Key Learning Points from the Study: Digital Transformation · • digital engineering •...

Digital Transformation

How Information & Communication

Technologies are disrupting Established

Industries

HGK, Zagreb – November 28, 2017

Key Learning Points from the Study:

November 2017Nicolas Ivandic – mutualGains Solutions GmbH

• Introduction of the study : authors, targets, cornerstones, structure & methodology

• General trends & key findings:

• technology as driver of transformation („software is eating the world“)

• productization & servitization, PSS

• monetization of digital products & services

• customer interface as key strategic position

• strategy & organisation

• platform-based ecosystems

• Recommendations for Industry & Business

• Digitalization as a huge challenge and collaborative task

• German National IT Summit as central interface between Government, Business, Academia & Society

• how to improve collaboration in complex environments: CBA/MGA & collaboration software

• digitalization and the political system

• Recommendations for Government

Agenda for Presentation


Digital Transformation – Research Project

–

• for the German Federal Ministry of

Economic Affairs & Energy:

• performed by the following consortium:

https://business-services.heise.de/specials/studie-digitale-transformation/english-version.html

• available since January 2017

• project start was May 2015

• budget: €2m (70% subsidized)


Authors from 4 institutions


1. Relevance of the Digital Transformation for

a) companies of

different industries

b) the collaboration among stakeholders from Government / Business / Science / Society

2. Findings & implications for 3 industries

resulting from an international comparative survey

3. Recommendations for Research & Science, Business & Industry; Government & Society

Targets of the study „Digital Transformation“

• business models

• strategy

• organization

• data analysis

• autonomous systems

• digital engineering

• automotive

• machine-building

• logistics

• value proposition

• value creation architecture

• revenue modelsocio-economic domain

technical domain


Cornerstones of the study

3 Industries in comparison

automotive machine-building logistics 5regions

199Interviews with

experts and

decision-

makes

automotive

ICTmachine-building

other

logistics

10 chapters & annex; 52 charts, 5 tables, 208 pages

Bilingual (German & English)


Structure of the study – Table of Contents

1. Introduction

2. What is ICT-induced transformation?

3. Digital change in the automotive industry

4. Current situation and trends in the principals domains

5. Estimates and forecasts for the key sectors

6. General trends and findings

7. ICT-driven platform ecosystems

8. Digital transformation as a collaborative task

9. International comparison of the risks and potential associated with digitalization

10. Conclusions and suggested next steps

Annex


Maturity model – a cross-industry comparison (see p. 191-197)

115 interview cards

general

questions

technological

maturity

socio-economic

maturity

risks &

opportunitiesToday

Future?!

5-stage-

maturity

model

value proposition

value creation

architecture

revenue model

strategy

organization

data analytics

autonomous

systems

digital

engineering

8 dimensions

machine-building logisitcsautomotive


The Maturiy-Model – current situation (Figure 26)


„Software is eating the world“: The digital disruption will affect all

industries…the mature and conservative ones included!

for digital companies is easier

to enter a different industry

than

for an established industry to

acquire ICT-skills!

customer

digital

company

digital service layer

successive

take-over of

industries

established

industry

monopoly of

customer needs

(i.e. Uber, Predix)

Skills: - Strategic comprehension

-Strategic management

- ICT skills


What’s at stake? The access to the customer…and hence, profitability!

Source: Handelsblatt , 14.03.2016

„ Companies that today know how to make good

machines or cars, but do not get proper

access to the customer, will tomorrow either disappear

as producers or lose their key relevance within the

value chain“


Some key ideas

„Creative destruction“ /

„industrial mutation“

(Schumpeter, 1912, 1942)

disrupts a known path of performance improvement, redefining

performance. Happens when new participants offer basic functionalities

at lower prices on basis of new technologies.

„disruptive innovation“

(Christensen, 1996):

process that incessantly revolutionizes the economic structure from within,

incessantly destroying the old one, incessantly creating a new one.

