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Industrial Equipment Industry: Engineered to Deliver in the Digital Era

The Accenture Technology Vision 2015

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Reinvention. It’s a word you hear often these days in conversations about business. But what does it mean in terms of real-life, day-to-day operations? In this report, The Accenture Technology Vision 2015—The Industrial Equipment View, we review how technology has created a new imperative for industrial equipment companies to change their business models and make way for the changes and opportunities opened up by the Internet of Things (IoT).

Industrial equipment executives reveal the four technology trends that will have the greatest impact on their industry over the next three to five years.

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It’s a tall order. Becoming a digital business is no longer simply about incorporating digital technologies into an organization. It’s about using those technologies to weave businesses into the broader digital fabric that extends to customers, partners, employees, and other industries.

This transformation will challenge industrial equipment players to be experts not just at manufacturing things but also at designing experiences, collaborating across industries, embedding digital connectivity into every facet of their operations, and developing new business and operating models that leverage the business’s connections to people and things.

Yes, even the makers and marketers of the ultimate hard goods now will seek to reinvent themselves as digital businesses.

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How We Performed Our SurveyThe survey data presented in this report was taken from a larger global survey of 2,000 executives representing companies in nine industries, including industrial equipment, as well as the public sector. More than three-quarters of respondents (76 percent) were C-suite officers, while roughly 24 percent were functional or business unit heads in nine countries—Australia, Brazil, China, France, Germany, India, South Africa, the UK, and the United States. An overwhelming majority—83 percent—of the companies represented reported annual revenues of $1 billion or more, including 803 companies, or 40 percent, with $10 billion or more in 2015.

In this report, we focus on the responses of industrial equipment executives to identify the technologies and most relevant trends from Accenture’s Technology Vision Report that probably will have the greatest impact on the industry over the next three to five years. We highlight some of the survey’s most striking and suggestive findings, filtered through the prism of four overarching technology trends, which we refer to as: • The Internet of Me • The Outcome Economy• The Platform (R)evolution • The Workforce Reimagined

More than 10 percent

221 industrial equipment executives across nine countries: Australia, Brazil, China, France, Germany, India, South Africa, the UK, and the United States

Australia Brazil China France Germany

India South Africa UK United States

More than 10 percent of respondents—221—represented companies in the industrial equipment industry. Like the other respondents, they completed a detailed, 28-question survey designed to capture insights on emerging technologies that organizations are actively exploring and to pinpoint the priorities for adoption and investment, with the intent of better understanding the business value that executives expect from the next wave of technologies.

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The Internet of MeThe Internet of Me places the end user at the center of every digital experience—a radical change that enables people and businesses around the world to interact through technology. As everyday objects such as parking meters, refrigerators, and security systems evolve into connected devices, they are changing the ways that forward-thinking businesses build new applications, products and services. These digitally enabled objects open up a powerful new channel for businesses to connect with their customers in authentic, meaningful ways. Businesses, in turn, will have to be prepared to design applications that enable people to control, measure, and even automate parts of their lives in both the digital and physical worlds.

Leading companies are already moving fast in this direction. In our survey, 86 percent of respondents from the industrial equipment industry place the personalized customer experience in their top three priorities for their organization, with 33 percent reporting it as their top priority. But turning this aspiration into reality poses particular challenges for industrial equipment companies.

The biggest challenge may be to develop new business and operating models that leverage the business’s connections to people and things. Consider Coca-Cola Amatil, a Southeast Asian beverage company, which increased sales by 12 percent after retrofitting vending machines with touchscreens, video cameras, and Microsoft Kinect technology to create a fresh, personalized vending experience.1

Each business will have its own unique way to create value by personalizing their products or services. No one solution fits all—every company will first need to determine which channels best suit their needs and then build unique solutions for those channels. For example, Georgia Power, a utilities provider, is driving new customer value by leveraging its network of 2.4 million smart meters. The company now offers consumers access to their real-time data generated by the meters so they can gain a deeper understanding of their energy use. The technology has enabled Georgia Power to sign up new customers by enabling pre-paid and pay-as-you-go billing and offer them to customers whose income or credit histories once prevented them from making a security deposit with the utility.2

86% place the personalized customer experience in their top three priorities for their organization; 33% report it as their top priority.

The biggest challenge? Developing new business and operating models that leverage the business’s connections to people and things.

33%

86%

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How Technology Improves OutcomesThe outcome economy is one in which highly connected hardware components—the IoT—are used to give customers what they really want: not more products or services, but more meaningful and satisfying outcomes. The Internet of Things (IoT) has given industrial equipment companies the tools to gain end-to-end insights into the outcomes that their customers are trying to achieve. What’s more, this same technology allows companies to discover the metrics, or measures of value, by which their customers define success. In effect, these metrics enable businesses to identify, measure, and aim for their customers’ desired outcomes. No wonder that almost 92 percent of industrial equipment executives surveyed agree that with more intelligent hardware, organizations will shift from selling products or services to selling outcomes.

