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Transform to the power of digital
Adapting & Thriving in an Age of Digital Disruption
June 6th, 2014
Didier Bonnet
The many dimensions of Moore’s Law
Technology will continue to be the endless agitator of the business world
Loga
rith
mic
Sca
le
1,000,000,000,000,000
1,000,000,000,000
1,000,000,000
1,000,000
1,000
1
0.001
Hard Drive Cost Efficiency (gigabytes/dollar)
Microprocessor Transistors/Chip
Residential Internet Download Speed (kilobytes/second)
Supercomputer Speed (FLOPS)
Supercomputer Energy Efficiency (FLOPS/watt)
Year
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
In 5 years = 10 times as powerful for the same price
In 10 years = 100 Fold
Source: “The second machine age” – Andrew McAfee and Erik Brynjolfsson
Copyright © 2014 Capgemini Consulting. All rights reserved.
2
Digital is forcing a fundamental rethink of both strategy and operations
Is manufacturing ready for the digital challenge?
The imperative of leading digital transformation
% of Fortune 1000 Companies that are New
The second machine age will have as profound an impact on business as electrification
35%
75%
1973-1983 2003-2013
Sources: http://www.forbes.com/sites/nathanfurr/2011/04/21/big-business-the-end-is-near/ and Capgemini Consulting analysis based on Bloomberg & Forbes;
Copyright © 2014 Capgemini Consulting. All rights reserved.
4
Winners at the Beginning and at the End Are Not the Same
Classic steam engine
powered factory
Machines supplied electric energy through common distribution
SUBSTITUTION APPROACH
TRANSFORMATION APPROACH
Assembly line powered by individual motors
First use: 1888-1895
First use: 1913
Large Steam Engine
Large Electric Engine
Use Technology to Transform, not Substitute…
Disruptors are rethinking assets and leveraging new forms of consumption
80 million power drills in America used an average of 13 minutes – does everyone need their own drill?
– Brian Chesky Airbnb founder
“Borrow the things you need from people in your neighbourhood within 30
minutes”
Retail Hotel Industry
Sources: http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-backers-think-its-more-valuable-than-hyatt/
Platforms Get Enormous Value from 3rd Party Developers
The “Sharing” Model The Open Platform Model
Ap
plic
atio
n 1
Ap
p. 2
Ap
p. 3
Layer 2
Layer 1
You don’t need to own this
Quantity
Pri
ce
Profits increase when others add to platform’s Long Tail
Most firm can only concentrate on most
valuable apps
Copyright © 2014 Capgemini Consulting. All rights reserved.
5
10,0
11,8
15,0
Airbnb
Accor
Starwood Hotels
Select Hotel Valuations & AIrbnb
The digital economy is forcing us to rethink strategy with different assumptions
Copyright © 2014 Capgemini Consulting. All rights reserved.
6
Digital eroded industry boundaries
No industry is immune from digital disruptions
New level of analysis: arenas, adjacencies
Entry barriers were based on the notion of asset intensity
Today, access to assets is key, not necessarily ownership
– Things that were massively asset intensive can now be done by borrowing / renting
– Provide flexibility & scalability without having to “bet the farm”
Start-ups can experiment at scale
Building a sustainable competitive advantage
Old assumptions New assumptions
Coders
Computing capability
Qualified specialists
Innovation Crowd sourcing
Flexible office space
In addition, different consumption patterns are emerging e.g. Sharing economy, EAAS……
Industry competition matters most
Information, automation and connected machines are removing traditional constraints and transforming operations
Copyright © 2014 Capgemini Consulting. All rights reserved.
7
DATA-DRIVEN AUTOMATION
Process and Decision automation
Advanced physical automation
Artificial intelligence
BIGGER, BETTER, DATA
Mobile Social Location Sensor IOT
CONNECTED EVERYTHING
People to People Machine to People People to Machine Machine to
Machine
MEANINGFUL DATA INSIGHTS
Descriptive and predictive Analytics
Machine Learning & Artificial Intelligence
Digital technologies are providing the potential for huge efficiency gains in manufacturing operations
Copyright © 2014 Capgemini Consulting. All rights reserved.
8
Reduced lead time
Improved safety
Reduced costs
Mass customization
Increased flexibility
Increased visibility
65% shorter lead times with
automated planning system
Using 3D printing, reduced
production costs to create
engine’s intake prototype
from USD500K to USD3K
Robots that line workers
can quickly train manually,
e.g. Baxter sold for USD25K
Customer supply chain visibility
platforms reducing support
calls/ emails by up to 80%
Autonomous
machines eliminating
repetitive injuries
Digital Operations
NikeID customization initiative
Sources: 1. Intel IT Performance Report, 2012-2013; 2. ABB Conversations, “Manufacturers employ robots to improve worker health and safety’, November 2012; 3. Ford press release, “Ford’s 3D-Printed Auto Parts Save Millions, Boost Quality”, December 2013; 4. Automation.com, “Harting researching optimized manufacturing processes”, February 2014; 5. Aberdeen Group, “Aberdeen Group, “Supply Chain Visibility Excellence”, March 2011
Apparel Company
Time
Putting these opportunities into a coherent digital transformation is the key: how Codelco transformed the mining industry
Copyright © 2014 Capgemini Consulting. All rights reserved.