2 observations regarding

ICT-induced disruption

• Process undergone by a product or service in a short period of time from

the marketplace’s edge to its mainstream

• Disruptive firms often simply transfer business models from the internet-

based world to real industry

„mutation“

(Zuboff, 2010):

Era of mass consumption is coming to an end. New era is focused on the

individual.=> individualized products & services at radically lower costs


The customer-interface is the key strategic positionwithin the emerging platform-based ecosystems

Tier

2

Tier

1OEM

Tier

3

exchangeability

customer-

interface

Customer

(from consumer to prosumer)

Uber

increasing profit margin

decreasing physical value-adding contribution

Skill: Strategic

comprehension


Software-platforms as triggers of data-driven ecosystemsTec-share of top 10 most valued companies ($bn)

1995 2005 2015

0% 10% 58%

source: table based on Schmidt (2016)


ICT-driven platform ecosystem – example Google‘sAndroid (Figure 37)


PSS (Product-Service-Systems):Integral and customer-oriented service delivery

i.e. machine i.e. maintenance-

service

Product-

Service-

Systems

Product(s)

& Service(s)

Service(s)

& Product(s)

Product(s) Service(s)

i.e. offer of

manufacturing function

Skill: to acquire and analyze

large volumes of machine and

usage data

Skill: to automate a service in

the form of a software

application that can be offered

to a larger group of users at a

lower price

Skills: - to develop PSS;

- to involve customers in design

and improvements (co-design)

- to collaborate


Digital products & services offer new possibilities of monetization:retrospective function enhancement – aggressive market penetration - dynamic pricing

OEM

supplier

eco-

system

dealer

ICT-

company

developer

customer

core

functionalitycontent

add-on

functionalities

core

services

add-on

services

€€

example: Tesla OTA-updates (~$2,500)

V1.0

(2012)

V1.33

i.e. Defrost Mode

V7.0

i.e. Autopilot

V8.0

i.e. Cabin Overheat Protection


Software is fundamentally changing the process ofvalue creation (Figures 28 & 29)

sporadical

customer

involvement

Customer

becomes

prosumer

digital enterprise

digital twins


Venkatraman’s “Five Levels of IT-enabled businesstransformation” (Figure 14)

revolutionary

levels

evolutionary

levels


A digitalization strategy is the necessary thrust for thetransformation of organizations!

Finding

The majority of the interviewed companies

stated that digitalization is an important

element of their strategy

but

almost none declared to actually have a

digitalization strategy in place!

Skill: Strategic management


Issues regarding Strategic Management & Digital Transformation (DT)

• recognition of the strategic relevance of ICT-induced change is a function of company size and

distress level

• discrepancy between general understanding of DT and translating it into specific operational

measures within a company:

• need for context-specific interpretation & assessment of how DT works

• in conjunction with the domain specific business models

• need to identify opportunities

• need for detailed operational implementaion

• need to overcome parth-dependency

• domain specific vision

• cross-domain visions

• dematerilization

• integration

• informatization

• autonomy

• efficiency gains

• new business modelsdecisions

concerning platform

ecosystems


Platforms for the Industry

• being offered or developed by Siemens, SAP, Microsoft, Bosch, GE, MAN, Deutsche Telekom,

and 1000 companies more. Device Insight: used by big SMEs.

• on the long run max. 50 thereof will survive, 2-3 per industry. Size & speed matter!

Success factors:

• high investment (>€100m; GE has spent more than $3bn; Siemens €10bn), also for acquisitons

• many technical interfaces, to enable access to many users

• tools for data-processing (big data, data analytics)

• deployed hardware (ABB: 70m connected devices and >70k control-systems; Siemens: 30% MS

of machine OS; GE with own data from power-generation and maintenance of air-plane engines;

Japan and China through robots)

• connectivity to free-accessible data (geodata, weather-data)

relevance of OPC UA


The need for ambitdextrous organisations –not a „spin-off”, but a a „spin-along” approach


Recommendations – Business & Industry

have a digitalization strategy and use an ambidextrous organization

to get the right culture to implement the digitalization strategy

continuosly develop smarter product & services towards PSS

put much stronger focus on the end-customer

set-up shared platform ecosystems for digital products and services

aggressively strengthen digital skills of employees and management

mobilize the innovative potential of open ecosystems by using digital

forms of collaboration


Contact

Nicolas Ivandić

mutualGains Solutions GmbH

Rieslingweg 17

67157 Wachenheim an der Weinstraße

Germany

T: +49 6322 9583850

M: +49 160 423 7839

E: [email protected]

Hvala na

pozornosti!


