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Are You Following the Right Digital Recipe?

June 9, 2018 • INNOVATION, Delivering Innovation - Accenture Research

By Tracey Countryman, David Abood, Aidan Quilligan, Raghav Narsalay, and Aarohi Sen

 

To produce a successful dish of digital reinvention, start by combining six ingredient technologies. Here’s how to get cooking.

 

Digital technologies have been feeding executives’ appetite for growth, cost savings, and innovation for years. Each one promises nourishment and sometimes brings delight. But how many business leaders are considering the value of combining technologies to create one gourmet meal?

So far, not many. And to be fair, technologies such as augmented reality are still very much emerging. Yet some companies have already discovered the power of combination and are reaping the rewards.

We studied the performance of 800 companies in 12 manufacturing and resources-based industries and 21 countries. According to our research, the five percent of organisations that combined six ingredient technologies – mobile computing, big-data analytics, machine learning, augmented and virtual reality, autonomous robots and autonomous vehicles – lowered their overall costs by 14% between 2013 and 2016. And we found trailblazing “combiners” in every industry and country. Cost savings for those not combining the six? They saw a negligible cost reduction – less than one percent. (We used a broad mix of research methods – See “About the Research” below)

About the Research
In 2017, we surveyed 931 senior executives from manufacturing and resources businesses across 12 industries in 21 countries (companies with annual revenues of more than US$500 million). The survey attempted to understand: (1) the digital technologies that were being deployed by companies to drive new-to-market efficiencies and hyper-personalised experiences; (2) the challenges of deploying digital technologies; and the (3) investments being made in digital technologies and capabilities to deliver new efficiencies and new growth. In our survey, we asked executives about the digital technologies (out of a list of 10) that were critical for driving higher operational efficiency and hyper-personalised experiences.

We designated these two outcomes as performance dimensions to map the impact of digital technology combinations on the bottom-line and top-line of corporations, respectively.

We then applied principal component analysis (PCA) to the data set to identify how the technologies correlated with one another to drive these two performance dimensions. The PCA analysis returned 5 different technology combinations.

Our model translated each into an index, assigning scores to each company based on their responses. We chose the combination with the maximum financial impact to rearrange the company list in decreasing order of index scores.

We then compared the top 10% from that rearranged list with the bottom 90%. The top 10% percent reduced overall costs by 14%. The bottom 90 by only 0.6%.

That raised even more questions for us: Can this technological combination really work for every company? What makes this combination so special? Which companies have mastered the art and science of combination, and what can we learn from their experiences?

To answer these questions, we examined cases of organisations that are combining multiple technologies. After poring over the results, we believe these six make for a formidable combination, and every executive should understand how each strengthens the other for the benefit of growth, efficiency and future innovation. Recipes are meant to be tweaked and improved, to be sure. But skilled chefs understand the value of a broad range of ingredients and why they work better in combination.

 

The Ingredients and the Recipe

Let’s look at the six ingredients, and how one major industrial company is using them all:

1. Mobile computing. Smartphones, tablets, and other handheld devices generate a massive amount of data – 10 million gigabytes every hour, to be exact.1 For example, Volvo’s On Call mobile app which gives drivers all sorts of information and utility. Volvo owners use the app to see where the car is parked, monitor fuel levels, double-check to see if a window was left open or a door ajar, and even start the engine remotely.2

2. Big-data analytics. Volvo analyses all that user data in collaboration with Teradata, the business-analytics solutions provider, to find patterns that can make the driving experience safer and more convenient.3

3. Machine learning. Next, Volvo translates trends in the data they collect into something meaningful for everyday operations. Take their ongoing work to be a leader in driverless cars. More than 20 cameras, radars, and laser sensors on board every Volvo vehicle stream real-time data to Nvidia’s autonomous-vehicle computing platform, which helps the car learn to react to situations on the road.4

4. Augmented, virtual, and mixed reality. How else will intelligent machines interact with humans in the future? Augmented, virtual, and mixed reality will be the “next screen”. In 2014, Volvo partnered with Google to use the tech giant’s Cardboard VR for the launch of its redesigned XC90 SUV. Paper goggles, paired with an Android/iOS app, now allow potential customers to test-drive the XC90 from their home.5 Volvo is also using Microsoft’s HoloLens mixed-reality headset to train factory and service workers and help design new vehicles; the company is hoping HoloLens will enable engineers and designers to communicate better and speed up vehicle development.6

5&6. Autonomous robots and autonomous vehicles. These related ingredients reduce the inefficiencies and safety risks associated with human labour. Manufacturing and resources industries are already the largest purchasers of robotics products and services. Volvo, for its part, has used robots to make cars for decades. Some processes – such as the welding of metal parts and the measuring, placing, and bolting of doors to its cars – are now completely automated.7 Robots are currently playing an important role in the production of Volvo’s popular S60 sedans.

