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Forget Internet of Things – The Real Business Transformation Explained

January 12, 2016 Leave a comment

I took my 5-year old to Jet Propulsion Lab one day he was quite amazed with this shining object exhibit that is supposed to demonstrate how data are being transmitted from space. Once upon a time we must have been amazed by imagining these lights moving along indicating live communication with a remote object. Now we all take the data transmitting part for granted. On the contrary, apps and cartoons about how our lives have changed by technologies are what is getting more of our attention today. One day we will look at the Internet of Things (IoT) in the same way.

JPL2

In the past year, there have been many inquiries from manufacturers around the world about buzz words such as Industrie 4.0, Smart Manufacturing and IoT. While there have been a lot of information on new technologies, less focus has been on the business transformation underway. What is beyond the automation of existing tasks? What are the fundamental changes from a business perspective? How do you prioritize the transformation of different parts of business for such changes?

To answer these questions, we need to better understand the underlying mechanism of these changes. I would propose one way is to look at these issues in the light of “Smart Pull,” a concept that expands the traditional definition of Pull in Lean manufacturing to a new world enabled by digital technologies.

The mechanism of Pull processes – those triggered by an actual event instead of a forecast (Push) – is nothing new. It is at the heart of many successful manufacturing strategies, MTO (Make-to-Order) and JIT (Just-in-Time) models. In the new paradigm, there are three major types of Pull made possible by digitization.

Collaborative Pull – This refers to the ability to draw out people and resources inside and outside an organization to collaborate on addressing a need as it appears. Some of the key technology enablers are virtual prototyping, simulation, additive manufacturing, social networking and enterprise search. These technologies enable people and resources across the globe to be identified quickly to work on a design or to solve a particular challenge, and to do so with better efficiency.

Services-oriented Pull – This refers to the ability to deliver a capability addressing a need as it appears. Famous examples are Uber personal transportation services or AirBnB lodging services. In each of these cases, a transportation or accommodation are delivered as a service to address a customer’s need through a social platform powered by Apps. In many cases, the pricing model is also based on the actual consumption of these services. MaaS or Manufacturing-as-a-Service is the consumption of manufacturing capacity as a service. Enabling technologies including IoT, intelligent sensors, cloud computing and social network platforms that carry out transactions required for matching sellers and consumers on-demand.

Adaptive Pull – This is the most common type of Pull used in manufacturing and logistics operations. Within traditional Lean manufacturing, Pull-based processes are being powered by digital technologies to go beyond elimination of over-production and inventory. Quality, maintenance, costing, procurement, production and inventory control can leverage these types of Pull processes. For example, a large number of real-time quality data can be gathered to analyze and benchmark across global production sites. Frontline workers and managers can now be automatically notified based on risks identified from such actual data. This is again a form of digital Pull that can be used to trigger an action based on actual data instead of a forecast. Enabling technologies include intelligent sensors, M2M, IoT, Big data analytics, BPM (Business Process Management), simulation and digital modeling.

These different types of Pull processes can be mixed and matched to create new customer experiences, or to pursue new level of efficiency. An example of a mixed Pull is the case of agricultural equipment manufacturer Kubota. They put sensors on their agricultural equipment to gather usage data at the field. Based on these data collected and analyzed, they now offer a value-added service to the customers on how to better optimize their farming operations. At the same time, such information is used to understand demand patterns. This knowledge has let Kubota know when to sell what types of equipment, and to which type of user. In this scenario, an equipment manufacturer and farmers work collaboratively to optimize farming operations (Collaborative Pull). The data analysis can then be sold as a service (Service-oriented Pull). The selling of additional equipment based on actual demand is also a type of demand Pull (Adaptive Pull).

The advantage of thinking in terms of the above “Smart Pull” concept is that it takes the focus away from technology and put it on business transformation. Challenges and inefficiency based on Push are then presented as opportunities. Perhaps you can start asking the following questions to identify areas of opportunities.

  • What kind of improvement in capital lockup or wait time has most impact to business?
  • Can these areas be improved by Pull?
  • Which part of your customer engagement or operation inefficiency can be addressed by changing from push to pull?

Perhaps the day will come when design, engineering, manufacturing, logistics and after-sales resources are all available as services to be called upon on demand just like what Uber is doing to transportation resources. A consumer could then use his or her phone to customize an order that meets his or her special needs. All the necessary industrial resources could then be orchestrated – on demand – based on Pull to fulfil each specific order. The concept of “Smart Pull” is truly revolutionary, given its role to help bring these business transformations to market.