Sustainable competitive advantage in factory automation

In their white paper Business Models for Smart Machines, Schneider Electric argues for machine builders to think about creating sustainable competitive advantage for their organisations. They need to do more than simply adopt the latest in technology from their suppliers and develop new business models. The paper serves to stimulate the reader by considering different approaches to value creation.

There are the innovation drivers for every vendor of automation products seeking recognition as leaders or challengers. But the key question for the market of automation is not who is first in developing and providing all the nice concepts and technologies. It is about creating and combining them in the right way and making them into new revenue streams.

Achieving competitive advantage can be through increasing operational efficiency. But to sustain this, a better way is through strategic uniqueness. Companies focusing on operational efficiency face growing competitive pressure from very different sides. This puts existing business models into question.

New business, new values

Blurring boundaries between products, interoperability with connected systems and services is a start. For example, the development of new smart products either digitally enhanced like expanded sensors and actuators. Similarly, the use of augmented reality, virtual reality systems and artificial intelligence. Markedly, complementary intelligent services that increase value of the complete offer for customer perspective are also important.

For many years business models in automation have been very similar, but existing business models use assumptions that may become invalid with IoT. New technologies, new requirements, transformations and new business models will come with manifold impact. But there are also many exciting opportunities for new business models which can increase the attractiveness of the complete offering.

The value of data

The value of data seems to be clear, but what is the best way to turn value into revenue? A link between data and business is the idea of data service platforms. For example, to have access to a platform that shares production process data from connected companies. To then get them analysed by data specialists who can propose recommendations to optimise the process and machine configurations. One way of enhancing this network could by adding different partners. However, new business models do not necessarily mean new cash flow for the machine builder.

Sustainable competitive advantage

A sustainable competitive advantage is one that is not easily duplicable or surpassable by the competitors. To avoid competing only on price level or functional level of a machine need a more intensive analysis of the users’ problems. These may include reduction of the Total-Cost-of-Ownership (TCO), CAPEX-TO-OPEX transformations, investment budgets.

More and more machines are not sold but provided as a service (Machine-as-a-Service). Most things can be a service, including: platforms; machines; virtualised hardware; software; data etc. One idea is to outsource the technical responsibility, then to compensate it with either a low regular payment or a pay per use to the provider of this service.

Should automation suppliers offer Machine-as-a-Service (MaaS), or is it something for OEMs to manage? MaaS requires a profound transformation of the of the companies in the chain. Markedly, self-understanding the machine builder, machine service and financing specialists and consequence implications.

Driven by Industry 4.0 and IoT, the big data analytics wave is coming. This kind of analytics is entering the smart factory but in support of fully automated decisions. In this way a smart factory will be automated based on smart algorithms and machines communicating with each other.

Before creating new technologies, machine builders must think about how to create the right values to be also able to sell it. But in the history, there were many examples, that being the better on the market is much more sustainable business.

All the technology required for “Industry 4.0” is available today already. Industry 4.0 can is more than an innovation driver for new businesses that are not exploited today, than an innovation driver for technology. Assembling these existing technologies with the right business models, will profit from Industry 4.0.