Car companies are tailor-made to take advantage of the sixth technology. Volvo has developed technologies such as adaptive cruise control, autobraking-pedestrian-detection systems, and parking assist.8 Volvo has even launched a large-scale trial of autonomous-driving technology on actual roads.

One might expect a company like Volvo to be out in front when it comes to combining technologies. But many others from a wide variety of industries are finding value in different combinations.

Take, for example, Lowes. The home-improvement retailer combined robotics with augmented reality/virtual reality to create LoweBot, an in-store robot helper. LoweBot, made by fellow robots, uses a 3-D scanner to detect people as they walk into stores. Shoppers can search for items by asking the bot a question or by typing the item name into a touch screen. The bot then guides them to the items using smart laser sensors, similar to the technology used in autonomous vehicles. Beyond providing a more efficient in-store experience, LoweBot helps Lowes with inventory monitoring and management in real time, detecting patterns that can guide future business decisions.

Or Burberry. The luxury brand is combining augmented reality and mobile computing to find new ways to engage with customers online. Working with Apple, Burberry created an AR feature that interacts with users’ camera feeds to digitally redecorate their surroundings with Burberry-inspired drawings by the artist Danny Sangra.

The bottom line is, no matter the industry, companies can create value by strategically combining technologies.

 

A Pinch of This and That

Being a master chef and running a top-rated restaurant requires more than just serving tasty food. Similarly, being a digital leader requires more than just investing in the right mix of technologies.

Companies are increasingly realising that the future is one of people working together with machines; in a human-plus-machine world, workers will become much more effective.

Our case-study analysis suggests three actions companies can take to make the most of their digital recip: Focus on people (the chef and his team inside and outside the kitchen), forge partnerships (the vendors who deliver the best ingredients), and fine-tune your performance management (distinctive guideposts of performance that define an exceptional dining experience).

People. Companies are increasingly realising that the future is one of people working together with machines; in a human-plus-machine world, workers will become much more effective. Consider the example set by thyssenkrupp, the German multinational whose products range from elevators to submarines to steel. In 2016, the companies’ Elevator Technologies division launched a cloud-based, predictive-maintenance solution called MAX in partnership with Microsoft.9 With MAX, thyssenkrupp’s elevator technicians can access elevator data in real time, including motor temperature, shaft alignment, cab speed, and door functioning.10 And thanks to Microsoft Azure’s machine-learning algorithms, they can also retrieve in-depth data on the lifecycle of each elevator’s key components and systems, and learn instantly which parts will require maintenance, and when.11

With HoloLens, Microsoft’s mixed-reality smart glasses, more than 24,000 of thyssenkrupp’s service technicians can visualise and identify problems with elevators ahead of a job. These glasses provide remote, hands-free access to technical and expert information when on site, which saves time and relieves stress.12

In all, MAX has helped reduce downtime by as much as 50% for thyssenkrupp’s customers and reduced service-intervention times for its technicians.13 With the solution installed worldwide, the time savings for elevator passengers could equate to 95 million hours in each year of operation.14 The company has already found early success. Since its introduction, more than 110,000 elevators are now using MAX, reducing downtime for more than 40,000 customers at almost 49,000 sites.15

Thyssenkrupp’s service engineers are much more productive, repairing more elevators in a day than they ever could before. And the company is saving money.

Partnerships. The best organisations harness innovation from their employees and supply-chain partners alike. Before making any significant investment decisions about digital combinations, companies should seek out opportunities to collaborate with startups, entrepreneurs, universities, and entities in their industrial value chain. That means competitors, too. Such partnerships reduce the costs of computation and experimentation. One partner may invest in augmented reality and virtual reality, another may invest in machine learning, and yet another may invest in autonomous robots. But everyone benefits.

Before making any significant investment decisions about digital combinations, companies should seek out opportunities to collaborate with startups, entrepreneurs, universities, and entities in their industrial value chain. That means competitors, too.

Take, for example, the partnership between a mining company (Rio Tinto), equipment manufacturer (Komatsu Ltd.), and a steelmaker (Nippon Steel & Sumitomo Metal Corp.).