92% agree that with more intelligent hardware, organizations will shift from selling products or services to selling outcomes.

In fact, that shift is happening today, as forward-thinking companies are integrating IoT into industrial equipment to improve outcomes for their customers in ways previously unimagined. For instance, Monsanto recently acquired Climate Corporation, a maker of farm intelligence software that integrates with precision agriculture sensors and systems to deliver intelligence about current and future weather, soil, and crop conditions. With the acquisition, Monsanto can offer growers actionable insights on how to reduce risks, improve yields, and increase profits. The agrochemical giant can now not only recommend the most profitable crops to plant, but also what types of seed to buy, when to plant, how to tend the crops, when to harvest, what yields to expect, and even what revenue farmers can expect at the end of the growing season.3

As Monsanto’s example suggests, the levels of insight and control that are the hallmarks of the outcome economy are only made possible through the integration of hardware with existing capabilities. Cloud-based software analytics and visualization technologies, along with hardware sensors and increased computing capabilities at the edge of the digital and physical worlds, are all necessary components in the outcome economy.

92%

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Companies that incorporate this next generation of intelligence are seeing their performance per unit cost soar—in part because of the precipitous fall in the cost of sensor technology. In mid-2014, Broadcom released the WICED Sense Development Kit that includes a full software development stack, a mobile app to view real-time sensor data, and a device the size of a key fob with five micro-electromechanical sensors (MEMS): gyroscope, accelerometer, pressure, humidity, and temperature. Retail price: $20. Other embedded and expandable solutions such as Raspberry Pi, Intel Galileo, and Marvell Kinoma also help makers embed sensors in just about anything so they can rapidly prototype and create new hardware-centric products in far less time and at much lower cost than ever before.4

The proliferation of sensor technology opens up far-reaching possibilities that can play out across industries, in the process forging new value chains. Consider the utilities sector, for instance. Companies such as SolarCity are going beyond the meter to own, install, and operate infrastructure on their customers’ premises. They have end-to-end insights and control over the outcomes their customers want. In doing so, SolarCity gains long-term, stable cash flows and removes the customer payback risks of renewable energy by guaranteeing economic outcomes up front. As SolarCity’s example shows, the outcome economy upends long-held notions of how superior products and services are defined and delivered.5

Necessary components in the outcome economy

Hardware sensors

Cloud-based software analytics and visualization technologies

Increased computing capabilities at the edge of the digital and physical worlds

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How Platforms Can Put Industrial Equipment Makers in the Driver’s SeatIn today’s market, industrial equipment companies are beginning to deploy digital industry platforms to grow their business at an ever-increasing rate. This doesn’t mean a conventional equipment platform—but an industry technology platform that will create new kinds of products, value, and differentiation for buyers and sellers across the entire supply chain.

40% are using industry platforms to integrate data and applications with digital business partners and to collaborate; 39% are experimenting with industry platforms.

40%

39%

For instance, 40 percent of the industrial equipment executives we surveyed are using industry platforms to integrate data and applications with digital business partners and to collaborate, while 39 percent are experimenting with industry platforms.

This technology will allow companies to forge new value chains on the fly to build, connect, and deliver applications specific to industry problems.

The key characteristic of a platform-based business is that others outside the company are creating value for the enterprise—in many cases enabling entirely new digital models for the company. Established non-tech industry enterprises are moving quickly with major strategic initiatives to become platform-based businesses, with industrial equipment at the forefront. Two-thirds (67 percent) of industrial equipment executives

surveyed plan to engage with new digital partners in their industry, 50 percent with major digital technology and cloud platform leaders, and 44 percent with new digital partners outside of their industry. By contrast, only 32 percent plan to engage with traditional business partners.

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General Electric (GE), for example, has outlined its vision for an “Industrial Internet” in which intelligent networks of machines operate through multiple forms of software, sensors, data, and analytics. To fulfill this vision, GE launched its Predix software platform, with very ambitious goals to provide a common platform across GE businesses. Its clear objective is to extend the reach of the company’s vision and ecosystem well beyond GE itself. In addition to launching 40 Predictivity solutions internally and developing offerings powered by Predix, the company is opening up the platform externally to all companies.6

Because every link in the value chain stands to benefit by migrating to platforms to solve development and operational problems, industrial equipment makers are among the earliest adopters of digital platforms. Some 39 percent of industrial equipment executives responding to our survey said they were already using platform-as-a-service (PaaS) solutions for operational and development projects. Such ecosystems will be facilitated by application programming interfaces (APIs) to integrate applications and collaborate with business partners. About half of industrial equipment executives surveyed said they would be using APIs for those purposes.

Where industrial equipment players plan to look for digital partners:

67% within their industry

50% major digital technology and cloud platform leaders

44% new digital partners outside their industry

32% traditional business partners

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Technology is smarter and faster than ever, but it can’t work alone—nor should it. According to 81 percent of the industrial equipment executives we surveyed for this year’s Technology Vision Report, within three years, companies will need to focus as much training on their machines (in such fields as the use of intelligent software, algorithms, and machine learning) as on their people. Such findings suggest that businesses are coming to recognize that technology is not just a set of tools, it is a partner in a new collaborative workforce. That conclusion is reinforced by the finding that 38 percent of industrial equipment executives surveyed are considering using robotics to automate business and industrial processes.

