FIVE STEPS TO MASTER
DIGITAL TRANSFORMATION
Table of Contents EXECUTIVE OVERVIEW: EMBRACING DIGITAL TRANSFORMATION
Executive Overview: Embracing It is still early innings for the Industrial Internet of Things (IIoT), and the fourth industrial revolution has
Digital Transformation ............................... 1
barely begun, yet organizations without a digital strategy are already falling behind. This trend toward
IT/OT Integration and Digital Transformation .........1
more connectivity, data, computing, and technology will only grow. Enterprises that digitally transform
The process .................................................... 3
themselves will, in fact, empower themselves to take advantage of the new technologies that can help
Challenges ..................................................... 5
them achieve their business goals.
Key technologies .......................................... 6
IIoT...........................................................................................6
IT/OT INTEGRATION AND DIGITAL TRANSFORMATION
AR.............................................................................................6
To maximize IIoT project return on investment (ROI), enterprise information technology (IT) and
Robotics ................................................................................8
PLM ........................................................................................9 operational technology (OT) professionals need to work together. IT must securely pull data from OT
Conclusion: human-centric solutions ...... 9 equipment before it can process it and share the appropriate insights with OT professionals, as well
as other internal and external stakeholders. Historically, a disconnect has existed between IT and OT
in most organizations. IT and OT both innovated and added capabilities, but this was done by taking
divergent paths and by being designed in proprietary ways.
Traditionally, IT worked from the top down to deploy and maintain enterprise infrastructure/business applications, while OT worked
from the ground up, focusing first on the end device (e.g., machinery) before moving on to monitoring and control-type functions. OT
professionals rarely had to work with networked technology. The introduction of IIoT technologies unifies these efforts around the
central theme of data, so that IT can embrace newfound operational responsibilities as OT professionals become familiar with IT tools.
IIoT solutions can virtualize control systems from multiple manufacturers and converge them under a single administrative platform.
They can restrict control access to on-premise workers and transmit analytics off-site for strategic planning. But reaching the point
where all of these moving pieces come together in a real-world production environment can be messy. Many OT devices come up short
in key areas, such as interoperability and security, due to the prevalence of over proprietary protocols, in the legacy machine-to-machine
(M2M) market out of which IIoT grew. IT and OT must work together using the appropriate protocol converters and taking the necessary
security measures to both connect and protect mission-critical operations. If they can do this, it can result in a converged system that
they can update and adapt far more easily than before.
With a converged IT/OT system, IT can regulate access to IIoT tools, ensuring security. The appropriate stakeholders can then
monitor digital twins, running digital tests and simulations based on near real-time, real-world data to optimize the performance
of all sorts of assets, reduce downtime, and perform predictive analysis for failing parts. IIoT tools can also empower the integration
of other technologies, such as augmented reality (AR), collaborative and connected robotics, and product lifecycle management (PLM).
A converged IT/OT system with IIoT tools feeds into PLM software for improved data management. In a recent survey conducted by
ABI Research, when asked to rank the most desired outcomes of applying emerging technologies to manufacturing organizations,
respondents ranked “improved data management” in the top three more than any other outcome, as seen in Chart 1 below.
Chart 1
Worker productivity 23% 8% 2%
Improved data management 19% 13% 10%
Streamlined processes 19% 4% 8%
Asset and resource tracking 15% 13% 8%
Improved facility and personnel safety 8% 19% 10%
Ability to analyze data for operational insights 6% 2% 6%
Alignment within corporate governance models 4% 21% 12%
Workflow efficiencies (time, cost-savings) 2% 6% 2%
Better tracking of KPIs 2% 6% 25%
Identify new business models 2% 6% 19%
Cybersecurity threat detection 2%
Rank 1 Rank 2 Rank 3
Source: ABI Research
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To achieve this level of IT/OT integration and make the digital transformation, ABI Research provides strategic guidance in the form
of the following step-by-step framework, which is explained in greater detail below:
• Appoint a chief digital officer (CDO).