Last September, the first retrofitted Komatsu autonomous truck debuted at Rio Tinto’s Hope Downs 4 iron ore mine in Western Australia, replete with high-precision GPS, hazard-detection system, and a wireless network. The shared benefits of such a collaboration are obvious: Increased productivity, cost savings (an estimated 15% lower load and haul-unit costs), and zero injuries. Ensuring an accident- and fatality-free work environment is a serious business priority for Rio Tinto at par with mainstream performance indicators such as efficiency or profitability. To that end, Rio Tinto is also using unmanned aerial vehicles, which cast eyes on the slopes, crests, and walls of mines, warning mine operators of landslide risks, among other things.

But a third company, Nippon, benefits as well. The Japanese steel giant saw a record-breaking shipment of five billion metric tons last year.16 The company is now co-investing: Nippon has a 14% stake in the Robe River JV company, which operates the West Angelas mine in the Pilbara region.17 Robe River has said they will be introducing 15 autonomous trucks at the site in the coming months.18

Partnerships like these are more than just one-time, buyer-seller interactions. They are long-term ongoing collaborations where every participant leverages their own technology investments and expertise. Every tech investment has a ROI beyond the organisation’s walls, and all partners benefit in some way or another. That’s why companies must carefully sync and pace their investments in consultation with one another.

Performance Measurement. How do you really know if digital investments are paying off? If you save money or see increases in worker productivity levels? Sure. That’s a big part of it and will make shareholders and executives happy.

Intel, for example, manages its business through seven key segments. These include the Client Computing Group, Data Center Group, and the Internet of Things Group (IOTG).19 The company formed IOTG several years ago to expand its reach in the Internet of the Things market. Today, that group includes platforms designed for IoT market segments, including retail, transportation, industrial, video, buildings and smart cities.20 Since 2014, IOTG has been Intel’s fastest-growing group. In 2016, sales had increased 33% from two years earlier.21 By separating out IoT revenues from chipset revenues in particular, Intel can properly measure a technology bet.

To properly measure performance, organisations must understand how technologies and digital workforces deliver benefits across organisational processes.

But the real test is whether those new tech applications and the digital workforces they spawn are having a disruptive impact. By disruptive, we not only mean dramatic and previously unseen increases in productivity and efficiency levels, but an impact beyond the immediate-use cases. For example, if an autonomous robot reduces the production-cycle time of an automobile by 20%, the investment will have paid for itself. Now imagine a scenario where these robots can predict potential faults during product assembly, thus reducing future product recalls. Or if they can inform and improve vehicle design by optimising the use of raw materials.

Given all this, companies must change the way they measure performance. They must think beyond their traditional productivity and efficiency metrics. To properly measure performance, organisations must understand how technologies and digital workforces deliver benefits across organisational processes.

 

Cook Happy

As advanced digital technologies continue to reshape markets and society as whole, companies have a rare opportunity to grow and make themselves more efficient than they ever could have imagined. These six technologies are only the basic ingredients. For more complicated dishes, corporations can look to add pinches of blockchain here and dashes of 3D printing and digital twin there.

But this core recipe will never see its full potential if leaders don’t also invest in their people, pursue unconventional partnerships with friends and rivals alike, and change the way they measure success.

Featured Image: Microsoft’s mixed-reality smart glasses – the HoloLens. https://www.microsoft.com/en-us/hololens

 

About the Authors

 

 

 

(left to right) Tracey Countryman is global managing director in resources with Accenture. David Abood is senior managing director in resources. Aidan Quilligan is the global lead for Accenture’s Industry X.0 practice. Raghav Narsalay is a managing director and Aarohi Sen is a manager with Accenture Research.

 

References

1. “Global Mobile Data Traffic Forecast Update, 2016–2021 White Paper”, Cisco (March 28, 2017). Accessed on January 20, 2018 and viewable at: https://www.cisco.com/c/en/us/solutions/collateral/service-provider/visual-networking-index-vni/mobile-white-paper-c11-520862.html

2. “Volvo became an unlikely tech superpower when no one was watching”, Business Insider (July 8, 2017). Accessed on January 25, 2018 and viewable at: https://www.businessinsider.in/Volvo-became-an-unlikely-tech-superpower-when-no-one-was-watching/Volvo-is-interested-in-more-than-just-self-driving-cars-Its-also-investing-in-technology-to-make-its-cars-more-connected-and-convenient-/slideshow/59505068.cms

3. Big Data at Volvo: Predictive, Machine-Learning-Enabled Analytics Across Petabyte-Scale Datasets”, Forbes (July 18, 2016). Accessed on January 25, 2018 and viewable at: https://www.forbes.com/sites/bernardmarr/2016/07/18/how – the – connected – car – is – forcing – volvo – to – rethink – its – data – strategy/3/#21f0f99a612d

