The State of Innovation In Automation

Changing approaches now can provide a foundation for future prosperity. The technology business has always been the world of cool ideas.

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How can you do something faster or easier, or make a whole lot more of something with little or no extra effort? Henry Ford’s revolutionary Model T production line may be a cliché, but it is an ideal example. There is another side to this too, one that doesn’t extrapolate from existing concepts: How can I do something totally new, something never before thought of, that is cool, fun and makes my life better? This side isn’t about mass producing the Model T, but about inventing the automobile in the first place.

Together, these typologies of innovation are the lifeblood of any technology industry, and the automation arena is no different. However, that lifeblood is gradually being drained away, squeezed out by economy-driven layoffs and slashed research and development (R&D) budgets.

“The automation world is ailing,” says industry guru Jim Pinto. Pinto is the founder of Action Instruments (now part of Invensys), a technology futurist, angel investor, speaker, industrial automation commentator, consultant and regular contributor to Automation World. “They’ve laid people off, and so on. It’s very difficult to innovate in that kind of environment.”

This is a real crisis because the manufacturing sector has been critical to America’s economic growth. “Manufacturing is a primary wealth-producing sector and is historically responsible for this country’s relatively high standard of living compared to other countries,” Pinto wrote in August 2009.

Going backwards

Pinto isn’t alone in his pessimism. “We’ve gone backwards,” says Charlie Gifford. “That’s my honest opinion.”

Like Pinto, Gifford is an industry expert who now makes his living providing manufacturers with advice and consulting services through his 21st Century Manufacturing Solutions LLC., Hailey, Idaho. Gifford specializes in combining Lean Manufacturing practices with manufacturing operations management (MOM) systems. He’s co-authored four books on the topic, contributed to key related industry standards including the International Society of Automation’s ISA88 and ISA95, and participated in the Supply Chain Council and MESA International (for Manufacturing Enterprise Solutions Association), who gave him their Outstanding Contributor Award in 2007.

“We have hit a wall,” says Gifford. “Several things are happening in parallel. We’re seeing the outsourcing of the manufacturing base in North America. Meanwhile, Europe is growing its manufacturing base. We’ve also lost corporate sponsorship for moving industry standards forward. The average age of the guys working on these standards is 60. At 47, I’m the young guy. And people aren’t allowed to travel or dedicate work time to the standards. So we’ve stopped moving forward on the standards (which are important to laying a framework for automation innovation). With all the layoffs and revenue dropping off…”

Gifford posits that one of the major stumbling blocks to true automation innovation comes from the automation vendors, whose business strategies are not only hampering innovation, but sowing the seeds of their own demise.

“Most manufacturing plants you walk into have automated the equipment, but they don’t really understand how to create a flow plant as per Lean principles. Only 15 percent of the plants have even adopted manufacturing execution systems (MES). Some more have alarming and trending, but don’t tie it into workflows so can’t relate it to the resources that are there.

“So why are 85 percent of plants not doing MOM or MES? It’s still too expensive!”

According to Gifford, a plant that makes $50 million in revenue may be willing to put $5 million back into the plant, and that has to be shared by all the different departments that need it, not just the manufacturing process. In Gifford’s experience, that money will go to upgrading equipment, hiring and training the workforce and maybe efforts to develop all-encompassing “silver bullet” solutions to difficult problems. “But it’s not a silver bullet that’s required anymore. It’s a transformation.”

There are 250 manufacturing plants in the United States that produce less than $500,000 in revenues, he adds. None of them can afford the $500,000 to $1 million a basic MES system will cost them.

“These guys are all selling to the top 15 percent, and the solutions are stuck in the innovative cycle. You can’t make the next leap in productivity because the vendors don’t want to lower the price to go after the remaining 85 percent. This phenomenon is what’s stalling the next wave of development and competitiveness. My belief is that it won’t happen for 10 to 25 years, because of the way the market works. And if it does come, it’ll be in an open source format that undercuts the existing vendors.”

The good news

However, it’s not all doom and gloom.

According to Pinto, there is a great deal of innovation going on in the United States right now. You just have to look outside the automation industry to find it. “If you are talking about everything, then we’re OK. Apple is doing very well, for example. They have hundreds of people involved within Apple just on thinking up what I can put on my iPhone. You’ve got two extremes.”

