Industry 4.0 is going to happen. Step by step. There is enormous potential in process optimization across currently isolated devices, components and subsystems.
The question is who will own the platforms that gather the data and orchestrate the process flows?
Three weeks ago, I attended the Smart Remote Services conference in Berlin where I have talked about architectures for Internet of Things (IoT) platforms (slides in German). Initiated by Dr. Marcus Nock from breaking systems manufacturer Knorr-Bremse, a small group discussed the concept of integrated remote service platforms and its implications.
Remote services keep maintenance cost in check
In the last 15 years, most machine and device manufacturers have established remote monitoring and servicing infrastructure for their equipment. The Krauss-Maffei service box with its integrated firewall is just one example. The benefits are particularly high for plants running in remote locations such as the Russian tundra or the Brazilian rainforest.
More recently, predictive maintenance is getting more widespread. If a mining crusher breaks down, the entire production is affected, costing hundreds of thousands of dollars per hour. Data analytics can help to establish a sophisticated early warning system to prevent this by replacing the right spare parts at the right time.
The future: Integrated platforms help to optimize processes
Further productivity gains will come from linking machines and devices of different types and manufacturers. At the conference, Dr. Hans-Peter Grothaus of agricultural equipment manufacturer Claas has provided two examples of the company’s foray into the field: If the quality of the soil is known from previous data analysis, fertilizer quantity can be adjusted individually for each square meter. If the tractor knows that a hay bale has finished compressing, it can stop briefly to allow the bale to be dumped.
Coopetition boosts IoT performance
Process optimization increasingly requires “coopetition” between industry players. Staying in the domain of agriculture the 365FarmNet platform links producers of grain seeds, fertilisers, protecting agents, farming equipment and an insurance company. Planning crops, forecasting harvest and insuring against crop failure can now be done on one integrated system thus freeing farmers from re-entering their data into different systems.
The same is happening in other industries: Siemens has recently launched an initiative to offer plant data services and analytics. Tech Mahindra and others are joining the race to capture market share.
Three stages of platform value growth
In order to provide value, platforms need a critical mass of participants. I foresee three stages in platform adoption:
• First, suppliers provide their own platforms for specific products or product ranges. For example, Liebherr has developed the fleet management platform LiDAT for their construction machines. Due to customer demand, these platforms are often extended to include competitors’ products but with limited data coverage and functionality.
• Second, customers realise that each of their suppliers provides a proprietary remote service platform creating inefficiencies. Depending on the power they can exert upon suppliers they establish platforms of their own requiring suppliers to integrate into a common framework. Car manufacturers for example guard their production processes by controlling remote services rigorously, forcing suppliers onto their own platform.
• Third, platforms for specific domains sectors or even industries are created by players with sufficient influence to gain widespread support. This approach goes beyond remote services providing integrated process support based on “smart data”. Once such an integrated platform ecosystem is established it wields enormous power for value capture: Participants can be charged by subscription, usage, transaction or revenue. In addition, the platform owner can define the rules of interaction.
Two prominent examples of such platform ecosystems come from other industries: Amazon’s mammoth e-commerce platform integrating individual retailers, and Apple’s new HealthKit, integrating activity data from diverse fitness and medical apps. In the industrial field, supply chain and B2B platforms such as SAP Ariba and Supply On could become influential as they already link different actors in the supply chain. So far, though, they lack a focus on remote services.
Platform ownership is the strategic challenge
The emergence of platform ecosystems that integrate manufacturers will be essential for the market dynamics of Industry 4.0.
What do you think? Who is positioned best to win the contest for integrated remote service platforms? What is the strategic impact for manufacturers?
In any case, the race is on.