4. “Volvo became an unlikely tech superpower when no one was watching”, Business Insider (July 8, 2017). Accessed on January 25, 2018 and viewable at: https://www.businessinsider.in/Volvo-became-an-unlikely-tech-superpower-when-no-one-was-watching/Volvo-is-interested-in-more-than-just-self-driving-cars-Its-also-investing-in-technology-to-make-its-cars-more-connected-and-convenient-/slideshow/59505068.cms

5. “Volvo is using Google Cardboard to get people inside its new SUV”, The Verge (November 13, 2014). Accessed on January 25, 2018 and viewable at: https://www.theverge.com/2014/11/13/7217397/volvo – is – using – google – cardboard – to – get – people – inside – its – new – suv

6. “Volvo’s engineers use Microsoft HoloLens to digitally design cars”, CNET (October 26, 2016). Accessed on January 25, 2018 and viewable at: https://www.cnet.com/roadshow/news/volvo – is – the – first – automaker – to – add – microsoft – hololens – to – its – engineering – toolkit/

7. “Robotics on the rise in manufacturing facilities,” Charleston Regional Business Journal (September 2016). Accessed on April 10, 2018 and viewable at: https://charlestonbusiness.com/news/manufacturing/70567/

8. “Autonomous Driving”, Volvo. For more information, please visit: https://www.volvocars.com/intl/about/our-innovation-brands/intellisafe/autonomous-driving

9. “thyssenkrupp rolls out MAX in Germany: world’s first predictive elevator maintenance service”, thyssenkrupp (April 26, 2016). Accessed on January 25, 2018 and viewable at: https://www.thyssenkrupp.com/en/newsroom/press-releases/press-release-61632.html

10. “Microsoft HoloLens enables thyssenkrupp to transform the global elevator industry”, Microsoft (September 15, 2016). Accessed on January 25, 2018 and viewable at:https://blogs.windows.com/devices/2016/09/15/microsoft-hololens-enables-thyssenkrupp-to-transform-the-global-elevator-industry/#AmJfgzw4ScgvucZM.97

11. “thyssenkrupp extends predictive maintenance benefits of MAX solution to more than 40,000 customers”, IoTNow (October 16, 2017). Accessed on January 25, 2018 and viewable at: https://www.iot-now.com/2017/10/16/69149-thyssenkrupp-extends-predictive-maintenance-benefits-max-solution-40000-customers/

12. “thyssenkrupp unveils latest technology to transform the global elevator service industry: Microsoft HoloLens, for enhancing interventions”, thyssenkrupp (September 15, 2016). Accessed on January 25, 2018 and viewable at: https://www.thyssenkrupp.com/en/newsroom/press-releases/press-release-114208.html

13. “Maximum uptime, all the time”, Thyssenkrupp. Accessed on January 25, 2018 and viewable at: http://www.thyssenkrupp-elevator.com/en/products-and-service/max/

14. “Thyssenkrupp moves into the digital age with MAX”, Thyssenkrupp (May 5, 2016). Accessed on January 28, 2018 and viewable at: http://blog.thyssenkruppelevator.com/content/thyssenkrupp-moves-digital-age-maxhttp://blog.thyssenkruppelevator.com/content/thyssenkrupp-moves-digital-age-max

15. “thyssenkrupp extends predictive maintenance benefits of MAX solution to more than 40,000 customers”, IoTNow (October 16, 2017). Accessed on January 25, 2018 and viewable at: https://www.iot-now.com/2017/10/16/69149-thyssenkrupp-extends-predictive-maintenance-benefits-max-solution-40000-customers/

16. “Rio Tinto’s autonomous haul trucks achieve one billion tonne milestone”, Rio Tinto Media releases (January 30, 2018). Accessed on March 12, 2018 and viewable at: http://www.riotinto.com/media/media-releases-237_23991.aspx

17. “Five billion tonnes of iron ore shipped from Australia”, Rio Tinto Media release (May 17, 2017). Accessed on March 12, 2018 and viewable at http://www.riotinto.com/documents/070517_Five_billion_tonnes_of_iron_ore_shipped_from_Australia.pdf

18. “Rio Tinto to expand autonomous truck operations to fifth Pilbara mine site”, Rio Tinto Media release (March 7, 2018). Accessed on March 12, 2018 and viewable at: http://www.riotinto.com/media/media-releases-237_24642.aspx?utm_medium=RSS

19. “2016 Annual Report”, Intel (2017, Page 5). Accessed on January 25, 2018 and viewable at: http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_INTC_2016.pdf

20. Author calculations based on Intel’s financial statements

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