Paul WellenerVice Chairman and US Industrial Products & Construction LeaderDeloitte Consulting LLPpwellener@deloitte.com

A manufacturing perspective: Tech Trends 2018 The symphonic enterpriseStrategic and operational transformations within industrial products, aerospace, and construction enterprises are being shaped by eight key technology trends according to Deloitte’s 2018 Tech Trends report. The pace of technology adoption continues to accelerate, and IT organizations and business leaders should work together to create a symphonic enterprise.

This perspective draws on Deloitte’s 2018 Tech Trends1 report, an annual report that examines the powerful technology forces that are remaking our world. It sheds light on the impact on manufacturing and construction of eight technologies, from data analytics and application programming interfaces (APIs) to blockchain, artificial intelligence, and digital reality. The report reflects the industry’s anticipated adoption level of these trends by assigning each a relevance and readiness score from

1 (low) to 5 (high) that is based on our research of exponential technologies in manufacturing,2 as well as input from our consulting leaders. While the companies within these industries are diverse and likely varied in their adoption of these eight technologies, the overall patterns are reflected in these scores. Real-world examples and key considerations are included for organizations to contemplate as they determine how these technologies may fit into their strategy and operations.

Tech Trends 2018 l Deloitte Insights

For more information or to view the full report, visit www.deloitte.com/insights/techtrends.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

Copyright © 2018 Deloitte Development LLC. All rights reserved.

AcknowledgmentsThe authors of A manufacturing perspective: Tech Trends 2018 would like to recognize the exceptional work of the following individuals for their roles as sponsors, project managers, editors, researchers, and contributors: Joann Michalik, Tom Walsh, Allan Cook, Robert Libbey, Ankit Mittal, and Mark Cotteleer.

AuthorsFor questions regarding A manufacturing perspective: Tech Trends 2018, please contact:

Heather Ashton ManolianUS Industrial Products & Construction Research LeaderDeloitte Services LPhashtonmanolian@deloitte.com

Endnotes1 Ken Corless, Jacques de Villiers, Chris Garibaldi, and Kieran Norton, Tech Trends 2018: The symphonic enterprise, 2018, Deloitte Development LLC, https://www2.deloitte.com/content/dam/insights/us/articles/Tech-Trends-2018/4109_TechTrends-2018_FINAL.pdf.2 Michelle Drew Rodriguez, Robert Libbey, Sandeepan Mondal, Jeff Carbeck, and Joann Michalik, Exponential technologies in manufacturing:

Transforming the future of manufacturing through technology, talent, and the innovation ecosystem, 2018, Deloitte Development LLC, https://www2.deloitte.com/content/dam/Deloitte/us/Documents/manufacturing/us-mfg-advanced-manufacturing-technologies-report.pdf.

3 John Ferraioli and Rick Burke, “Drowning in data, but starving for insights,” Deloitte Insights, April 11, 2018, https://www2.deloitte.com/insights/us/en/focus/industry-4-0/starting-digital-supply-network-journey-legacy-systems.html.

4 John Hagel, Jeff Schwartz, and Josh Bersin, “Navigating the future of work,” Deloitte Review 21, July 31, 2017, https://www2.deloitte.com/insights/us/en/deloitte-review/issue-21/navigating-new-forms-of-work.html.

5 Tom Davenport, Ashwin Patil, and Derek Snaidauf, “A revolution in data-driven quality improvement,” Deloitte Insights, April 26, 2018 https://www2.deloitte.com/insights/us/en/topics/analytics/a-revolution-in-data-driven-quality-improvement.html.

6 Stephen Laaper, Glenn Yauch, Paul Wellener, and Ryan Robinson, “Embracing a digital future,” Deloitte Insights, March 21, 2018, https://www2.deloitte.com/insights/us/en/focus/industry-4-0/digital-supply-network-transformation-study.html.

7 Allan Cook, Mark Cotteleer, and Jonathan Holdowsky, “Digital reality: A technical primer,” Deloitte Insights, February 8, 2018, https://www2.deloitte.com/insights/us/en/topics/emerging-technologies/digital-reality-technical-primer.html.

