Industrial manufacturers must extract more value from digital innovation

THE world has become digitally connected to the point of no return, which means that industrial manufacturers can no longer afford to merely be impressed or engage in dreaming about the promise of industrial innovations. Instead they must act now to leverage Industry 4.0 and the next evolution, Industry X.0, to stay relevant and drive incremental revenue growth.

Industry 4.0 uses cyber-physical systems, the Internet of Things, data exchange, and cloud computing to create smart, connected products and plants. Industry X.0 takes this to the next level with an open, circular, approach to industrial value creation. It incorporates Industry 4.0's core operational efficiencies, but also draws on combinations of advanced digital technologies to continually create new value in new places: new levels of efficiency, new sources of growth, and new, hyper-personalised customer experiences that satisfy the seismic shift in customer expectations we call "industrial consumerism".

Companies in Asean should not assume that they have the luxury of time before the Industry X.0 wave hits them, but take the initiative in developing the ecosystem, business model and capabilities in order to differentiate themselves from competitors. For example, an integrated logistics provider in Asean is implementing a connected vehicle platform across its fleet of vehicles in order to maximise value in their existing assets and to provide customers value-added services and offerings such as last mile delivery, and time or distance based leases.

DIGITAL ADOPTION

However, the initial progress of digital adoption by companies remains sluggish. Research conducted by Accenture for the World Economic Forum showed that 73 per cent of the C-level executives interviewed globally were convinced that the Industrial Internet of Things (IIoT) would fundamentally change their industry, but merely 20 per cent had a holistic strategy for harnessing it. Companies that want to succeed in the future must master the radical digital transition headed our way by opening themselves to a journey that will change their organisation models beyond recognition.

Accenture believes the following three factors will play a key role in driving IIoT growth in Asean:

  • The availability of pre-packaged platforms "as a service" to allow industries to adopt Industry 4.0 in a quick and efficient way.
  • The decreasing cost of sensors, storage and computing capabilities and capabilities to analyse and process the data captured.
  • A better awareness of the disruptive capabilities of IOT and new business models it enables.

As a driver of Singapore's economy, manufacturing is not exempt from pressures to digitalise. DC Manufacturing Insights forecasts that manufacturing companies in the Asean region will ramp up their IoT technology investments to more than US$15 billion by 2019. The prospect of tangible business benefits has sparked intensified interest in Industry 4.0 solutions as they open up opportunities to Singapore's manufacturing industry, including the creation of new products, services and business models.

An example is JTC Corporation's Fusionopolis in One North, which piloted the Integrated Estate Management System (iEMS). iEMS is a solution that leveraged the latest technologies in building management systems and Industrial IoT, allowing JTC to proactively monitor real-time data on building functions such as air-conditioning, which accounts for approximately half of a building's operating expense. Six months into the pilot, JTC realised monthly savings of 15 per cent on addressable electricity usage, as well as a 13 per cent reduction in addressable chilled water use.

The role of innovation for a company's continued survival in this era of digital disruption is particularly important, as the market is shifting from a supply-side focus to a demand-side orientation.

INNOVATION-DRIVEN MODEL

Today, customers no longer just expect better, faster or even smaller products and services. Instead, they seek new and fluid service experiences that will necessitate companies developing a demand-driven approach that can anticipate and meet the fast and frequently changing needs of customers in near real-time.

Accenture research has identified an innovation-driven growth model that shows four innovation approaches to satisfying the new market.

The first and most common is the Market Share Protector that basically follows the old innovation rule book, spending just enough on R&D to create product and service innovations that will maintain the same market share.

The Efficient Executor is the next type, possessing more innovation efficiency, but not connected to products, platforms and outside ecosystems needed to generate higher innovation returns.

Early Innovators are the third type. Their approach realises increased returns due to their agile and responsive start-up-style innovation processes that lead to breakthrough innovations. Such innovations can change entire markets or carve out new market segments - thus producing higher returns than the first two innovators.

The fourth type, the Brilliant Innovator, has the systematic innovation efficiency and innovative power to yield the highest returns, and is considered the role model for industrial manufacturers in the outcome economy.

Manufacturers in Asean have to embrace digital transformation by bridging the chasm between intent and action. New digital technologies are only as effective as the ability of industrial companies to make the most of the value they offer.

  • The writers are senior managing director and head of Accenture's industrial practice and managing director, products Asean, Accenture, respectively.