Accenture believes it can broaden the digital conversation, and help industries unlock value in their respective sectors, with its newly coined umbrella term Industry X.0
In today’s digital age, terms like the internet of things (IoT), industrial IoT (IIoT) and the fourth industrial revolution (Industry 4.0) are being bandied about by just about everyone. These terms, which not many understand, aim to underscore and capture the disruption and transformation that companies and industries are experiencing with the advent of newer technologies like artificial intelligence, data analytics, blockchain, 3D printing, virtual and augmented reality, quantum computing, robotics and automation.
Consulting firm Accenture Plc believes it can broaden the digital conversation, and help industries unlock value in their respective sectors, with its newly coined umbrella term Industry X.0. Is there a need, however, to introduce another term like Industry X.0, which Accenture has trademarked, rather than using the existing Industry 4.0 term, which many experts swear by?
In an interview on 15 January, Eric Schaeffer, senior managing director at Accenture, said he believes there is good reason to do so. “Industry 4.0 is manufacturing-centric; it’s on the shop floor. Industry X.0 does not only focus on manufacturing industries. The word digital has a technology connotation to it. Industry X.0 is slightly broader. It is how digital is going to transform the industry," he explained.
Schaeffer, who has also written a book Industry X.0—Unlocking Value in Industrial Sectors, believes that digital is going to change the way companies operate, and will influence all functions like research and development (R&D), manufacturing, business support, human resources (HR) and finance. In the near future, companies will not sell a product or service but will be rewarded on outcomes that are based on transactions, according to Schaeffer.
He insists that companies should begin using “digital-artificial intelligence and analytics on the shop floor, which will allow them to unlock a lot of value that’s still trapped in the enterprise". Citing an Accenture and World Economic Forum (WEF) study, released in January 2016, Schaeffer argued that industrial manufacturers could contribute to unlocking an estimated $100 trillion in value over the next seven years “if they managed to leverage the industrial internet of things (IIoT) and digital to vastly improve health and safety, employment, income, industrial value creation, resource efficiency and profits within their operations and ecosystems."
Accenture, according to Schaeffer, also believes that customers can add 300-700 basis points to their operating margins by adopting digital technologies. One basis point is one-hundredth of a percentage point. Moreover, “70%-80% of this Ebitda (earnings before interest, tax, depreciation and amortization) expansion is not on new business model. This is on how you leverage digital in your customer interactions, or in your day-to-day operations," he adds.
According to Schaeffer, every industrial manufacturer must master at least six digital capabilities. First is an understanding of what software is all about. “Products are going to become increasingly software- and digital-enabled. Many of our manufacturers are mechanical engineers who don’t know much about software. It is a fundamental change for them," he points out.
He cited the example of German industrial giant Siemens AG, which “reached 75% digital automation in one of its plants, and effectively reduced its defect rate below 12 items per million produced, while increasing plant output 8.5 times with little change in employment."
Accenture, according to Schaeffer, also believes that customers can add 300-700 basis points to their operating margins by adopting digital technologies
The second capability is understanding analytics, which “is very critical. Our clients sit on data that they never use. They have implemented SAP but they never use the data", he adds. The third capability is what Accenture terms a “Unified PLM (product lifecycle management) strategy that involves integrating the product life cycle, software life cycle and experience life cycle. During digitization, hardware, products, shop floor machinery and other production assets will age more slowly than the software."
“Integrating the three is important because they work at different paces," explained Schaeffer.
Agile manufacturing is the fourth capability that “encloses the loop between manufacturing and engineering," he added. It can be achieved by adopting industrial automation wherever possible to increase shop floor speed and flexibility, he said.
The fifth capability revolves around what Accenture calls “as-a-service" and “it’s really focused on the Cloud. So if you’re becoming a service company, it needs to be cloud- enabled," said Schaeffer. For instance, a couple of years back, French tyre manufactuer Michelin set up a “specific unit—Michelin Solution—to move from products to services and their first service was to sell tyre as a service", said Schaeffer. “That means, if you have got a fleet with trucks, you don’t buy the tyres. You pay them by kilometres and Michelin will guarantee that wherever your truck is you have the perfect set of tyres depending on the season in winters. When your truck is not on the road you don’t pay, so that’s moving from a product to a service," he explained.
Last, but not the least, the sixth capability is all about “ecosystems and open innovations". Clients cannot have all the capabilities internally; they need to partner with others, Schaeffer said. The first reason is that innovation does not always come from the inside of the company. The second reason is that consumer expectations, or enterprise expectations, change rapidly. “You don’t have the time to build the capability internally. You need to take it where it is and assemble it. So building an ecosystem is important. Many of our clients don’t know how to do this," he said.
On 5 January, for instance, automotive supplier Faurecia and Accenture signed a five-year deal to jointly develop products and services for connected and autonomous vehicles. “At CES (Consumer Electronics Show) 2018, we demonstrated the first digital cockpit in the car, leveraging Alexa from Amazon and a bit of our artificial intelligence. This is how digital is transforming the product.
Alexa is pretty simple in terms of a virtual assistant. What we showcased at CES is that we have an Alexa environment for all persons seated in a car. If you have got four people in the car, they will have four different Alexa environments—one which helps the driver stay awake, assisted driving and focuses on the driving capabilities and then for the passengers, they are more focused on entertainment, helping them connect to their homes but they are independent environments. This had never been done before and so here it shows the power of digital because it creates a very different experience."
Implementing Industry X.0, though, is easier said than done. “More than 80% of the executives that Accenture interviewed across the world said that digital would transform their sectors within the next five years. But only 13% said that they had a strategy to address this. So, it just shows that many of the manufacturers are a bit lost on what to do," Schaeffer pointed out.
There is no standard digital road map, he said, adding that it was “a lot about experimenting; it’s a lot about failing and when you fail that is a success because you have earned from it. Many engineering companies don’t like to fail, so they don’t like to experiment".
Finally, concluded Schaeffer, if the digital vision does not come from the leadership of a company, it will be “extremely difficult for the enterprise to transform itself. It has nothing to do with just digital, it is all about change management".
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