8 Eric Piscini, Mark Cotteleer, and Jonathan Holdowksy, “Blockchain: A technical primer,” Deloitte Insights, February 6, 2018, https://www2.deloitte.com/insights/us/en/topics/emerging-technologies/blockchain-technical-primer.html.

9 University of Southern California Information Sciences Institute, “Experimental and theoretical adiabatic quantum computation,” [no date], https://www.isi.edu/research_groups/quantum_computing/home.

Getting started • Start upstream. Consider deploying text and

predictive analytics and machine learning at the ingestion point of raw data to impose structure and create linkages within raw data, helping create a foundation for greater storage and management efficiencies.

• Create a cognitive data steward. Initially a human (and eventually assisted by cognitive computing), performs manual examination of problematic data to resolve issues more quickly.

• Identify the first target. Focus initial efforts on what problems to solve.

Getting started • Assess your needs. Consider creating an informational

baseline of how tasks within a process are performed, along with the skills required. Identify different talent options and technologies to improve process efficiency.

• Investigate tools and tactics. Look for industry- leading practices of intelligent automation and explore how to apply them to the needs identified by your informational baseline.

Reengineering technologyBecause of its inextricable link to business strategy, IT departments are commonly transforming into engines for driving business growth. As the pace of innovation increases, IT organizations should consider modernizing their infrastructure and the architecture while also shifting the way they deliver technology capabilities. This combined

top-down, bottom-up approach can create the velocity necessary to redefine IT. One area where manufacturers can apply this approach is the supply chain, where many companies are creating a digital supply network (DSN) that brings together legacy systems to generate valuable insights.3

No-collar workforceThe rise of robotic process automation (RPA), artificial intelligence (AI), and cognitive technologies in the workplace is helping create a new category: the no-collar workforce. As human workers and machines learn to work together in a single loop of productivity, organizations will likely need to redesign jobs and reimagine how work gets done in this hybrid environment. Tech fluency and HR for humans and machines are both part of this new culture of human/machine collaboration.4

Enterprise data sovereignty

The new coreMany of today’s tech savvy organizations have identified the next focus for digital innovation—transforming core back- and mid-office systems. Extending the digital mandate to the “heart of the business” operations is likely the next frontier for organizations to win, and many companies are targeting supply chain6 and finance to create a new core that can fundamentally change how work gets done.

Digital realityThe application of augmented reality (AR), virtual reality (VR), mixed reality (MR), and immersive experiences to the industrial products and construction industries is quickly moving beyond pilots into production. Many companies are ramping up development of digital reality,7 taking into consideration core integration, cloud deployment, connectivity, Internet of Things (IoT), and access.

Blockchain to blockchains

API imperativeThe focus of application programming interfaces (APIs) has moved beyond the corporate walls as many companies seek to extend application integration, interoperability, and modularity out to customers, partners, and ecosystems. Many leading companies recognize APIs can be assets, delivering ROI on technology investments through reuse and creating strategic differentiation in the marketplace that can even be monetized.

Exponential technology watch list

Trends in action A global engineering and construction firm uses robotic process automation (RPA) to dramatically improve billing operations. Implementing a RPA solution enabled the company to streamline invoice creation from 4.5 hours to 11 minutes, and freed 20 full-time employees to focus on other customer billing issues.

Trends in action A global industrial manufacturing conglomerate launched an API program to create an ecosystem of third parties that builds tools and solutions that integrate with its thermostats. The company employs API management to provide API security, scale, and analytics for its API program.

Trends in action An industrial manufacturer has executed an industrial-scale initiative to extend analytics capabilities across the enterprise and reimagine the way the company utilizes transaction, sales, and customer data. By creating a master data set, encompassing 20 years of data across hundreds of enterprise resource planning (ERP) systems, the company’s IT team consolidated data silos into centralized hubs. This approach helps enable large strategic and operational analytics initiatives while at the same time powering smaller, more innovative efforts.

Trends in action A global manufacturing company’s digital initiatives include a push to bring its IT closer to its businesses and the development of an application ecosystem to help customers achieve efficiencies and cost savings. To help do so, an agile mind-set is being applied to the software development process to speed the delivery time of working prototypes.

