On the brink of a paradigm shift

The wave of digitalization we’ve seen in the B2C field is slowly but surely moving towards industrial processes. Not only do new technologies enhance safety and productivity, the potential for new business models is immense. New kinds of services, even whole new industries, will emerge. The automation of processes is only the beginning.

Digitalization has become increasingly common in various business areas. We shop and handle our banking online. It is very rare to go to an actual bank to check ones bank account these days. If we look at the traditional world of B2B, digitalization is lagging a bit behind. I would still dare say that in material handling, in practically any industry segment, the goal is to automatize functions as thoroughly and well as possible.

Why automatize? One reason is to lower costs. Another reason is lowering risks, the chance of human error. The third reason would be improving the safety in material handling. Even though safety is a top priority, a slight chance of injury always exists when large masses are being moved around. These are key reasons why, in the material handling business, the significance of automation, digitalization and the industrial internet will grow in the upcoming years. The more production facilities can be automatized, the better the quality of the products will be. Schedules will be more reliable, downtime will decrease and risks will be lower. These are the key benefits that the industrial internet brings today, but it is just the beginning.

Where are we now?

All technology elements are there already. Equipment and machines can be equipped with sensors. A paper machine can tell the receiving crane that the paper roll is almost ready. The crane can tell the receiving roll warehouse that it is bringing the roll in. The sensor technology exists and the data can be transferred. There are a lot of different functionalities in the analytics already. The interfaces exist and they are intuitive and easy to use.

A while ago I listened to an interview of the CEO of Rovio (the company behind Angry Birds). He said that the most radical thing to happen to their business was the development of touch screens. Touch screen technology is something that we use every day, but still it is pretty rare to find touch screens in steel or paper factories. The technology exits, it’s widely used and it is only a matter of time when companies can use them in industrial environments and production processes. Consumerization has lifted people’s expectations and there’s a sense of anticipation in the air. It is now a matter of getting businesses to understand that digitalization really is the next huge opportunity.

How should companies develop their strategies regarding the industrial internet then? There are three main things to consider. The first thing is to determine how the existing and available technology could be used more widely in the functions of a company instead of just focusing on the basic ERP’s and CRM’s. Next, it is crucial to go over the basic processes and ask oneself, can we really get all the benefits out of this new technology? If the basic processes – sales, supply and maintenance – have not been automatized and there is no real visibility to the processes, then there is no sense in reading new sensor data either. The third thing would be to re-examine the business models. What is the actual service that is being offered to the client?

I would like to use the intelligent garbage bin as an example here. If the bin can communicate to the waste management company that the bin is full and needs to be emptied, the customer will surely be satisfied. The waste management company is happy, because this way it can optimize its collecting routes. The customer is also pleased, because now the bin is emptied only when full, and the customer might even pay a little extra for such a service. Everybody wins.

In order to succeed in the future, we have to welcome change

A company that is willing to challenge its business models, its value chain as well as its position in the value chain, will succeed. A company that is even willing to challenge its core business. The companies who think that because they’ve manufactured the same thingamajigs for ages and they’re the best in the business their customers will continue to praise their products without wanting anything else, they’ll have harder times ahead.

If the product or service isn’t digitally compatible, that will pose challenges for the company. A lot of companies will be in trouble if they do not utilize digitalization in their business in time. There are examples of this already in the photography industry, for instance. Start-ups are on the rise and they’re moving up fast. They can offer services that companies find easy to utilize and digitalize their own business through these services.

I dare to say that the long-term possibilities of digitalization are being underestimated, but the short-term possibilities are overestimated at the same time. The technological possibilities that might be available next year might not immediately fit the business models of every company. It might be that utilizing the full potential of existing technologies or harmonizing the communication between different sorts of sensors could take a while. But when we look further into the future, 5 to 10 years from now, it is clear just how much we underestimate the possibilities that digitalization brings.

I built our family house over fifteen years ago and installed two different phone sockets in every room. I figured that when our children would be in their teens, this would come in handy. Separate landlines to different floors, one downstairs for us parents and one upstairs for the kids. But, over the years, cell phones became more common and more sophisticated, leading up to the smartphones of today. They evolved into pocket-fitting mobile devices with numerous different functionalities (not to even mention the applications they have), the actual phone just being one of them. Who would’ve guessed back then?