Recommendations – Business & Industry

have a digitalization strategy and use an ambidextrous organization

to get the right culture to implement the digitalization strategy

continuosly develop smarter product & services towards PSS

put much stronger focus on the end-customer

set-up shared platform ecosystems for digital products and services

aggressively strengthen digital skills of employees and management

mobilize the innovative potential of open ecosystems by using digital

forms of collaboration


Digitalization is a major challenge and will bedecisive for competitveness…and survival

Company

Value-creation and margins

shifts

access to customers

new business models

platforms & ecosystems

skills

State

Freedom, safety & prosperity

free societal order and state of

law (consitutional democracy)

employment

wealth-distribution

infrastructure (incl. interfaces)

Person

Self-determination and participation

autonomy

protection of private sphere

source of data

qualification / skills


Digitalization and complexity

new worlds

new ecosystems

new channels to customers and markets

new market places

new skills

new players

new competitors

new sources of benefits and competitve advantage

new models of development

new technologies

neue Flexibilität

new ways of thinking

new forms of collaboration

new interfacesnew opportunities and risks

neue insights

new infrastructure

blurring of boundaries, speed and

interactivity

speed is critical

for the set-up of

new ecosystems!


Digitalization: Opportunity or Threat?

Speed & Collaboration

are decisive!


The National IT Summit

Figure 42: Bodies in the thematic

area of digitalization

Central interface

for collaboration between

Government, Business,

Academia and Society

and

for shaping the Digital

Transformation


The National IT Summit

Table 3: Bodies within

the National IT Summit

9 platforms and 2 forums

for 7 action areas

33 focus/working groups

supported by many project

groups


National IT Summit of Germany Identified improvement potential

• Involvement of SMEs and start-ups

• Transparency: • selection of participants

• decision-processes

• results

• documentation

• effective and efficient collaboration:

• composition of the groups

• clarity in role allocation

• specific recommendations / result focus

• certainty about use of results

• professional moderation

• synergies / integrated work / networking

• digital tools

This is basically applicable to

all kinds of organisations and

bodies!


Economically:

quicker and better outcomes + fast alignment of the framework,

in order to reach the targets of the Digital Agenda and the

Digital Strategy

#1 Objective of the Digital Agenda: „Better exploitation of Germany‘s innovation

potential for digital value creation und networking, specifically in the middle-size

companies in the traditionally strong fields of industrial technology and production

engineering in order to secure growth and employment“

Relevance of the findings

Politically:

it is urgent to give a voice to SMEs and start-ups


The overwhelming and increasing complexity caused by…

…cannot be overcome with„analog“ ways

number & heterogenity

of players

communication &

coordination required by

team-workinformation overkill dynamism


Typical problems of collaboration and decision-making in groups

problematic acceptance

and legitimacy of

decisions

explosion in the number

of conventional

meetings

redundancies in the

work of unlinked groups

high participation-barriers of

place-bound formats of

participation

incomplete, partial

involvement of

stakeholders

poor transparency

lack of

synchronisation

typical blockades /

dominance of few

players

limited number of

participants

ineffective and inefficient

collaboration

„DEAD”-approach & simple

majority are no solutions


How to boost collaboration? through a powerful combination of methodology and technology

Consensus Building Approach (CBA) / Mutual

Gains Approach (MGA) for better solution-finding

& decison-making in groups

Consensus Building collaboration-software

comprehensive involvement of players by

slashing costs of participation

support of the Consensus Building Approach

scalability

Effective and efficient collaboration

The conditions for a quantum-leap in the collaboration within and among different bodies are given,

methodologically (CBA/MGA) as well as technologically (collaboration software, web 2.0)


The 4 Phases of the Mutual Gains Approach – Fig. 44


Collaboration software: „many-to-many“ solutions that promotesintense interaction between users - Functionalities

• Brainstorming: anonymization and parallelization generate more ideas in shorter time. Availability in real time

• Discussion: structured, anonymous, semi-anonymous or not; anonymization and parallelization overcome barriers.

More ideas are generated than in verbal discussion

• Voting: with scales, multiple choice, preferences, rank order, etc and based in different criteria. Anonymously or semi-

anonimously based on group membership. Result in real time allow for fast and improved anylsis and evaluations

• Agenda: to organize activities chronologically and by topic. Templates reduce preparation-time and encourage

repeatable meeting processes

• Minutes: automatic and impartial documentation

• Other


Powerful Electronic Meeting Systems: Collaboration softwareAnnex F


Benefits of the powerful combination

Consensus Building Approachfor better outcomes

process-ownership of the participants

focus on interests instead of positions

joint exploration of tentative solutions and joint

solution-finding

credibility due to high transparency and observance

of commitments

build-up of longlasting relationships - networking

joint fact finding

lowers participation-barriers (participation not bound to

a place)

enables collaboration in large groups (discretionary

scalability)

overcomes typical blockades of group-work

reduction of project costs by 50-70%*

reduction of project time up to 90%*

Collaboration softwaretool to support team-working in larger groups

makes asynchron work on tasks possible

*(cases Boeing, IBM)


