PTC Live Global 201313 Jun, 2013 By: Nancy Spurling Johnson
Event Report: Technology is key to getting ahead of the forces driving massive transformation in the manufacturing market, says company CEO at annual user event.
"When it comes to products and services, and the relationship that those products and services create with your customers, we are in the middle of some kind of massive transformation."
Those were the words of Jim Heppelmann, president and CEO of PTC, at the company's four-day user conference and exhibition that ran through yesterday at the Anaheim (California) Convention Center. From the world where products are consumed, to customer expectations, to a product's very bill of materials, Heppelmann remarked, the manufacturer's reality is dramatically changing. In his opening keynote address at PTC Live Global 2013, an event attended by a reported 1,900, the company leader discussed seven macroeconomic forces he believes are driving this transformation.
"If you think about any one of these forces," Heppelmann said, "by itself it's a big deal. Any one of these forces could help you gain an advantage on a competitor — or put you at a big disadvantage if they beat you to it. But I would position with you that the sum of all of them is completely transformational. This is a life-or-death moment for companies to either get ahead of these things — realize that the world of the future is smart, connected, global, configurable products and try to win in that world — or perhaps get run over by new people who try to disrupt your market, your business, by getting to this concept before you."
Heppelmann addresses the crowd at PTC Live Global 2013 on Monday.
Also this week, PTC announced Manufacturing Transformation, a report by independent research firm Oxford Economics that presents much of the quantitative and qualitative analysis behind Heppelmann's seven forces. Based on input from 300 manufacturing executives, it identifies the strategies that manufacturers are adopting to transform their businesses and differentiate themselves for competitive advantage. Adjusting priorities, the report states, can enable large manufacturers to increase revenue by as much as $200 million and reduce costs by as much as $100 million. PTC is currently offering Manufacturing Transformation free to those who register.
Seven Forces Driving Manufacturing Change
Heppelmann outlined the seven macroeconomic forces that he believes are driving transformation in today's manufacturing industry — and driving his company's software-development strategy as well. (Note: A video recording of Heppelmann's presentation is available on the PTC web site, as are recordings of several other keynote talks by PTC executives and customers.)
First discussed at the company's 2012 user event, digitization means replacing 2D analog product and service information with a fully accurate virtual representation that can be easily leveraged across the value chain, from engineering to the factory floor to service technicians. Creo (PTC's line of modeling apps) can simulate and verify not only the fit but the performance of parts in their operating environments. "This is the benefit of digitization to engineers," Heppelmann said.
Digitization carries over to offer incredible value in service efficiency, Heppelmann added. For example, videos developed from 3D modeling data can show a technician how to disassemble a product step by step, as opposed to requiring that person to study and assimilate a written manual.
Technology is tearing down geographical, technical, and economic boundaries, Heppelmann told the crowd, allowing information to flow around the world instantly and opening new markets for manufacturers.
Heppelmann cited a November 2012 report by the McKinsey Global Institute, which predicted that by the year 2025, 70% of the demand for manufactured goods will come from countries that we classify today as developing countries. "We used to think that business could be local, or maybe national. Today, viable businesses need to think globally. That is 70% of market; you need to be there to fill it or someone else will."
Globalization is here to say, he said. It has already affected innovation. "The best companies approach globalization with a design-anywhere, build-anywhere, and sometimes sell-and-service-anywhere strategy."
On the other hand, Heppelmann cautioned, each region has a new rule book that can impact how products are manufactured and sold. Manufacturers must navigate governmental and non-governmental policies and industry standards related to matters of the environment, health and safety, and trade. "A strong headwind of regulation is in the way of globalization."
PTC defines personalization as efficiently tailoring products and services to accommodate regional and individual preferences. Related to the concept of mass customization, it involves single products that have a "mathematical explosion" of options that can meet most of the needs of most customers, Heppelmann said. It is "reverse innovation," he explained. "For example, when you think, 'How would I have to change my product to make it able to work in a developing nation?'"
"But you can only go so far," Heppelmann warned. "Product variability can get prohibitively expensive." On the other hand, the variability of the software that drives those products can go a lot further. He explained that a consumer might have a very limited choice of iPhone models but unlimited options to customize the phone through the apps used. "This could extend to vehicles too, for example," he said.
Products today are composed of highly integrated hardware and software that support sophisticated human-to-machine interaction, diagnostics, and service data capture, with additional value delivered through enhancements. "More and more, software defines the product," Heppelmann said. It can set apart two very similar products, making for completely different user experiences.
If you hang around a PTC executive very long, you'll likely hear him use the phrase "Internet of things." It's a reference to Internet-connected devices — often mobile — that are embedded with sensors to collect information and that are individually addressable to enable sophisticated monitoring, control, and communication. Consumers and manufacturers alike will benefit from — in fact, require — products with embedded connectivity.
It doesn't sound like a real word — Heppelmann called it an "academic term" — but servitization is a real driver of the future of manufacturing and of PTC. The company defines it as "the fundamental business model shift in which products evolve to become integrated bundles of services capable of delivering value continuously through the customer experience lifecycle." Also referred to as products as a service, servitization involves switching product ownership — that is, risk, cost of ownership, maintenance — from the consumer back to the product developer. "Most people just want the benefit" of products, Heppelmann said, not the drawbacks.
We're already seeing servitization in the consumption of music and movies, software, transportation, and even jet engines in use by an airline but owned and maintained by the manufacturer. "Why can't [this concept] go everywhere?" Heppelmann asked rhetorically. "Well, I think it probably will."
This manufacturing transformation is a great opportunity for PTC, Heppelmann concluded. "This is what our [software-development] strategy is all about. This is why we have CAD and PLM — and ALM [application lifecycle management] and SLM [service lifecycle management] technologies — because those are the building blocks to help people implement smart, connected products delivered with or as services.
"I think it's also a great opportunity for you," he told attendees, "because your companies are going through transformations, and your ability to guide your companies in terms of harnessing these technologies for constructive use is not only good for your career, it's good for your company."
About the Author: Nancy Spurling Johnson
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