the next wave of digital transformationmailings.wobi.com/2020/wos/2020-wobi-digital-v6.pdf ·...

THE NEXT WAVE OF DIGITAL TRANSFORMATION

Michael E. Porter Harvard Business School

November 2020

2 COPYRIGHT 2019 © MICHAEL E. PORTER AND JIM HEPPELMANN

Machine

Advantages:

• Physical power

• Consistency

• Resistance

to harsh environments

• Calculating power

Human

Advantages:

• Ideation/Creativity/

Innovation

• Broad sensory pattern

recognition

• Complex

communication

• Sophisticated

sensorimotor skills

MACHINE VERSUS HUMAN ADVANTAGES

Digital Advantages: • Calculating Power

• Data Processing

• Artificial Intelligence


1800s 1960s 1990s

Mechanical Products & Manual

Processes

Value Chain Automation

Value Chain Dispersion and

Integration

Smart, Connected Products (IoT)

IT automates processes and

information collection and

analysis of activities within the value chain

The internet enables coordination and integration across the value-chain,

across geography, and with customers

and business partners

IT is embedded in products themselves,

expanding the way products create

value and shifting the nature of competition

Products were mechanical/

electrical, and information

processing and storage was manual

2010s

WAVES OF DIGITAL TRANSFORMATION


SMART, CONNECTED PRODUCT TECHNOLOGY STACK

Identity &

Security

External

Data

Sources

Network Communication

Product Data Database

Application Platform

Rules/Analytics Engine

Digital Twin

Product Hardware

Product Sensors and Software

Digital

Business

Systems CONNECTIVITY

PRODUCT CLOUD

PRODUCT


NEW CAPABILITIES ENABLED BY SCPs

Sensors and external

data enables monitoring:

• Product location

• Product operation

• Product condition

• Surrounding environment

Software embedded in

the product or cloud

enables:

• Expanded and remote

control of products

• Unprecedented

customization and

personalization

• Digital user interfaces

Algorithms and

analytics can optimize:

• Product operation

• Capacity utilization

• Diagnostics, allowing

for predictive service

and repair

The combination of other

capabilities enables:

• Autonomous operation

• Autonomous adaptation

and personalization

• Self-diagnosis and service

• Self-coordination with other

products and systems

1. Monitoring

2. Control

3. Optimization

4. Autonomy

COPYRIGHT 2019 © MICHAEL E. PORTER AND JIM HEPPELMANN

EXPANDING INDUSTRY BOUNDARIES: PRECISION AGRICULTURE

Smart Product

Smart, Connected Product

Product System

System Of Systems Product

Weather Data System

Tillers Planters

Tractors

Farm Equipment

System

Combine Harvesters

Irrigation System

Seed Optimization System

Farm Equipment System

Precision Agriculture

System Platform


+ Shift rivalry away from

price

+ SCPs and systems subsume

functions of other productsThreat of Substitute

Products or Services

Rivalry Among

Existing Competitors

Bargaining

Power of

Buyers

Bargaining

Power of

Channels

Bargaining Power

of Suppliers

+ Less dependence

on mechanical

components

+ Expanded opportunities

for differentiation,

segmentation, switching

costs

+ Reduced

dependency

on channels/

service

partners

EFFECT ON INDUSTRY COMPETITION: OPPORTUNITIES

+ Higher barriers to entry

+/- Greater visibility of

customer value

+/- New product-as-a-

service business

models support

recurring revenue (but

must be renewed)

Threat of New Entrants


- Higher utilization and product sharing can

reduce unit volume

+ Shift rivalry away from price

+ SCPs and systems subsume functions of

other productsThreat of Substitute

Products or Services

Threat of New Entrants

Rivalry Among

Existing Competitors

- Add features customers

won’t pay for

- Higher fixed costs increase

discounting

Bargaining

Power of

Buyers

Bargaining

Power of

Channels

Bargaining Power

of Suppliers

+ Less dependence

on mechanical

components

- Greater power

of IT vendors

+ Expanded opportunities

for differentiation,

segmentation, switching

costs

+ Reduced

dependency

on channels

/ service

partners

EFFECT ON INDUSTRY COMPETITION: CHALLENGES

+ Higher barriers to entry

- New entrants can leapfrog

+/- Greater visibility of

customer value

+/- New product-as-a-

service business

models support recurring

revenue (but must be

renewed)

- Can enter without a product

- New entrants from systems of systems


Which product capabilities to pursue?

Functionality embedded in

the product vs. the cloud?

Open or closed

system?

Technology development: internal

or outsource?

What data to capture? Disintermediate distribution or service channels?

Change the

business model?

Sell data to

outside parties?

Expand product

scope to systems?

6

9

7

8

10

5

2

4

1

3

SCP’S TEN NEW STRATEGIC CHOICES FOR MANUFACTURERS

How to manage data rights, access,

and security?


