New business from BIG DATA

Digitalisation has radically changed the old idea that the services cannot be stored or transported, they are instantly perishable, and they come into existence at the time they are bought and consumed. More and more services can be exported to global markets, just like physical products. The Industrial Internet will radically change the success factors of industrial firms, giving birth to companies that revolutionise the terms of competition – just as the Internet made Google and Amazon possible. In January 2015, the Economist stated “Manufacturers must learn to behave more like tech firms.”

Where can success factors be found in a changing business environment? How should machine and equipment manufacturers adjust their operations in order to act like technology companies? Based on cooperation between research institutes and companies, the opportunities, enabling factors and barriers to digitalisation were considered via the SmartAdvantage project. Five companies – Pesmel Oy, Chiller Oy, Huurre Oy, SW Development Oy and Delete Finland Oy – were involved; they represent different sectors and share a desire to develop new business based on digital solutions. The diverse effects of digitalisation were reviewed from three perspectives – data, technology and business. The key challenges lie in identifying customer needs and the value of services, as well as in the earnings logic and traditional and slowly changing roles within business networks.

In many cases, either an equipment supplier lacks information on delivered equipment, or is unable to benefit comprehensively from the information it gathers. This means that the development and implementation of knowledge-based services also requires the renewal and expansion of expertise, either in one’s own organisation or by networking. Because companies specialising in data analysis rarely have special sectoral expertise, long-term partnerships need to be built. Examples of cooperation that have hit the headlines include the partnership between Kone and IBM, and that between ABB and Microsoft in Industrial Internet solutions. For many companies providing expert services and software, analysing data on customer processes provides major opportunities to learn how to operate and optimise processes in a new way.

Technology has a key role as an enabler of digital business. It is also a challenge for traditional machinery manufacturers and suppliers, since digital service technologies require a vision of how the sector is developing and broad expertise in various sub-areas – such as IT and automation systems. Industrial machinery and equipment usually has a long lifecycle lasting up to decades. Careful selections of technology and platforms and a flexible approach are therefore required, when combining the diverging lifecycles of physical product and the related service solutions. Flexibility could mean building solutions in small steps, testing them together with the customer, and learning from the customer’s activities.

Change will multiply the number of opportunities available, even if challenges and obstacles emerge on the path to digitalisation. The companies involved in the SmartAdvantage project also saw opportunities in internationalisation, and new partnerships and business models. The first applications deal with the after-sales market and the development of maintenance services. This means using data gathered from machinery to reduce maintenance and downtime, identify process bottlenecks and optimise processes. Probable future trends include the development of predictive maintenance supported by various remote services and data-analytics, the utilisation of data produced by other actors, and the delivery of data for use by third parties.

This will bring change to many services and service activities. Machinery manufacturers and suppliers could learn from how tech companies use extensive data masses when creating services to their customers.. Product-service solutions could provide a substantial competitive advantage. According to a recent review by the Ministry of Economic Affairs and Employment, we have only caught a glimpse of the ways in which digitalisation will transform the world.

Helena Kortelainen, VTT and Kari Koskinen, Tampere University of Technology

See also:

SmartAdvantage project: and

Business Review published by the Ministry of Economic Affairs and Employment (in Finnish only). Services as a source of growth. No. 2 /2016.