Information for Business from Lenovo
Think Space
Contributor: Andrew Birmingham
Industrial disruption on a global scale

Much of the IT industry’s attention on digital disruption has been focused on the impact mobile technology is having on the changing relationships between brands and consumers.

However, changes wrought by digital technology in industrial markets might be even more significant as increased efficiency is having a major impact on the way the world works at macro-economic levels.

According to a report from Accenture called ‘Winning with the Industrial Internet of Things’, over the next 15 years associated technologies will add more than US$14 trillion to the world economy.

Authors Paul Daugherty and Bruno Berthon say that the impact on the US alone could yield more than US$7 trillion benefit: "The United States’ economy will gain US$6.1 trillion in cumulative GDP by 2030. By taking additional measures, for instance, to improve the country’s broadband infrastructure, this figure could rise to US$7.1 trillion. This could mean that the United States’ annual GDP is 2.3 per cent higher than trend projections in 2030."

Small wonder then that the world's largest industrial vendors have spent much of the last decade quietly reinventing themselves. Siemens, GE, Schneider and ABB all appear to have reached the same conclusion as Marc Andreessen famously did in the Wall Street Journal four year ago – software is eating the world.

In many ways these four industrial giants are doing something that incumbents in banking, retail and media failed to do – they are disrupting their own markets and reinventing what it means to be a global player.

Each is going about it in a slightly different manner. In an interview with Which-50 late last year, Gartner Research Fellow Kristian Steenstrup described the various approaches. For instance, Schneider created a software technology group and hired a senior technologist from SAP to head it up and to teach them how to be good at building software.

Siemens on the other hand devolved responsibility out to the divisions who are free to tackle change industry by industry and product line by product line, he said. Meanwhile, ABB opened up the chequebook and has spent years buying-in expertise, particularly in the utility and mining sectors, including its purchase of Australian mining software leader Mincom in 2011.

And finally, according to Steenstrup GE, which originally coined the term ‘industrial internet’, started by building a software centre of excellence in California. Similar to Schneider, it raided Silicon Valley for leadership by hiring an ex-Cisco executive as its head. Since then GE has led the debate over the industrial internet.

The implications of digital transformation can be felt across a broad range of different industries:

Earlier this year Cisco conducted research across 14 countries and key among its findings is the importance of data analytics to pricing decision making. The potential benefits included quicker problem-solving, improvements in process control and better safety outcomes for personnel:

  • Automotive: By 2020 the number of connected cars in the world is set to grow to a quarter of a billion according to a study by Gartner. The arrival of that new driverless fleet will also form the bedrock of a new ecosystem as a new service industry emerges to support the sector.
  • Retail: Juniper Research says that technologies like RFID tags, beacons and connected consumer electronics when married to new advances in analytics will improve both the service levels retailers can provide and their understanding of consumer needs and behaviours.

The opportunities seem endless, but of course there is a slight problem. It still comes down to the execution. While Accenture's research found strong optimism among CEOs that their organisations have the capability to create new, service-based income streams, there is scepticism in the ranks about the ability to deliver.

That same research found that 73 per cent of executives feel that their companies have yet to make any concrete progress. In addition, only seven per cent have developed a comprehensive strategy with investments to match.

In a digitally led world you don't get much time to fret. As has reported previously, Apple in music (seven years), Google in mapping (18 months) and even Tinder in dating (six months), winners reach market saturation quickly. Disruption is ugly, brutish and short.

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