Digital Transformation = Mutation = Convergence of technologicalcapabilites and values associated with self-determination

• The key notes of digitalization – blurring of boundaries, speed, interactivity

– will affect the political life

• New possibilities of getting informed and to participate in political discussions

and decision-making processes

• Autonomy/association and deliberation/decision will be redefined. There

will be shifts in the balance of powers.

• Fatigue symptoms of the Western democracy – „Postdemocracy“

(confidence loss, frustration, apathy, sinking voter turnouts, community as

hostage of particular interests) – and of the modern state. „Failed states“.

• Ending era of mass-consumption. New era is focused on the individual: Self-

determination as key value

• Mutation as reconfiguration of assets, caused by unmet needs

• New „genetic code“ with 5 functions: inversion, rescue, bypass,

reconfiguration and support

Mutation is much more than

an innovation or an industrial

change. „Mutations create new

frameworks…. They leverage new

technologies to do new things.

Historically, mutations have

superseded innovations when

fundmental shifts in what people

want require a new approach to

enterprise: new purposes, new

methods, new outcomes.“

(S. Zuboff)

Mutation will also hit the political system! Political ideas, institutions and life will change


Recommendations – Government

improve digital skills in education, qualification and training

strengthen legal framework for digital ecosystems

support entry into digitalization

promote open innovations

promote digital forms of collaboration for open ecosystems

strenghten the digital infrastructure: „digitalize“ the interface

National IT Summit with the aid of the Consensus Building

Approach and collaboration software, thus giving example and

promoting the digitalization of other bodies

politics should face and shape its own mutation („digital state

turn“, „politics 2.0“)


Contact

Nicolas Ivandić

mutualGains Solutions GmbH

Rieslingweg 17

67157 Wachenheim an der Weinstraße

Germany

T: +49 6322 9583850

M: +49 160 423 7839

E: [email protected]

Hvala na

pozornosti!


Back-up

Back-up


Technological Revolutions since 1770 (Table 1)

Perez (2010): Technological Revolutions and Techno-Economic Paradigms, in: Cambridge Journal of Economics 34, 1, p. 185–202.


The 3 dimensions of the Disruptive Innovation Model

Christensen, „The Innovator‘s

Solution“, Fig 2-3; p.44, (2003)


ICT-evolution as driver of the ICT-induced disruption(Figure 1)


The most important human-machine interfaces (Figure 2)


„Software defined everything“: Integration of mechanics,electronics and ICT into a system is a core element of PSS

highly integrated hardware

(i.e. smartphone)

highly integrated

software

(i.e. OS, API)+

1. multifunctionality

2. easier extension of functionalities

through software

1. easier linking to services

2. scale effects

3. shorter time-to-market

4. ….

=>

interaction with organizational structure and strategy

Skills: Strategic and organizational-design skills

Skills: Investment skills- HW-overprovisioning

- non-specialized HW where possible

- mechanisms for easy and secure SW-updating


Data acquisition & analysis – another key technical issue

all of the organizational measures that improve process quality.

One of the main tasks of management (especially QM).

system-wide data acquisition

comprehensive data acquisition

provides a supply of reliable, meaningful information,

which is a prerequisite for accurate decision making

and enables a systematic learning process.

Data

acquisition

Problem: really

comprehensive

enough?


…but there are cases where nature and scope ofdata cannot be ascertained exactly!

• Role of artificial intelligence / machine learning

• need for a radical change in thinking regarding experimental approach

deterministic highly dynamic

infinity

1. in a highly dynamic infinity

there are no fixed models

2. collision with traditional

deterministic approachA -> B -> C =>

Quelle: http://www.indiancarsbikes.in/wp-content/uploads/2015/07/Volkswagen-

Factory-Robot-001.jpg?3a87fd Quelle: Google


Platform types (figure 39)


shapers/operators: Audi, BMW, Daimler

• define rules and set-up entry barriers

• exploit informatization for

productization/servitization and

monetization

•Tier

•3

HERE seems to have the potential for a platform-based ecosystem

data-producers

(market location-based

data)

data-consumers (use high

quality and precise data)

producers from other

industries (navigation,

autonomous driving,

consumer electronics)


Recommendations for Industry & Business

Continuous development of products & services towards PSS

PSS are the prerequisite for customer-oriented, data-driven and flexible scaling-up and differentiation of

the offer.