One way to improve interactions between people and machines is to “democratize” technology—that is, to find ways to categorize and shift skill sets so that employees can approach tasks that were previously reserved for specialists. Mitsubishi Electric, for example, is experimenting in Japan with software from the augmented reality software company Metaio, on Epson’s Moverio smart glasses to assist air conditioner technicians on their service calls. The glasses let the technicians view three-dimensional overlays on the physical objects they’re repairing so that they can see how to remove or replace parts.7

This reimagined workforce—one that will enable more work to be done better—will raise many new issues. Which jobs should be assigned to humans and which to humans working with machines? What governance systems are in place to help us decide? How can the human workforce be trained for this new blended work environment? How do we rethink the skills for hiring human talent—should we emphasize more or less specialized knowledge? The answers to such questions will help determine which industrial equipment companies will probably become digital leaders.

The Changing Face (and Wiring) of the Workforce The drive to digital amplifies the need for humans and machines to collaborate in new and more effective ways. Advances in natural interfaces, smart machines, and wearable devices are revealing new opportunities for companies to empower their workers through technology. But braided into these opportunities are new challenges in managing human-machine collaborations. An overwhelming majority of industrial equipment executives surveyed—86 percent—say that successful businesses will be those that manage employees alongside machines that capture what’s best about both human talent and machine intelligence and embraces both as critical members of the reimagined workforce.

86% say that successful businesses will manage employees alongside machines that capture what’s best about both human talent and machine intelligence.

81% say that, within three years, companies will need to focus as much training on their machines as on their people.

38% are considering using robotics to automate business and industrial processes.

86%

81%

38%

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Conclusion Past editions of the Accenture Technology Vision have concluded that every business was becoming a digital business and predicted that large and often long-established businesses, with their deep resources, huge scale, and process discipline would use technology to drive their growth—and in the process rewrite the digital playbook.

In 2015, some non-IT businesses, notably industrial equipment companies, are aggressively placing themselves in the digital driver’s seat. They are proactively making big moves to understand their customers better and deliver better outcomes to them, form alliances across industry boundaries to optimize operations and product development, and use human-machine collaboration to create value in innovative ways. They are thinking about how to combine their industry expertise with the power of digital technology to build new value chains, forge closer and stronger connections to customers, reshape their markets, and define new business identities within a profoundly changed marketplace.

Senior leaders will need both boldness and clarity of focus to seize advantage in this new marketplace. As they shed their old-line identities as makers of things and learn to be providers of outcomes, they will need to model the impact of transitioning to outcome-based revenue streams, evaluate their ability to deliver hardware solutions at the edge, and develop ecosystem strategies that will enable their enterprises to work with a portfolio of potential partners, some far from their core businesses. They will need to formalize technology partner and cloud services relationships to support their platform environments, expand partner strategies to move up the value chain, and think big and broadly about the problems and opportunities that participation in platforms will reveal. And they will need to identify opportunities for leveraging technology to help the human workforce focus on tasks that are more complex, while using augmentation technologies to make jobs once reserved for highly skilled workers accessible to those less skilled.

Such moves are the nuts and bolts of reinvention. By deploying the power of new technologies to create memorable customer experiences, deliver better outcomes, and forge new value chains, forward-thinking companies are refashioning themselves for success in the digital era.

Copyright © 2015 Accenture All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

For more informationContact us:

Philippe Guittat Senior Managing Director philippe.guittat@accenture.com

Eric Schaeffer Senior Managing Director eric.schaeffer@accenture.com

Follow us on Twitter: @AccentureInd

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with more than 336,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com.

1 Coca-Cola Amatil Boosts Sales With Interactive Vending Machines,” FoodBev.com, May 6, 2014. http://foodbev.com/news/coca-cola-amatil-boosts-sales-with-inter#.VCm4_hYfBSk.2 PayGo to Support Georgia Power Prepay Initiative,” PayGo press release, January 21, 2014. http://home.paygoelectric.com/paygo-to-support-georgia-power-prepay-initiative/ 3 Climate Corporation Website: http://www.climate.com/ 4 Broadcom website: http://www.broadcom.com/products/wiced/sense/ 5 “Musk Solar Strategy Used as Model for Record Investments,” Bloomberg, September 15, 2014. http://www.bloomberg.com/news/articles/2014-09-15/musk-solar-strategy-used-as-model-for-record-investments 6 “Minds + Machines Roundup: One Platform, 40 Predictivity Solutions, and Predix for All,” GE Software, October 9, 2014. https://www.gesoftware.com/blog/minds-machines-roundup-one-platform-40-predictivity-solutions-and-predix-all 7 “Augmented Reality Gets to Work,” MIT Technology Review, February 24, 2014. http://www.technologyreview.com/news/524626/augmented-reality-gets-to-work/