• Train cross-functional teams.
• Align business goals.
• Choose partners that accelerate innovation.
• Scale applications.
THE PROCESS
Enterprises cannot rely on existing infrastructure, systems, and processes to implement new digital technologies. They need to take
steps to undergo a digital transformation to stay agile and competitive. Strengthening human and business relationships, internally and
externally, will play a key part in this ongoing process. There are five tenets of the digital transformation journey:
1. Appoint a CDO
First, companies must make an individual leader responsible for the transformation. This person will not simply issue man-
dates or orders, but instead will oversee a strategy and facilitate coordinated activities between departments. The CDO
should manage the relationships between operations and OT professionals and the pure IT professionals. This person will
track the progress of IIoT and other digital projects, make recommendations to the chief executive officer (CEO) on what
applications and technologies to scale, and own ROI success metrics (for a given project, application, or technology), in
addition to more customary profit and loss (P&L) responsibilities.
2. Train Cross-Functional Teams
Before looking at the bottom line, the CDO first must create and train cross-functional teams with both IT and OT profes-
sionals. These people need to work together every day to understand each other’s goals and challenges. This will increase
communication and the exchange of ideas, and it will help business units better understand how to use IIoT platforms
and IT systems. These teams will serve as joint project planners and conductors. This layering of expertise can also act as
a catalyst for new, hybrid roles and titles (e.g., DevOps = development and operations; Full Stack Developer = front-end,
middleware, and back-end development). Enterprises will need to balance the top-down strategic pressure of the CDO
with the bottom-up joint project planning of the cross-functional teams, as displayed in Figure 1 below.
Figure 1
CDO
Cross-functional
Teams
Source: ABI Research
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3. Decide on Business Goals
Many enterprises make the mistake of skipping straight to this step, but a company should not set expectations based on
outcomes for digital projects until the stakeholders understand each other’s goals and challenges. IT professionals need
to understand the needs and obstacles to implementing a new technology, and OT professionals need to understand how
it will help and change how they do their jobs. Once they understand each other, the cross-functional teams will figure
out the real potential business outcomes of new technologies and perform their joint project planning duties much more
effectively. From there, they can set realistic business goals for proofs of concept (PoCs) of digital technologies.
Consider the availability of advanced analytics, codeless content creation, and the broader machine learning/artificial
intelligence (AI) suite, for example. This first led companies to ask: “How can we leverage analytics to automate process
(software)?” Then it became: “How do we apply AI to rethink product (hardware)?” That was followed by: “How do we op-
timize for success throughout the automating process?” Here, we see that an overly narrow purview of the role of new
(and, therefore, often not always fully understood) technologies can disguise a strategic decision (one with cross-company
impact) as tactical; e.g., if AI were viewed as a feature enhancement, rather than a fundamentally new way of doing things.
The scenario becomes more paradoxical with performance, particularly when applying past metrics to new products,
projects, or processes.
4. Foster Collaboration: Choose Partners that Accelerate Innovation
At this point, the cross-functional team leaders and the CDO can meet with digital technology suppliers and potential part-
ners. Most enterprises go into their first meeting with an IIoT supplier with no plan beyond “I’ve got to get a piece of this
IIoT stuff,” or (only slightly better) “We need some predictive analytics.” Also, IT and OT leaders often never meet until this
time. The previous three steps should prevent these situations.
Instead, leaders who follow these steps should know what they hope to accomplish and understand all the stakeholders’
challenges when they walk into these meetings. The meetings themselves should result in partnerships between the end
users and companies that can help them solve their problems and accelerate innovation. This means partnering with
companies that can provide an open IIoT platform that helps enterprises implement advanced, predictive analytics and
third-party apps, and that can support transformative technologies, such as digital twins, AR, robotics, and PLM. It should
also have protocol conversion and data ingestion capabilities to breach data walls and bridge IT and OT. Enterprises need
to choose partners that will both help them overcome the basic hurdles to get connected and prepare for the next wave
of transformative technologies.