• develop progressively smarter products & services, which requires the embedding of digital

components in traditional product & services.

• push digital innovations over much shorter cycles and with stronger customer orientation (for

example, products that can be adjusted ex post according to the changing patters of use)

• convert hardware-based into software-based functions

• use hardware that will support future functionalities (overprovisioning)


Recommendations for Industry and Business - especially for B2B-companies

Stronger focus on the end customer

The complex and highly fluid nature of performance interactions within the value-adding networks is

blurring the boundaries between B2B and B2C.

• pursue a more intensive collaboration with end customers (prosumers) and down-stream

companies nearer to the end customers.

• invest in open forms of collaboration with customers and end customers.

• open up product & service interfaces and actively participate in open-source developments.

• use approaches like Design Thinking, Open Innovation oder Crowd Sourcing for the development of

new products & services.

• collaborate with B2B-companies from countries that already focus more on end customers (like Korea)


Recommendations for Industry and Business

Set-up shared platform ecosystems for digital products and services

Platforms build the core of data-intensive products & services and are the basis for the generation of

ecoystems (which are decisive). Platforms are the technical enabler of digital business models.

• get a thorough understanding of customer‘ needs using the possibilities of a platform.

• especially SMEs should participate in the build-up of a shared platform (data und apps) and of its

ecosystem.

• take advantage of the diversity in order to generate a wider data-basis that will trigger innovative

products & services.

• integrate the platform concepts in the own business models (hybrid revenue models)


Recommendation for Industry and Business

(Aggressive) strengthening of digital skills of employees and management

The increasing digitalization of products & services requires a fundamental transformation of a company.

• required competences (especially from management): high ability to adapt and a high affinity to

digital technologies and understanding of their operational implications

• job built-in training (programming for engineers, digital management) and certification of digital

skills (especially for management)


Recommendations for Industry and Business

Digital form of collaboration for open ecosystems

Mobilize the innovative potential of ecosystems, where so heterogeneous organization forms are active

(companies of all sizes, convened bodies and industry association).

• discuss problems, develop ideas, disseminate ideas, analyze problems, discuss criteria, put forward or

agree to solution proposals using collaboration software and the Mutual Gains or Consensus

Building Approach.


Recommendations – Science & Research

develop new technologies for the functional safety of autonomous

systems

provide mechanisms to improve the trustworhtiness of

data-intensive systems

create an information structure for platform-centered ecosystems

research and promote collaborative and distributed value-creation

structures

develop a robust transformation strategy based on maturity


Skills required by the collaborative task of shaping the Digital Transformation (Chapter 8)


Better collaboration – but how?

decrease consumption

of time and resources

bundle input for

other associations

make use of synergies

and avoid redundancies

demostrate feasibility and

transfer to other

associations

ensure acceptance

and legitimacy

of decisions

it has to be „their“ platform

(ownership)

overcome blocades and

dominance of certain players

motivate and qualify participants

make complexity

manageableovercome limitation in

the size of groups

encourage participation

of all

relevant actors

make process and

results transparent


Project-proposal

survey of requirements,

framework conditions

and incentives

Test #1

present findings of study

demonstrate

functionalities

prioritize requirements

clarify willingness to

participate

design of platform

proposal

financing

communication

present & discuss

proposal

define priorities

decide about preferred

software and platform-

operator

• Action-plan for

implementation &

scale-up

time-schedule

costs

milestones

run pilot with preferred

software-supplier

discuss proposed

action-plan and work it

out in detail

analysis of software

and platform-

operators

screening

benchmarking

discuss results of the

analysis & screening

define catalogue of

requirements

sca

le-u

p

(TN

10

00

, 50

00

, 10

.00

0)

exploratory

conversations with

relevant stakeholders

screening of appropiate

participants for the

project (~200? )

selection of 3 suppliers

of collaboration-software

for tests #1, #2 and #3

test #1 test #2 test #3 pilot

done jointly with all participants and using collaboration-software

Key Learning Points from the Study: Digital Transformation · • digital engineering •...

Documents

Transcript of Key Learning Points from the Study: Digital Transformation · • digital engineering •...