Defining the digital future

This article was first published in Electronics Weekly.

The fourth industrial revolution, digital driven change, has been creeping up on companies for some time but its adoption is now accelerating. Low cost technologies including Robotics, AI (Artificial Intelligence), RPA (Robotic Process Automation) and IIoT (Industrial Internet of Things) are now widely available and accessible to a broad range of industries and marketplaces.

The impact will be significant. PA’s research shows that we can increase productivity between 20 and 50 per cent, by using this technology to generate new business models, new propositions, new revenue and new profit sources.

There are four fundamental questions companies are asking as they try to navigate their way through this changing world.

• Are we there yet – what capabilities are actually available now?
• Where do we place our bets as technology develops – what can we predict?
• What are the risks?
• How can we quickly build these new capabilities and monetise innovative products and services to secure new value?

Are we there yet?

While some commentators are sceptical about how much has really changed, we think there are now enough examples of the use of digital innovations in practice to drive a fundamental shift in how businesses operate – the ‘tipping point’ has been reached.

These include developments in surface mounted technology that are enabling a move to full automation. Companies such as CIG (Cambridge Industries Group)  are  already close to a fully automated factory by  combining  technologies like automated optical inspection, RFID tags, and extensive use of production data (material flow, process data and results of quality control) to control, simulate and optimise plant output.

Autonomous vehicles are another key technology that is now a reality. Rio Tinto has a fleet of 69 self-driving mining vehicles, running seven days a week 24 hrs a day, monitored from a centre located 1,200 km away from the mine. These vehicles have a 15% lower load and haul unit cost than the manual fleet and Rio Tinto now plan to expand its autonomous fleet by 50% by mid-2019.

PA helped Rentokil develop an IoT platform which has connected sensors across a thousand customer sites. The resulting 24/7 monitoring helped them deliver more proactive and rapid pest management services and will now be scaled up to a further 10,000 customer sites.

Other developments such as blockchain are also beginning to have an impact. IBM, in conjunction with blockchain partners, has developed a new solution for universal cross border payments that enables near real-time financial settlements.

Predictions and challenges

We can expect further significant developments in 2018. Any product that is now controlled manually is potentially a source of a new service when it can be controlled remotely. New business models will be developed to exploit this potential.

These will be enabled by digital technology platforms, Amazon, Google, Uber, AirBnB, and GE’s Predix, that can create new value by bundling services from a range of partners. The key advantage they offer is the ability to grow the customer base and revenue without a significant increases in cost. How companies monetise products will also continue to change this year, with further growth in ‘pay for use’ models rather than ownership of assets.

All this will be underpinned by further technological developments such as new software that can reconfigure existing hardware to secure new capabilities from the device. Big data analytics will also continue to increase its role with the design and development of algorithms that translate data into predictions and decisions.

A real driver of change will be the way different providers are increasingly coming together to develop and support new products and services in a changing mix of what is known as ‘eco-system’ partners. Equally, the increasing use of innovation centres will change the ways new ideas are developed into products and services by using ‘agile’ or ‘fail fast’ processes.

The risks

However, these developments will only happen if we can deal with two fundamental issues: people and trust. With 35% of all UK jobs predicted to be ‘computerised’ in the next 20 years the impact of Industry 4.0 on the workforce will need to be carefully managed by both industry and politicians. Companies tend to think that they can deal with the impact on people with minor reorganisations or retraining, rather than understanding and reacting to the fundamental changes. But it is not just about managing the negatives, there are real opportunities too. In a robotic world there will be new options to re-shore the globalised and off-shored manufacturing industry, and that will create demand for highly skilled technicians to design, programme and maintain the new robotic workforce.

Themost immediate threat to the success of digital developments lies in the risk of losing valuable IP, data and security breaches, as the Industrial IoT becomes more pervasive. Security incidents in IoT solutions are now common, with the Mirai botnet just one example. This compromised thousands of digital devices to conduct a massive cyber-attack on core internet services.

Solutions to improve Industrial IoT security are currently immature but developing quickly. Until they are available, organisations will need to make sure that security requirements are incorporated from the early stages of design rather than bolting them on later – things must be secure by design.

The significant fines for breaches the EU General Data Protection Regulation (GDPR) and the upcoming EU Network and Information Systems Directive (NISD) will help focus minds on the need to develop IoT security measures.

How to respond

Companies are taking two distinctly different approaches to the development of the fourth industrial revolution. The first is to experiment across a diverse range of technologies to build new capability, new products and new services. These businesses typically start by focusing on a few new ideas for products or services within incubator labs. This doesn’t need a grand strategy and simply going through the process itself can help inform their strategy and ensure they are well placed to seize the opportunity.

The second approach is seen incompanies that have become trapped in a commoditised world where they compete in one or two dimensions: price and sometimes service. They are unable to adapt and develop the enhanced capabilities needed to secure the advantages of the new technology. These companies are destined to become casualties or also-rans, missing out on the opportunities.

Deliver value, not hype

Businesses need to understand that there are real risks in doing nothing. It is critical that organisations focus on understanding the opportunities of digitalisation and how they can build capabilities and resources, and nurture their workforce through the transition. There are real uncertainties ahead, but companies can, and should, develop strategies to manage those uncertainties, balance the risks and find way to explore the new innovations that will create a successful digital future.

Tim Lawrence is global head of manufacturing at PA Consulting Group