Getting started • Identify automation opportunities.

Almost all traditional IT operations are candidates for automation, which can help workers handle increasingly complex workloads.

• Break down silos in IT. Consider reorganizing IT workers into multi-skill, results-oriented teams and looking for opportunities to share resources and acquire new skills.

Relevance

Readiness 2

4

Relevance

Readiness 2

4

As data becomes “the new oil,” companies must free it from siloed systems, refine it, and make it accessible across business units and geographies. This can require a modern approach to data management, along with adopting new technologies to assist in developing deliberate techniques for managing, monetizing, securing, and unlocking the value of data. In manufacturing, this can translate to measurable results on goals that touch many areas of the business, such as quality improvement.5

Relevance

Readiness 3

5

Getting started • Make a plan. Map out a transformation

plan for one function, focusing on applications that have proven to be clear winners in other finance, marketing, HR, or supply chain organizations. Make sure to understand the tax and control implications of the changes.

• Learn from others. Create a small cross-functional team to understand the possibilities of transforming the core into a digital backbone. Learn from success and failure of other groups across the enterprise.

Trends in action For a diversified industrial products company, digital innovation is not only a shift in the products and services it provides, but also in the way it runs the business. The company has created partnerships between core functions like marketing and IT to digitize the business. IT brings technical discipline and expertise to support the business platforms and processes, while marketing adds customer orientation and strategic direction to the cross-functional partnership.

Getting started • Learn more about the technology. Take the

opportunity to upskill current IT resources, learning the language of AR, VR, MR, 360°, and immersive technologies to properly evaluate devices, ecosystem partners, and applications.

• Look for examples. Explore use cases within the sector as well as identify what business goals companies in adjacent sectors are pursuing with their digital reality initiatives.

Trends in action An engineering and construction firm touts use cases of VR for design and modeling purposes, as well as AR and MR for on-site installations and building design. Additional use cases for digital reality platforms extend to industrial equipment failure diagnosis, with companies in the space already piloting the technology for infrastructure maintenance. Visualizing IoT and field servicing/repair are other areas of growth.

Relevance

Readiness 2

4

Getting started • Find the key use case for your company.

Focus on those aligned with strategic objectives or those that have disruptive potential, and get started with proofs of concept.

• Identify your minimum viable ecosystem. Recognize the market players and business partners necessary to make your blockchain commercialization strategy work.

The advancement of blockchain initiatives8 in industrial products and construction continues as industry segments identify use cases and experiment with different approaches to scalability and scope. The next phase will likely involve linking blockchains across different industries to share digital assets seamlessly, including financial, supply chain, and service monitoring.

Relevance

Readiness 1

4

Getting started • Embrace an open API arbitrage model.

Let demand drive project scope, and let project teams and developers determine the value of APIs based on what they’re actively consuming.

• Determine where microservices can drive value. Look for opportunities to transition to microservices if you have a large, complex code base or require large teams to develop an application.

Relevance

Readiness 3

5

Relevance

Readiness 3

4

The pace of technology innovation continues to increase, driving companies to pay close attention to emerging technology forces that could manifest in the next three to five years. Companies should consider developing disciplined innovation capabilities for technologies like artificial general intelligence (AGI) and quantum cryptography to experiment with, incubate, and scale these exponential opportunities.

Getting started • Explore and experiment. Look to how others in

your industry are approaching exponentials, then prioritize use cases, develop basic business cases, and build initial prototypes.

• Be programmatic in your approach. Innovation is more about programmatic disciplined effort, carried out over time in a well-considered portfolio approach.

Trends in action While applications of quantum technologies remain nascent, an aerospace company has partnered with the University of Southern California, home of D-Wave One, the world’s first commercial adiabatic quantum optimizer, to address real-world problems using the power of quantum computing, including research in the area of quantum cryptography.9

Relevance

Readiness 1

4

Trends in action A global manufacturing company has already utilized blockchain for industrial ledger applications and is exploring use cases across the company’s businesses for tracking trade, contracts, and renewable energy, as well as applications in additive manufacturing.