When the World Bank released its Global Economic Prospects report in January this year, there was cause for careful celebration of economic growth, after a much stronger-than-expected 2017, as the recovery in investment, manufacturing, and trade continues. However, the report cited this as a “short-term upswing.” Growth in advanced economies is expected to moderate slightly in 2018, as central banks begin to remove their post-crisis accommodation and as upturn in investment levels off. It’s a reminder of how fragile global economics can actually be and why businesses need to take it upon themselves to strive for increased efficiencies and financial sustainability to immune themselves as much as possible from unknown global factors.
This of course calls for a bit of a change. Many industries have already had a taste of what change can mean from digital disruption. Traditional industries threatened from technology-driven start-ups is in many ways healthy. But what if you are the one being disrupted? How do businesses cope with disruption and guard against any future disruption? The answer is quite simple – be disruptive yourself. Look at products and processes and improve efficiencies, improve product accuracy and make customers happy. Easier said than done, but you don’t have to boil the ocean. You can reap huge gains from small marginal improvements.
Aggregation of marginal gains
Marginal gains can make a huge difference, regardless of the context. Many of us by now are familiar with Dave Brailsford, General Manager and Performance Director at Team Sky who faced the daunting challenge of winning the Tour de France – something no British cyclist had ever done. He believed in a concept that he referred to as the “aggregation of marginal gains,” carving out a 1% improvement in everything relating to his cyclist’s performance. Not only did he secure a victory at the Tour de France for Britain, but also applied the same approach with equal success in the 2012 London Olympics.
There are similar examples in industry. Through industrial IoT, we have plenty of evidence that just a 1% efficiency improvement can reap huge rewards for businesses. In the airline industry, we have seen how improved flight path planning coupled with asset performance management and field service expertise has already reduced annual fuel costs by around $30 billion. It’s about improved intelligence. Field service experts can know in advance when a product or part is failing or needs replacing, enabling more efficient ordering and repairs – no ordering errors and no wasted journeys.
The same is true in the oil and gas industry where we have seen $90 billion in capital expenditure savings from improved equipment servicing and process efficiency, and also $27 billion savings in rail company operation improvements. Given the numbers, Industrial IoT combined with asset performance management and field service optimization can turn industry on its head. Where once service was seen as a cost to a business, now it is an asset, a money generating function – a disruptive department if you will.
Orienting around customer outcomes
A ServiceMax customer survey found that this shift to being service-led has already seen an average increase in revenues of 22%, a 19% decrease in average repair time and a 12% increase in contract renewals. Some of this is low hanging fruit too – there are much more gains to be had from delving deeper into becoming a digitally disruptive, service-lead organisation. Accenture’s suggestion that digital enterprises operate differently by breaking down traditional walls, killing linear processes and more importantly orienting end-to-end processes around customer outcomes rings true here.
Businesses are starting to recognise this too. A recent Vanson Bourne survey found that 86% of companies claimed field service will become a primary revenue driver by the end of 2018, while 73% linked profitability and customer satisfaction with field service. This understanding of how field service has changed within industry is crucial because it feeds into how sensor-driven automation is creating an intelligent platform for businesses from which they can rip up often costly traditional processes and practises and re-invent themselves as more efficient, more agile business operations.
What this means in terms of how resilient businesses become when faced with global economic and political change remains to be truly tested. Yet, given the energy efficiency gains we have already seen in transport and power industries in particular from just a 1% improvement – also think of the potential environmental gains here – it’s possible to see how businesses can become more sustainable and more able to cope with the unknown.
Certainly service-led businesses with up-to-the minute intelligence on products, parts and manufacturing processes have a competitive edge. In today’s and tomorrow’s business world, the power of three – Industrial IoT, asset performance management and intelligent field service – is surely the magic number.