5. Scale Applications
The nature of work performed and the needs of the situation (urgency, ability, availability) are vital determinants of success
in the planning and prioritization process. Enterprises need to adapt their IT architecture to support IIoT business cases.
This means integrating the IIoT platform with enterprise applications, infrastructure, and security, and then scaling on a
single, unified platform.
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In the hardware market, the design of a manufactured product is generally demarcated by three phases of development
after the completion of conceptual and or prototype work:
• Engineering Validation Test (EVT): Can several units that operate as expected and meet all functional
requirements be built?
• Design Validation Test (DVT): Can several units that operate as expected, meet all functional requirements, and
are aesthetically acceptable be built?
• Production Validation Test (PVT): Can many units that function as expected, meet all functional requirements,
and are aesthetically acceptable be built with industry-leading manufacturability?
In software feature engineering, teams often build an app, deploy it to a limited number of servers, and then check for
obvious issues before proceeding with a larger rollout. This introduces the chance for human error and the potential for
bias (regardless of intent). Although most companies run automated tests to check code for glaring errors, the sprawl and
complexity of today’s connected endpoint infrastructure makes the jump from pilot to production environment that much
bigger. This is where the advent and layering of microservices can end up interacting with each other in unexpected ways.
It is also where AI can be a big help. Aligning on key performance indicators (KPIs) beforehand, regardless of AI maturity, is
essential; if an app hits those KPIs and promises ROI, scale and implement that app company-wide.
CHALLENGES
Following the steps above will not happen without facing certain challenges. This section examines the challenges that act as inhibitors
or barriers to progressing in a digital transformation.
Culture Changes:
Increasing inter-departmental communication for joint project planning clashes with the siloed cultures of many enterprises.
Some employees might feel as if the new CDO or liaisons from other departments want to tell them how to do a job that they have done
without help for years. The CDO and cross-functional team leaders must communicate that digital technologies will make jobs easier
and more productive.
Confusing Ecosystem:
The digital technology ecosystem evolves every day. Hundreds of companies have built pieces of software that they call “platforms.”
Perhaps the “platforms” that most suit that word fill the role of an application enablement platform (AEP), which provides a solution for
importing data and feeding it into applications, but even AEPs do not do everything. Enterprises’ large network of partners need to help
implement transformative technologies.
Skills Gap:
The chain is broken. We need people skilled in practice as much as those skilled in theory to help prepare professionals for the available
jobs, as well as to give companies a tool to better qualify and evaluate candidates. Part of this has to do with skills development; another
has to do with the time (and cost) of employee placement, which is and will continue to be a fairly universal challenge (and differentiator)
in the digital transformation story. Digital transformation experts and data scientists come only at a premium. Enterprises with this skills
gap must both hire more people who know how to implement digital technology and partner with suppliers that will offer consulting and
training.
Outdated Networks, Infrastructure, and Software
Many enterprises struggle to extract data from legacy equipment. To extract these data and build networks between devices from
multiple original equipment manufacturers (OEMs), they need to work with partners that have experience in protocol conversion and
breaching data walls. They also need to make sure any networks that connect legacy equipment have firewalls in all the right places.
Outdated software presents security risks, as demonstrated by North Korea’s WannaCry cyberattack.
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KEY TECHNOLOGIES
IIoT
The ability to extract precise, high-quality data allows companies to get more value from operational assets while improving the lifespan,
cost profile, and maintenance schedule of component systems. Connecting assets and operations through the IIoT will empower enter-
prises to monitor performance, status and operations, create digital twins and improve maintenance and repair processes. Advanced
IIoT platforms can live stream data off machines and systems, which end-users can feed into simulations and digital twins. Sensor data
on IIoT platforms provide the building blocks for digital twins. Machine-learning algorithms, simulation software, and reality-based CAD
models all depend on accurate sensor data on integrated IIoT platforms. The resulting analysis drives action to orchestrate the ma-
chines and systems and provide visualizations to help employees make better decisions.
