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Manufacturing as a platform

In a recent book by a professor of engineering, an information business models scholar, and a C-level strategist, a complex question got a deceptively simple answer.

The question: How can a major business segment be invaded and conquered in a matter of months by an upstart with none of the resources traditionally deemed essential for survival, let alone market dominance?

The answer: the power of the platform – a new business model that uses technology to connect people, organizations, and resources in an interactive ecosystem in which amazing amounts of value can be created and exchanged.[1]

Along with many other commentators, the authors tell the stories of the most famous ‘upstarts’ – Uber and Airbnb. The world’s biggest taxi company that owns no taxis, and the world’s biggest ‘hotel’ business which owns no tangible property. Their success has been examined thoroughly elsewhere. My point is that manufacturing is not immune to the power of the platform. For instance, a logistics company could extend their own business model and invest in high-end 3-D printing technology and produce prototypes or spare parts for the manufacturing industry to order as well as delivering them. That kind of additive manufacturing is a distinct threat. It’s why manufacturing must embrace the platform and the ecosystem that goes with it to succeed in the future and fight off potential disruptors.

In an interview with Reijo Sihvonen in our new Spotlight on Smart Manufacturing Fujitsu’s Head of Manufacturing Vertical talks about how the modern, smart manufacturer has to focus on outcomes not physical products. I think that’s true. They also need to look more carefully at the way their customers are using the products. When you understand that in detail, you can adapt products to their specific (and unique) needs and then adapt or make an individual product to meet them. In other words, achieve the much talked about Lot Size 1.

That kind of responsive manufacturing is already being done. Another aspect is how a customer experiences a manufactured product. For instance, you can offer additional services like predictive maintenance which ensures the product suffers virtually no downtime. As a consequence a customer can be charged on the basis of successful operating hours (jet engines are a well-known example). And you can make the most of the flow of valuable data that’s generated by the product to optimize its operation, for instance, by matching a heating pump’s capacity to the weather forecast.

Manufacturers need to take a more holistic view of what they do and look beyond pure manufacturing processes. In addition to getting closer to their customers, manufacturers should scan the horizon for non-manufacturing disruptors – like that logistics company I mentioned – which might be about to challenge them and take their business.

Simply, it’s a new business model

You need to do a holistic assessment to identify key areas of interest. And it really must be an all-encompassing view. On the one hand it should include the customer’s experience of the product, as well as its complete lifecycle based on a thorough analysis of competitors and megatrends. That enables you to identify a megatrend that might look like a threat at first but can be turned into a new opportunity if you spot it early enough.

On the other hand, your assessment should include the supplier and partner network as well. Partners are important because it will be very hard to address every new opportunity in a rapidly changing environment on your own. To do that requires a fast and agile adaptation to new technologies and services. That’s why Co-creation is at the heart of an ecosystem approach which addresses this new development style. Fujitsu has long pioneered Co-creation and we’re ready to help you achieve that holistic view.

Once that’s achieved, you need to decide how to not just cope with what’s happening, but act on it decisively. That’s when all the new technologies and solutions associated with Industry 4.0 come into play. Gather data from the shop-floor and product lifecycle and use it to gain insights for use in things like predictive maintenance, non-destructive testing, or overall equipment efficiency. All those things can become the foundation for new business models.

Or you could use distributed ledger technologies (like IOTA) to maintain a secure, immutable, and accurate audit trail which encompasses the whole product lifecycle (not limited by single company or owner). The underlying basis for all of this is the data that’s harvested from emerging (as well as existing) sensor technologies which provide information from every aspect of a product’s operation and usage.

It’s a broad and fascinating subject and Reijo’s views are an important and timely addition to an ongoing debate across the manufacturing sector.

 


[1] Platform Revolution: Geoffrey G. Parker, Marshall W. Alsytyne, Sangeet Paul Choudray: Norton 2017

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