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:
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.
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.