Fully one-quarter of the world’s economy will be digital by 2020,
forecasts a new report from Accenture. But that prediction doesn’t tell
the whole story. Because increasingly, all business processes will be
not only digitized – converted from analog to digital – but also
digitalized – transformed in a way that blurs the physical and virtual.
Many organizations are struggling to respond. In fact, only five percent
of companies say they’ve mastered digital transformation to the point of
competitive differentiation, according to Forrester.
The challenge is especially acute for manufacturers. From innovation to
production to logistics, manufacturers are seeing their operations
revolutionized by digital technologies.
That starts with research and development. Here are four key ways
digitalization is transforming R&D:
1. End consumers are more empowered
Technology has put consumers in the driver’s seat. Customers now have
instant, constant access to information about products, quality, and
pricing – for both you and your competitors. In the past, if you had
established yourself as a leader in a region, the competition was at a
disadvantage. Today, customers know how you stack up against rivals
around the world, and your past market leadership is irrelevant. This
isn’t just a problem for sales and marketing. It’s also a problem for
R&D, which must respond – in as near to real time as possible – to
changing customer demands. The good news is that technology is also the
solution. For example, by designing smart products that leverage
Internet of Things (IoT) sensors, R&D can capture usage data to
understand customer desires and capture performance data to learn how to
improve products rapidly.
2. Transparency is rewriting how manufacturers collaborate
Information access is changing the way manufacturers interact both
internally and with suppliers. This is true for every function, but
especially for R&D.
As R&D creates more smart products, the skills it requires are changing.
The automotive industry is a case in point. Fifteen years ago, cars
began to incorporate electronics such as engine-control systems. Today,
electronics are where most automotive R&D is happening, and within 10
years, electronics will allow cars to pretty much drive themselves.
That dramatically changes how cars are designed. In the past, mechanical
engineers led design efforts, and electronics were merely an add-on.
Today, software development – with its very different requirements and
design cycles – is integral to the process. In the automotive industry
and in virtually every other industry, product design will involve new
stakeholders who must work together in new ways.
3. Business models are growing more flexible
In the past, product designers worked for companies that sold products.
But increasingly, manufacturers will sell not products but services.
That affects R&D in fundamental ways.
A good example is a midsize SAP client that makes industrial air
compressors. Some years ago it realized customers wanted not air
compressors but compressed air. So it began offering compressed air as a
service. Before this time, it designed and manufactured air compressors
and then sold them to customers. Now, it designs and manufactures air
compressors, installs them at customer sites, and then charges for the
compressed air customers consume.
That new business model changes how R&D develops products. First, it
needs to design in IoT sensors to monitor the compressors in real time
and enable predictive maintenance. Second, it needs to optimize
longevity and ease of maintenance. One way the company achieves that is
by having engineers regularly spend time with field service to see
firsthand how equipment is performing.
4. Business processes are becoming more customer centric
In fact, 83% of executives believe digitalization is driving a shift
from supply-side economies of scale to demand-side economies based on
interconnection with customers and partners, according to the Accenture
Manufacturers will have to be more connected to customers, because new
business models will demand it. Take the air compressor customer. It
hasn’t invested in a capital-intensive air compressor; it’s simply
contracted for compressed air. At the end of the contract, there’s
little disincentive to switching to a more attractive contract. The same
will be true for many products across many industries.
How does that change R&D? Design cycles will have to accelerate to
maintain competitive differentiation. For example, most carmakers update
a car’s electronics only if the customer happens to come in for service.
Tesla has upped the ante by sending new features and functions directly
to the consumer through regular software updates. Don’t be surprised if
its competitors start to follow.
Ultimately, the digital economy begins and ends with the customer.
Customers are more empowered, so companies need to become more
customer-centric. And nowhere is that more true than in R&D.
For more insight on the new customer-centric digital economy, see
Customer Relationship Status: It’s Complicated.
How IoT Is Impacting 7 Key Industries Today
There is no single way to describe the Internet of Things (IoT)—it
varies by industry, both in types of systems and in use cases. IoT in
one sector is different from IoT in another. To better understand just
how IoT is impacting a variety of industries, Forbes Insights, in
partnership with Intel, conducted a survey of 700 executives familiar
with their organization’s implementation of IoT programs.
Growth in IoT systems has been most pronounced within the manufacturing
and financial services sectors, with 47% and 42% of executives in these
sectors, respectively, reporting growth in their networks exceeding 10%
over the past three years.
As the survey found, financial services, healthcare and manufacturing
are leaders in IoT thinking, and in many cases, are connecting IoT
capabilities with powerful advanced analytics or artificial
intelligence. Close to six in 10 executives in the financial services
sector, 58%, report having well-developed IoT initiatives, followed by
healthcare organizations (55%). Growth in IoT systems has been most
pronounced within the manufacturing and financial services sectors, with
47% and 42% of executives in these sectors, respectively, reporting
growth in their networks exceeding 10% over the past three years.
Keep reading to find out more about how executives in communications,
energy, financial services, healthcare, manufacturing, retail and
transportation are leveraging IoT.
