“There is a fundamental disconnect between the wealth of digital data available to us and the physical world in which we apply it. While the reality is three-dimensional, the rich data we now have to inform our decisions and actions remain trapped on two-dimensional pages and screens. This gulf between the real and digital worlds limits our ability to take advantage of the torrent of information and insights produced by billions of smart, connected products (SCPs) worldwide.” – Michael Porter and James Heppelmann[i]
The world around us as we know it is changing. We are living through a convergence of the physical and digital worlds that is taking place at an exponential pace. According to the research firm IDC, businesses were projected to have spent approximately $1.1 trillion in 2018 on digital transformation technologies – hardware, software, and services.[ii] Much of this massive spending has taken place within industry and manufacturing, and has ushered in an era now being called the Industrial Revolution 4.0 – or just Industry 4.0, to represent the fourth revolution that has occurred in manufacturing. Industry 3.0 witnessed the adoption of computers and automation and the enhancement of smart and autonomous systems fueled by data and machine learning. Industry 4.0 optimizes this revolution and allows for the cyber-physical systems, the internet of Things (IoT) – within Industry it is coined the Industrial IoT (IIoT), the Internet of Systems and smart connected products (SCPs).[iii] The digital world is based on 1s and 0s. The physical world is full of winners and losers. The current winners are making the necessary strategic changes to take advantage of this revolution and figuring out how to harness those 0s and 1s to lift the world around them and usher us into this new era.
We learned that any company that provides the necessary tools to enable a revolution will likely be successful and profit nicely. One shining example of a company doing exactly this is PTC. Now located in Boston’s innovation district, PTC is winning in the digital age and exemplifies what a company needs to do to survive. Originally founded in 1985 as a tech company that created Computer Aided Design (CAD) software using a unique set of algorithms to design and describe a physical object in the digital world. While witnessing several years of success, PTC expanded their offerings to include product lifecycle management (PLM) software and other various complementary services. During this time, PTC began facing increased competition and lost its dominance in the market. However, in 2010, Jim Heppelmann – who had been serving as the CTO for the past 10 years, was announced as the CEO and he sets course on a mission to revitalize the company after a “lost decade.”
Through a series of strategic acquisitions focused at developing a product suite spanning across the full digital spectrum, making the physical world more productive and efficient. PTC’s strategy and products team sought to develop a product suite, while still rooted in CAD and expanding on PLM, that brought the necessary tools to engineer’s desk and manufacturing floor. These software products developing an end-to-end IoT application enablement and cloud-based platform as a service (ThingWorx), IoT connectivity (Axeda), analytics (ColdLight), augmented reality (Vuforia), and industrial automation (Kepware). Additionally, several recent partnerships such as Rockwell Automation – including a $1 billion investment in PTC in 2018[iv], Microsoft – bringing in Azure and Hololens technologies, and Ansys – providing real-time simulation in a design environment, brings together capabilities only found in PTC’s software suite[v].
Through their Industrial Internet of Things platform – ThingWorx, and AR software, PTC is enabling the millions of front line workers to be trained quicker and more productive. Additionally, plant floor managers can now conduct real-time analysis of various machine’s operating metrics, allowing the plant to conduct predictive maintenance only when needed and not wasting the hundreds of man-hours and millions of dollars on conducting maintenance that doesn’t need to be done. PTC also offers support for the various cloud providers, and so it is aware of each unique environment but is not beholden to one service.
The key component of PTC’s ability to be a winner with their ThingWorx IoT platform, and other products, is in their executive team. As we all know, creating and marketing a platform isn’t an easy task and takes a capable and competent team to support it. PTC has built itself around a task to create products that enable the Industrial Revolution 4.0 and beyond. As such, PTC shifted its business model to provide a subscription-based software service, allowing them to continually capture the value of their services.
Some Struggle to Survive
One example of a large and deep-pocketed company that attempted to provide a platform tools to capture part of the digital transformation market, but has also struggled General Electric’s subsidy GE Digital, and their IoT and asset management platform, Predix. Similar to ThingWorx, Predix is a cloud-based PaaS but has failed to garner the market share (outside of likely forcing the other GE subsidies to adopt Predix) required to provide the necessary return of capital to GE. GE Digital was likely unable to demonstrate the value creation to the market, resulting in its inability to take off. This resulted in the shopping of Predix on the market during the summer of 2018 and eventual spin-off of GE Digital (to include the Predix platform).[vi] The article also notes that the CEO of GE Digital, Bill Ruh, also left the company.
GE Digital’s Predix is not alone in facing stiff competition and difficulty in capturing market share and creating value for its customers, as noted with many of GE’s jet-engine customers (and the airlines who buy these engines) resisting to pay the premium for the added value Predix (and other IIoT platforms) may provide.[vii] Of the companies that recognize the need to make the transition involved with Industry 4.0, Predix is just one example of a likely failed attempt. However, since the late 1980s, and Industry 3.0, the manufacturing industry continues to have difficulty in embarking upon the digital transformation journey and ushering in new technologies, making them obsolete organizations.[viii]
[i] Porter, Michael and James Heppelmann. “A Manager’s Guide to Augmented Reality.” Harvard Business Review, Nov-Dec 2017.
[ii] Gagliordi, Natalie. “Digital transformation technology and services spending is on the rise.” www.zdnet.com, Jun 2018.
[iii] Marr, Bernard. ”What is Industry 4.0?” Forbes.com, Sep 2018.