ANALYTICS DIGITAL

TWIN

Smart, Connected

Products

SCPs ADVANCE THE CAPABILITY OF MACHINES


* IDC's Digital Universe study, 2014

DATA GROWTH* (ZETTABYTES)

2013 4.4

2015

8.5 2017

16.4 2020

44.0

IOT

ENTERPRISE

WEB

SOCIAL

?

THE EMERGING CONSTRAINT

DELUDE OF OPTIONS

AND CHOICES


Smart, Connected People (AR)

Delivering digital information,

capabilities and choices to users and workers in context. Brings

humans into the digital age

2015s

WAVES OF DIGITAL TRANSFORMATION

1800s 1960s 1990s

Mechanical Products & Manual

Processes

Value Chain Automation

Value Chain Dispersion and

Integration

Smart, Connected Products (IoT)

2010s


TODAY’S INTERFACES SEPARATE THE PHYSICAL AND DIGITAL WORLDS


A set of technologies that superimposes digital

data, images and control options onto a human’s view of the physical world.

WHAT IS

AUGMENTED REALITY (AR)?


AR INTEGRATES DIGITAL INTO THE PHYSICAL INTERFACE


SMELL TOUCH HEAR SEE TASTE

HOW HUMANS ACCESS AND PROCESS INFORMATION


ANALYTICS

HOW SCPs AND AR WORK TOGETHER

SMART CONNECTED

PRODUCT AR EXPERIENCE

Control/Optimize

Sensor Data

Interact

Visualize or Instruct/Guide

DIGITAL

TWIN

Computer Vision

Performance Metrics

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TEMP.

16KG

WEIGHT

V2


THE NEW PRODUCT CAPABILITIES WITH AR

+ VISUALIZE INSTRUCT/GUIDE INTERACT SIMULATE

Enhance the user’s ability

to understand the

physical world by

overlaying relevant

real-time digital

information, or possible

choices and future states

Train or guide users to

perform tasks via

overlaying digital data

and instructions, or

enabling real-time expert

guidance

AR as an interface

enabling control of the

product, via overlaid

graphics or natural user

interfaces such as voice

commands, gesture

control, or sight tracking

Where needed, virtual

reality adds a fourth

capability to overcome

practical constraints

such as distance, time,

size, and hazardous

environments

AR substantially enhances the capabilities and impact of smart, connected products


ANALYTICS DIGITAL

TWIN

Smart, Connected

People

AR ADVANCES THE CAPABILITY OF WORKERS


IMPACT OF AR ON COMPETITION

Improving

Productivity in

the Value Chain

Differentiating

the Product

21 Copyright 2019 © Professor Michael E. Porter 20190319 – Golden Marketing Conference

AR and Product Differentiation


[VALUE]

[VALUE]

[VALUE] [VALUE]

[VALUE]

Marketing / Sales

Manufacturing / Operations

Service / Support

Training Design

ADOPTION OF AR ACROSS THE VALUE CHAIN

Survey of PTC customers, FY 2019 Q1-Q3. n = 78

• Guided Work Instructions

• Service Inspection & Verification

• Remote Expert

• Customer Self-Service

• Knowledge Capture & Transfer

• Just-In-Time Training

• Expert Coaching

• Safety & Security Training

• Collaborative Design Review

• Fast Product & Component Lookup

• Augmented Design Review

• Maintenance Work Instructions

• Operator & Assembly Work Instructions

• Augmented Operator Manual

• Virtual Product Companions

• Augmented Brand Experience

• Interactive Consumer Products

Marketing and Sales Experience

Customer Self-Service


Logistics Guidance

Remote Expert Support

Vuforia Expert Capture_Knowledge Transfer_PPT.mp4

Manufacturing Knowledge Capture

Vuforia Expert Capture_Just in Time Training_PPT.mp4

Manufacturing Knowledge Transfer


3

4

5 1

2

AR REQUIRES ADDITIONAL STRATEGIC CHOICES

What is the range of AR opportunities, and in what sequence should they be pursued?

Product Differentiation

Where will AR have the greatest impact on cost reduction?

Should the company make AR design and deployment a core strength, or will outsourcing or partnering be sufficient?

How will AR change broader communications with stakeholders?

Which Opportunities?

Shifting Communications Model

AR Talent and Resources

How will AR reinforce a company’s product differentiation?

Operational Effectiveness


Smart, Connected

Products

OPTIMIZING THE WORK OF MAN AND MACHINE

ANALYTICS DIGITAL

TWIN

Smart, Connected

People


CLOSING THOUGHTS

• The Digital Transformation has enabled a new, building set of capabilities that have dramatically increased the efficiency of machines and products, as well as people

– Enabling more effective training and guidance to address shortage of skilled front-line workers

– Enhancing worker productivity through better collaboration with machines

– Counterbalancing the shift to automation by empowering human workers

• Both IoT and AR change the competitive environment, requiring new strategic choices and organizational models. For example:

– What product capabilities to pursue?

– Change the business model?

– What business are we in?

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