PTC has digital twins capabilities to contextualize and structure data, analysis and results on its Thingworx platform to help build ap-
plications for decision-making. PTC acquired Coldlight in 2015 for USD105 million for its machine learning capabilities. This empowers
its digital twins to optimize model selection for predictive analytics on the Thingworx IIoT platform.
ABB Ability, introduced in March 2017, is ABB’s solution set for IIoT hardware, software, and services, bringing together its experience in
industrial automation with connectivity, cloud assets, digital twin technology, and AI. ABB boasts 180 solutions within the Ability portfolio
and communicates a core benefit of Ability being built on a common technology platform. While claiming extensive domain expertise,
ABB believes one of its differentiators is being masters of the control loop from SCADA and DCSes to control room technologies, par-
ticularly in robotics, marine, and utilities markets. ABB claims it runs 70 million connected devices and 70K operational control systems.
Manufacturing is an important IIoT market for Bosch. It test-drives all its IIoT solutions at its own factories, such as a track and trace so-
lution. It also has developed analytics tools that combine manufacturing data from quality, maintenance, and production line utilization
systems with the IIoT to address individual customer problems.
Schneider Electric is like other industrial firms in many ways. Its IIoT products are targeting its existing base of customers for stickiness
and additional revenue. It has added cloud services to take advantage of big data opportunities, particularly for analytics and services
across a customer’s global footprint of assets. It has also supplemented new IIoT data generation capabilities with new software and
services packages for insight generation and operations management.
Where it is a bit different is in its aggressiveness in adding connectivity and sensing capabilities across its product lines, either through
retrofit or new product enhancements. Schneider Electric also has one of the most extensive industrial communications portfolios for
IIoT connectivity, including Ethernet networking terminals, fieldbus and industrial Ethernet networking terminals, and 900/2400 MHz
wireless radio gateways.
AR
Companies started seriously investigating AR in 2017. Already, AR in smart glasses or on mobile devices can display information in
context for field service, maintenance, repair, and telepresence. It will display CAD data, and as AI learns and matures, it will recognize
damage- or display-integrated digital twin data and automatically load repair instructions within sight. In January 2016, PTC launched the
full commercial package of its AR program, and has 100 clients, including Caterpillar, which are using it in the production and operation
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of heavy equipment, electronics, and medicine. It currently runs on a variety of phones and tablets, with factories attaching the tablets
to an adjustable arm, but PTC is working with Microsoft to integrate the software package with HoloLens, using hand gestures and voice
commands to control it. PTC also has a Vuforia AR software development kit (SDK), which ODG and Vuzix are trialing. Figure 2 below
shows a Vuforia AR image of a Caterpillar machine.
Figure 2: Vuforia AR Image of a Caterpillar Machine
Source: PTC
Manufacturing is all about yield, output, and optimization, yet roughly 80% of manufacturing failures and defects are due to
human error. Wearable quality assurance software for technicians can improve accuracy by providing relevant and more accessible
information at the time work is performed; it can also alleviate geographical constraints imposed by in-person inspections. According to
Vital Enterprises, a CA-based startup that provides smart glasses-enabled quality assurance software for field service technicians, even
simple AR applications, such as those that enable glanceable work instructions, can reduce technician task completion times by 10%,
decrease first-time errors by 5%, and catch 20% more errors by auditing photo work logs. This means faster throughput, at greater
accuracy, and with minimal re-work. A lot of times, it is just a matter of educating the employees who are doing the work—not just
managers and P&L owners—to get the necessary buy-in.
