Last month Michael Porter and Jim Heppelmann published a follow-up to their seminal November 2014 Harvard Business Review article on How Smart Connected Products are Transforming Competition. In this newest installment, Porter and Heppelmann, focused on How Smart Connected Products are Transforming Companies.
LNS Research agrees with the duo in that Smart, Connected Products and the Industrial Internet of Things (IIoT) will transform the internal operations of companies and how companies interact with the rest of the value chain. In a recent LNS Research blog post, I highlighted the IIoT Platform, Big Data Analytics, Business Model Transformation, and Manufacturing Systems Transformation, and Organizational Structure Transformation as the top areas that will be impacted. In this article I will drill down into one of the most important areas highlighted by Porter and Heppelmann: How manufacturing will transform and the emergence of Smart Factories.
Traditional Manufacturing System Architecture
For more than 20 years manufacturing organizations have been attempting to create “shop floor to top floor” connectivity through a rigid, tightly integrated, and hierarchical model depicted by the often referenced Purdue or ISA-95 model. In large part these attempts have fallen short, but not for lack of effort or well-funded and intentioned projects. Rather, these endeavors have been doomed from the beginning because of the very architecture itself.
The above image is an LNS Research adaptation of the traditional models. Although at first glance it seems like a logical approach, there are a number of shortcomings limiting integration, including:
- As a temporal model, the data structure and decisions made at lower levels have much higher degrees of fidelity and granularity than higher level systems. Because of these differences in data models, if all information flowed through from the bottom to top, higher level systems would be quickly overwhelmed. Subsequently, only limited amounts of data actually flow.
- Since different systems, at different levels, have different organizational owners, there has been a homogeneous adoption of systems, i.e. there has been broad adoption of ERP, PLM, and Plant Automation systems but limited adoption of MES.
- Due to some systems that reside on plant networks (like data historians or HMI/SCADA) and some systems that reside on enterprise networks (like ERP and PLM), there a number of security concerns between tight integration between the different networks
- Because so many end-user companies have pursued tight integration strategies across the levels and some vendors have attempted to pursue single vendor lock-in at multiple levels, there has been a proliferation of integration standards, many of which are still proprietary.
Next Generation Manufacturing System Architecture
As described in the Porter and Heppelmann article, the Internet of Things is a transformative set of technologies that will change products, operations, and service delivery. To capture the value of the IoT in an industrial setting, manufacturers need to deploy a new technology stack, an IIoT Platform.
As companies deploy IIoT Platforms, it will have a number of impacts on traditional systems and architecture.
- First, many legacy system providers like ERP, PLM, and MES vendors will begin to re-platform legacy applications onto IIoT Platforms; think SAP on HANA, GE on Predix, or PTC on ThingWorx.
- Second, we will see the lower levels of the model converge to enable Smart Connected Assets that are delivered to Smart Factories as plug and play; think selling compressed air instead of air compressors or selling holes instead of drills.
- Third, and most importantly, a new set of consumer-grade lightweight applications that are IIoT enabled will begin to span the entire model. This enables data from anywhere to anywhere and workflows that move across the entire value chain; think closed-loop quality or capable to promise.
It is truly an exciting time in the manufacturing technology market place. Not since almost 20 years ago, when many of these original legacy systems were implemented, has there been so much innovation, opportunity, and momentum for investment and creating new business value.
Over the coming years, we expect to see a dramatic increase in innovation among manufacturing organizations. For many companies this is taking the form of pilot projects, where companies are beginning to use internet technologies to remotely monitor assets, raw materials, production operations, and finished goods inventories across the global plant network to enable new levels of production visibility, optimization, and asset reliability. As these innovations and pilot projects begin to emerge as broadly deployed best practices, the industry will start to see the emergence of business model transformation and the visions of Industrie 4.0 and Smart Manufacturing will start to become a reality.
This is the fifth installment in a series of guest posts by leading industry analysts covering topics found in the new Harvard Business Review article, How Smart Connected Products are Transforming Companies, co-authored by PTC CEO, Jim Heppelmann, and Harvard Business School professor, Michael Porter.