Dr. Jay Lee is also positive about the overall picture, but says that people need to change their thinking, to break out of what has become a culture of stagnation. Lee is Ohio Eminent Scholar & L.W. Scott Alter Chair Professor at the University of Cincinnati’s Department of Mechanical Engineering, and Director of the National Science Foundation Industry/University Cooperative Research Center on Intelligent Maintenance Systems (IMS), which also involves the University of Michigan and Missouri University of Science & Technology. Most importantly for the context of this story, however, Lee is the creator of Dominant Innovation, a revolutionary conceptual framework for changing the way American companies do innovation.

“What do we really mean by innovation?” asks Lee. “Do we know our customers? Are we meeting their invisible needs? We always hear that you should listen to your customers. I disagree with that 100 percent. If I ask you what you want in your laptop, you’ll say you want it to be light, to have a long lasting battery and the like. Anyone can think of that. Those are no-brainers. But how about scanning in a picture and being able to convert it to a text file? Is that something your customer is going to ask for?

“Everybody focuses on the device. They don’t think about the customer services delivered by the device. If we in America keep thinking about devices, we will lose out. China can do the same things just as well. And a few years down the road, Vietnam will take over from China.”

Lee drops examples in a rapid staccato.

John Deere makes farming equipment, but is the customer’s ultimate concern plowing fields or growing crops? Growing crops requires a lot more than the tractor. So John Deere eventually put sensors on their tractors that can tell you the pH level of the soil and what kind of fertilizers you need. And because that may change from one field to the next, they added global positioning system (GPS) trackers. That information can then be uploaded, and John Deere can establish a relationship with a fertilizer company to deliver what the farmer needs. “So John Deere doesn’t just make tractors anymore. They make information collection and analysis devices. If they just made tractors, they would have disappeared by now.”
 
Having gone from 50 percent market share to 20 percent market share and taken a substantial government handout to stay in business, General Motors Co. is under tremendous pressure to turn things around.

“Don’t be in the car business,” counsels Lee. “Anyone can make cars. But GM can add value through mobile services. Right now, OnStar (a subscription-based communication and in-vehicle security system available for GM vehicles) can tell emergency services if you’ve had an accident and use GPS to guide help to you. But you can also use it to find and book a parking space in a busy area. It can use historical information to tell you.

“Think of the car as a cell phone. You buy a plan to go along with it. Your mobility plan. Is the cell phone what makes the money [for the supplier] or the plan? GM is the same. I would rename GM from General Motors to General Mobility. You want to dominate the mobility business.”

Dominant Innovation

The challenge, says Lee, is to look at the customer’s invisible needs. “I call them gaps. Find the customer’s gaps. If the customer has a need, he knows it already. And so do you. You have to find the things they don’t know they want yet. If you do, they’ll you pay for it. Dominant Innovation is about how to find those gaps and transform your traditional market into a dominant market.”

The examples keep coming. Lawnmowers aren’t about cutting grass; they are about having a nice-looking lawn. Aircraft engines don’t just power the plane; they make it safer. Skin care products are about looking younger and healthier—literally skin lifecycle products. Sports shoes aren’t apparel; they are exercise systems, complete with tracking and monitoring so you know how far you ran, how many calories you burned and whether you hit your targets.

But how can that be applied to automation? Lee has worked with numerous automation vendors, including Mitsubishi, Omron, Rockwell and Siemens to help them figure that out.

“A factory has a supply chain, a factory, sensors and so on. Anybody can follow the same path. You don’t need an MBA (Master of Business Administration) to follow that path. Don’t make controllers, because anyone can do that. Make devices that provide value-added services like tracking and reporting energy use and monitoring machine health and performance.”

One concept Lee is working on right now is evidence-based services. Rather than a product, this innovation is about delivery and billing, and offers the billing department economies of scale in exchange for risk. “I don’t sell you product. I sell you results, and at the end of the year, you give me a cut of what you save. You no longer compete in a product market.”

He agrees with Pinto and Gifford that things need to change. For example, he says that in the current manufacturing model, companies don’t talk to customers enough. However, “I don’t agree with all the negative things we are hearing. There is a lot of hope in manufacturing. We can change the whole world if we start thinking this way. I am very optimistic about America’s future.”

Innovation isn’t a luxury, says Pinto. “The companies that don’t innovate die. If your company is doing badly, then you are selling things people don’t want. It’s time to change that and start making new things.”

Before it’s too late.

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