1.Communications: For telecommunications providers and other
communications companies, the mobile revolution is underscoring the
shift to IoT. About half of the communications companies represented in
the survey, 53%, either have IoT embedded into their processes or have
it in key business areas. In communications companies, the most
prevalent IoT data sources include audio devices (45%), followed by
mobile phones (42%). The most prevalent application is preventive
maintenance (44%), followed by efforts to increase employee productivity
(40%). In addition, more than one-third of communications providers are
in the forefront of applying approaches with computer vision and
analytics to better understand and predict customer behavior, as well as
the viability of assets. In total, 38% report they have implemented
visual analytics across parts of their enterprises.
2.Energy: Energy companies tend to have operations spread across remote
locations such as oil and gas fields, which require continuous
monitoring. Close to half of executives in the energy sector, 47%,
indicate they either have implemented IoT across selected
functions/business areas or have extensive IoT deployments. Leading data
sources include machinery (49%) and robots (46%). Energy companies are
turning to IoT to monitor asset performance (45%), enhance their
customers’ experience (43%) and boost overall efficiency (40%). About
one-third, 34%, report they have deployed visual analytics deeply within
their enterprises. Camera-mounted drones, for instance, can help
companies monitor the health and safety of production fields and
facilities, spotting anomalies before they become a hazard.
3.Financial Services: Financial services organizations are highly
security conscious, and therefore increasingly rely on networks of
cameras and other visual sensors to ensure the viability of their
facilities. As noted above, financial services leads the way in IoT
deployment, with 58% of survey respondents having some degree of
capabilities. Companies in this sector are also well ahead in terms of
visual analytics adoption—51% report they have developed and implemented
capabilities employing cameras and visual sensors connected to AI and
analytics systems. Mobile phones are the leading endpoint choice for
financial companies (cited by 51%), along with cameras and sensors
(48%). While financial firms have multiple goals in their IoT efforts,
most pronounced is the need to expand the connectivity of their networks
(31%), along with employing IoT as vehicle for greater security (30%).
4.Healthcare: Within healthcare, there is concern about the experiences
customers receive not only at bedsides, but also in waiting rooms,
emergency rooms and business offices. Healthcare organizations are also
leading the way with IoT, with 55% having fairly robust deployments in
place. In healthcare, audio devices and mobile phones are the most
essential devices in use, mentioned by 46% of respondents in the sector.
Employee monitoring is the most prevalent use case (41%), along with
monitoring facilities and enhancing customer experiences (each cited by
38%). The majority, 57%, also employ visual analytics to improve their
levels of customer service and patient care.
5.Manufacturing: Manufacturers, more than companies in other industries,
rely on heavy machinery to produce products and therefore have a deep
interest in understanding the performance of these machines.
Manufacturing organizations have a range of opportunities—through
computer vision to manage and track the movement of goods, linked to
artificial intelligence-enhanced systems that can predict, and even
remediate, events before they happen.But there’s more to the story than
managing machines. Overall, compared with other industry groups,
manufacturers are seeing the greatest transitions from IoT. A majority
of executives in manufacturing firms, 51%, “strongly agree” that IoT is
opening up new lines of business for their organizations. In addition,
29% of manufacturing executives report their IoT efforts have enabled
them to offer new products or services, along with 29% of those with
communications companies. A majority of manufacturers, 51%, state either
that selected business areas are supported by IoT or that they have
deployed it extensively across their organizations. A majority, 52%, of
manufacturers indicate they have visual analytics capabilities in place
as well, enabling the real-time monitoring of assets and products.
Mobile phones and computer systems are the main sources of IoT data for
manufacturers (cited respectively by 48% and 47%), and the leading use
cases in this sector are preventive maintenance (51%) and increasing
6.Retail: In retail, what happens on the sales floor doesn’t stay on the
sales floor—customer behavior and reactions are studied, evaluated and
evolved. Half of the retail executives in the survey, 51%, report having
robust IoT efforts underway—either deployed across departments or
extensively across their enterprises. A majority, 53%, also report
employing visual analytics to some degree, enabling a greater
understanding of customer preferences and behavior. The most prominent
IoT data sources include computer systems (51%) and sensors (47%). For
retail organizations, the main use cases are enabling business
transformation (44%) and providing training enhanced by augmented
virtual reality (43%).
7.Transportation: Transportation is about movement and logistics, and
IoT systems are playing a role in managing these capabilities. About
half of the executives in the survey in transportation-related
organizations, 47%, report having either departmental-level IoT efforts
underway or implementations that reach across their enterprises. The
most important use cases are increasing productivity (40%) as well as
logistics monitoring and routing (40%). Close to half of transportation
companies, 46%, have some level of visual analytics incorporated into
their IoT efforts. Cameras and sensors, for example, may be placed along
railroad tracks to monitor wear and tear on wheel assemblies or
anomalies with freight cars.
As these examples demonstrate, every industry has the potential to reap
the benefits from IoT. Yet it’s up to executives to recognize the
potential of these technologies and determine how best to leverage them
within their companies and respective industries. Those who do will
certainly reap the rewards.