. Employees from different silos learn from each other in this way, working together more easily and always working on a product from the same set of master data, meaning a well-defined product data architecture. In this way, it is possible to actually focus on trends such as servitization and personalization.

The secret weapon to realize this? A digital twin, a virtual representation of your product. You can use and consult these during, among other things, product design, optimization, sales processes, inspections, and maintenance. The digital twin can be used during the entire product lifecycle, allowing departments to take advantage of the collected data. For example, an R & D department can optimize future versions of a product with collected feedback from the end user experience in the usage stage & service interactions with the product.

Take advantage of existing and future growth opportunities

Offering products as a service—the Spotify model—is becoming more and more commonplace. In fact, I see it will be the future of the manufacturing industry. Servitization requires insight into the way a product is used in practice so that your production processes and services can be tuned in seamlessly. The use of digital twins will, therefore, become inevitable for production companies. After all, the more complete the view of your product and product lifecycle is, even at a distance from the customer, the better service you can offer.

IDC predicts that 65 percent of manufacturers will use digital twins by 2020. The adoption of disruptive technology is, however, easier said than done. IDC discovered that more than half of European organizations get stuck in its digital transformation because this is often not carried out organization-wide. To help embed this new digital strategy into your organization, three McKinsey consultants wrote “The Alchemy of Growth.” In the book, they argue for a three-horizon framework consisting of short-, medium-, and long-term goals. This allows you to exploit existing and future growth opportunities simultaneously.

Taking guidance from IDC on a digital road map

IDC went a step further. The research organization developed a similar three-horizon framework and focused on the manufacturing industry. With the help of IDC’s Digital Use Case Map for Manufacturing, production companies can shape their digital future in a schematic way. Step by step you will learn how to develop a digital road map based on the specific needs of your company, including examples of relevant use cases that can be rolled out during the transformation.

Practical examples of a three horizon framework

Back to the digital twin and servitization—undoubtedly a goal in the long term, but certainly also applicable to the first step in your three horizon framework. A major obstacle to implementing new business models is often the current ERP system that is less agile than you would like. Instead of just focusing on upgrading and replacing current systems, a digital twin is a practical way to collect data and improve critical processes in your company. Just think of product development and producing as efficiently as possible.

Collaboration as a first step in your digital transformation

In order to continue growing as a production company, you will have to build your digital ecosystem in the medium term. Ultimately, in the long term, you reap the benefits of your service-oriented approach and you can embrace a completely new business model. However, the first step in your transformation to an intelligent enterprise is to work together. Employees are inclined to approach products and business processes only from their own frame of reference. By broadening the horizons of colleagues and making them look critically at all processes (from idea to design from marketing to sales and from cash to logistics), the road to an implementation of your digital strategy is a lot less bumpy.

Meanwhile, several companies have benefited from the use of this strategy in combination with digital twins. The Brazilian tractor manufacturer Stara can actively monitor its vehicles thanks to IoT sensors. Performance is increased and defects are prevented. But thanks to the technology, Stara also introduced a new business model. The organization uses data from the vehicle sensors to advise farmers in real-time on the most optimal conditions for planting crops.

Another good example is the American company Kaeser, which sells compressed air products. Thanks to digital twins, the company has completely switched to selling compressed air-as-a-service. Kaeser no longer supplies compressors only but maintains the systems during their lifetime. Customers only pay for the use. With real-time data, Kaeser employees can monitor the compressor and schedule maintenance if necessary.

Pull your production company into the future with a three horizon framework

Several success stories show that the use of digital twins can attract an organization into the future. In fact, it is a proven way to become an intelligent manufacturing company. Use cases such as these should be an essential part of your digital road map—not to take it over as is, but as a basis for your strategy.

Paving the road to your new digital strategy is no longer an impossible task thanks to IDC’s three horizon framework. The practical and scalable use cases that have been mapped out by the organization provide a guide to fully map the journey to your intelligent enterprise.

 Note: Besides the Digital Use Case Map for Manufacturing, IDC has also an Execution guide to help you launch use cases in your manufacturing company.

About Zach van der Walt

As the Lead for Discrete and Service industries for SAP Netherlands, Zach van der Walt is responsible for exploring new industry trends and introducing disruptive technologies and unconventional ideas, while cultivating a value-lead environment throughout our SAP customer base. In his role, Zach heads the SAP Industry Value Engineering (IVE) – for Discrete and Service Industries for SAP Netherlands. The IVE builds innovative use case for customers supported by value base roadmaps and business cases that help support the future of work with software for the data-led enterprise. The IVE also drives key programs and exploration with key customers and co-innovation partners.