The Lee Company, a US$160 million dollar contracting, facilities, and home services firm, started a pilot project with Vuzix (M100 smart
glasses) and XOEye in 2014 to trial telepresence and remote guidance-style solutions in a field service setting (both Vuzix and XOEye
are included in the Vendor Landscape section below). Following a successful pilot program and regular “brainstorming sessions” with
XOEye to develop a custom software application for HVAC field service professionals, Lee issued 150 pairs of the Vuzix M100 smart
glasses to its technicians. In a typical workflow, this allows employees outfitted with HUD hardware to capture photos, as well as videos
on-site, and upload that information to the service ticket that initiated the job. Technicians are also given the option to watch a training
video or record one of their own for future use. If problems arise, a telepresence-style call to Lee’s “triage center” can be initiated for
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assistance. The final step for technicians is to record a recap video for the customer that outlines and explains the service provided.
Today, Lee has 800 Vuzix M100 devices in the field, and after just 6 months, saw a US$20.11 return for every US$1 invested by reducing
field services cost.
DHL has also started using AR apps in its picking process. It uses AR to help employees navigate through warehouses to find the correct
packages quicker. It has started to scale this app company-wide and plans to launch more PoCs in its warehouses.
ROBOTICS
With robotics, function-based designations (e.g., “fulfillment”) can be relegated to software (but driven by operations); “preferred quali-
fications” become minimum functional requirements; and productivity KPIs start to revolve around utilization as much as they do
throughput. While public-facing pilot projects in retail, home care, travel, and tourism put Pepper-style solutions (Softbank Robotics)
front and center, most of today’s robotics-based automation implementations go beyond this line of sight to include: autonomous
travel, human-less fulfillment, unmanned data centers, semi-supervised and assisted automation, manufacturing and logistics, etc. This
is where commercial and industrial robotics have started to take the next step, incorporating more AI and machine vision.
By starting with 3D CAD software, engineers can experiment with a variety of new parts and materials to design robots to do a variety
of complex tasks, as seen in Figure 3 below. Robots can work on farms, maintain ships, assist in food production. and work side-by-side
with humans. It only takes the right design and the right algorithms.
Figure 3: Robot performing a new task
Source: PTC
ABB offers an interesting IIoT service for its robotics customers. Robots with either cellular radios or Ethernet ports deliver
machine health and operational data to applications that analyze them and alert service personnel of operational quality or impending
robot failure.
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PLM
PLM brings together data, people, processes, and enterprise systems to manage product data from inception through design,
engineering, and monitoring in the field. It serves as a backbone for all of these other technologies and essentially gets the right data to
the right stakeholders, such as for equipment manufacturers wanting to close the feedback loop between sales, marketing, and R&D.
These data can include product data from design changes and 3D CAD data to maintenance records. These resources provide a solid
foundation for other transformative technologies by enabling engineers, operators, and other manufacturing and industrial process
professionals to systematically detect (track), inspect (trace), and rectify (troubleshoot) potential failures.
Many enterprises have scaled or plan to scale PLM solutions, including Staples Solutions, the European branch of the office supply and
services company. Staples Solutions uses PLM to accelerate product development and innovation.
CONCLUSION: HUMAN-CENTRIC SOLUTIONS
Historically, people have made data decisions. Now, data can make people decisions.
Following the step-by-step process outlined in this report to implement technologies will help enterprises move through their
digital transformation. Clearly, an enterprise never finishes digitally transforming, but it must stay agile and be prepared to adapt to
newer transformative technologies in the future. Most importantly, all enterprises should prioritize customers and employees above all
other stakeholders.
Luckily, the technologies highlighted in this report make people their central beneficiaries. These solutions exist to make tasks
easier, not to steal jobs. The IIoT provides information to help humans make better decisions and catch equipment issues before they
cause unscheduled downtime. AR displays information in context to help humans do more work faster and more effectively. Robots will
perform some tasks previously assigned to humans, but they will also work side-by-side with humans, requiring humans to design and
program them. Finally, PLM exists to get the right data to the right humans to help them do their jobs. Digital transformation ultimately
benefits human employees.
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Published April 27, 2018
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