Digitalization Changes Everyone’s Job

Acknowledging the digital transformation is one thing, recognizing how it is changing business broadly and how you should adapt in response is another, more critical factor to success.

At Inductive Automation’s Ignition Community Conference 2022, Jeff Winter, manufacturing industry executive at Microsoft, said, “When digital transformation is successful [in a company], it fundamentally changes everyone’s job. But how many companies are ready for that?”

According to Winter, being ready for that change doesn’t require a focus on technology, but on people. “People are the focus [of the digital transformation], tech is the tool, and value is the outcome,” he said.

Grasping the digital transformation’s reach

Microsoft sees five areas of focus for industry amid the digital transformation, Winter said. Those areas are:

• Transforming how employees work;
• Engaging customers in new ways;
• Innovating to deliver new services;
• Building more agile, responsive factories; and
• Creating more resilient supply chains.

The ability to monitor equipment use at customer sites reduced equipment failure by 13%, improved quality by 27%, and reduced service costs by 10%. “And the key was having PLM and IoT as part of digital thread which extends out to customer.

Winter sees the burgeoning industrial metaverse, driven by digital twins, as a nascent technology that will bring the various technologies used to build the digital thread together for industry. “The metaverse is being created by the convergence of virtually enhanced physical reality and the physically persistent virtual space, ranging from augmented reality to the internet,” he said. “The metaverse is the digital twin on steroids that connects with employees and customers.”

Citing Anheuser-Busch InBev as an example, Winter said the company is leveraging metaverse building block technologies to change how they operate, manage, and engage with everyone. “Their digital factory initiatives with Microsoft uses Azure AI (artificial intelligence), digital twins, and the Microsoft Cloud to give the brew master unprecedented visibility into the brewing process to track quality,” he said. “It also delivers built-in energy management capability to help them achieve sustainability goals, provides line balancing automation to compensate for bottlenecks in can manufacturing operations, and enables preventative maintenance and remote collaboration with experts to ensure zero downtime.”

From product to service

Not many companies have yet built a full digital thread connecting product design, manufacturing, and maintenance, said Winter. But for those who have, their businesses have changed dramatically.

A key reason the digital thread is so impactful is its potential impact on core industrial business operations. “It completely changes the way products are manufactured, delivered, consumed and sold.” Winter said. “The cycle of delivery used to end at the point of sale. Profits used to come from the sale of products, but now they’re coming from digital services to align more directly with customers. With feedback constantly available about customers’ use of your products, that information can be used to continuously improve the product” and charge for it in different ways.

Winter referenced Rolls-Royce Aerospace and Celli Group as two very different companies that are already doing this. In the case of Rolls-Royce Aerospace, the company’s Total Care Service delivers “power by the hour”—essentially delivering aircraft engines as a service— rather than simply selling aircraft engines.

Based on Rolls-Royce’s digital thread capabilities, Winter said the U.S. Air Force awarded the company a $2.6 billion deal to build its new B52 engines. Rolls-Royce’s ability to develop these new engines using a full digital engineering environment for the USAF’s verification and validation processes was a key aspect behind its winning this contract. “Rolls-Royce met all requirements of the bid and reduced work while increasing efficiency—all in a virtual environment,” said Winter.

Celli Group, which manufacturers beverage dispensing equipment is using PLM (product lifecycle management) and IoT (Internet of Things) technologies to create “a smart warranty which changes based on how frequently you use their product,” Winter said. The ability to monitor equipment use at customer sites reduced equipment failure by 13%, improved quality by 27%, and reduced service costs by 10%. “And the key was having PLM and IoT as part of digital thread which extends out to customer,” he added.

This can be a challenging transformation for most companies, Winter said, because the old model gets cash up front, but [in that model] there is no guarantee of your customers’ continued use of your product. “The value lies in staying in touch with the customer after the sale,” he said. By staying in touch with customers, you can:

• Capture data and deliver insights that you can charge for as an add-on service;
• Create a subscription model where the OEM’s accountability becomes continuous and further benefits the customer by moving capex to opex; and
• Develop outcome-based contracts, which fundamentally change the way in which you engage with customers based on proactive maintenance incentives.

Of course, not everything a manufacturer produces can be successfully turned into a product-as-a-service (PaaS). And we’re seeing some examples of this which may test the bounds of PaaS viability.

BMW, for example, is piloting the idea of charging a monthly or annual fee for seat warmer capability in the U.K. CNN reports: “The heating coils and other hardware required to heat the seats are already in the car, but owners can, if they wish, pay a monthly fee to BMW which will allow them to actually work. The benefit would be a lower upfront price for the car and, potentially, the ability to only pay for the feature when it might be needed, like in the winter.”

One key to successful PaaS for OEMs is to focus on things that can be improved via service rather than an optional cost to use a built-in feature.