9
Codelco 2.0
Trucks driving themselves
Operations controlled remotely
Information shared real-time
Codelco 3.0 “Intelligent Mining Model”
Autonomous mining machinery / human-free mining
Integrated information networks and fully automated processes
From a physical-intensive model to a knowledge and technology-intensive one
Benefits
Operational Efficiency
Improved safety
Exploitation of caches of ore that are not economically feasible today
Extension of the life of older mines Real-time integrated
platform
Sensors: information capture
Dig
ital
Mat
uri
ty
Codelco 1.0
California Division of Motor Vehicles = 11.9 million credit card transactions
Target = credit card data and encrypted PIN numbers from 40 million credit and debit cards
But digital also has its dark side...
Copyright © 2014 Capgemini Consulting. All rights reserved.
10
50
60
70
80
90
100
110
120
130
140
1972 1977 1982 1987 1992 1997 2002 2007 2012
19
77
= 1
00
Year
Private Employment Labor Productivity
Sources: “The second machine age” – Andrew McAfee and Erik Brynjolfsson http://europa.eu/rapid/press-release_MEMO-14-60_en.htm; http://www.cso.com.au/slideshow/541868/pictures_12_biggest_data_breaches_last_12_months/;
http://qz.com/212003/targets-traffic-still-hasnt-recovered-from-the-giant-data-breach/#/h/70781,3/
Private Employment and Labor Productivity
Man vs. Machines
Privacy
Google fined for collecting and storing personal data from Wi-Fi networks for its Street View application
European Union ruling on the right to be forgotten
Security
Digital is forcing a fundamental rethink of both strategy and operations
Is manufacturing ready for the digital challenge?
The imperative of leading digital transformation
On average, manufacturing companies are still at an early stage in their digital transformation
Copyright © 2014 Capgemini Consulting. All rights reserved.
12
Banking
Consumer Packaged Goods
Insurance
Manufacturing
Pharmaceuticals
Retail
High Technology
Telecoms
Travel and hospitality
Utilities
Average industry digital mastery:
Source: Capgemini Consulting and MIT CDB, The digital advantage, 2012
Dig
ital
Cap
abili
tie
s
Leadership Capabilities
CONSERVATIVES BEGINNERS
FASHIONISTAS DIGIRATI
Manufacturing companies are making headways in their use of digital technologies… mainly in operations
Copyright © 2014 Capgemini Consulting. All rights reserved.
13
54 %
OPERATIONAL EXCELLENCE CUSTOMER EXPERIENCE
Source: Capgemini Consulting and MIT CDB, The digital advantage, 2012 Manufacturing- Digital Masters
Core process automization
Operations monitoring in real-time
38 %
83 %
100 %
29 %
Use analytics to target market and customers
Sell products & services
14 %
33 %
67 %
Manufacturing average
Leading digital manufacturers have opened a big gap in leadership capabilities
Copyright © 2014 Capgemini Consulting. All rights reserved.
14
ENVISIONING AND DIGITAL LEADERSHIP STEERING AND ENGAGING THE ORGANIZATION
Source: Capgemini Consulting and MIT CDB, The digital advantage, 2012 Top-performers (Digital Masters)
Manufacturing average
100 %
83 %
83 %
28 %
Aligned digital vision among executives and middle management
Roadmap for Digital Transformation
34 %
Coordinate cross-function and cross-company digital initiatives
38%
Promoting a Vision for the Future that Involves Digital Technologies
80%
47 %
On average, manufacturing companies lack foundational capabilities that are essential for a successful digital transformation
Copyright © 2014 Capgemini Consulting. All rights reserved.
15
IT AND PLATFORM INTEGRATION DIGITAL SKILLS
Top-performers (Digital Masters)
Manufacturing average
75% 48 %
38 %
67%
100%
56 %
83%
100%
100%
39 %
39 %
43 %
Have a common digital platform for different business units
Have an integrated view on customer data
Have an integrated view on supply chain status
Have mobile skills
Have skills in embedded devices
Have necessary skills in leadership to conduct digital initiatives
Digital is forcing a fundamental rethink of both strategy and operations
Is manufacturing ready for the digital challenge?
The imperative of leading digital transformation
Innovation challenges
Building a coherent digital transformation: the leadership challenge
Transformative Vision Shared Vision
Digital Tsar/ CDO Digital Units Investment Committees
Promoting Change Employee Participation Investing in Skills
Shared understanding Two-speed IT transformation
Chief Digital Officer at Starbucks
“IT and business need to have a highly trusting relationship and be both determined to do the right thing for the customers ”
“Boeing believes the future of the aviation industry lies in ‘the digital airline’”
Digital skill building is becoming a foundational competitive advantage
Copyright © 2014 Capgemini Consulting. All rights reserved.
18
Plugging the Skill Gap
Innovative Recruitment Methods
Target Company
Acquisitions
Partnerships Incubating for
the Future
Training Programs
Made several Acquisitions of Mobile, Social and
Technology Firms
Partnered with Kaggle, a Platform for Data Prediction
Competitions
Partnered with Techstars for an Incubator Program
Launched an Employee Exchange Program
with Google
Gamified their Recruitment Process
Source: Capgemini Consulting, The Digital Talent Gap, 2013
Launched a Digital IQ training. Over 20,000 employees trained in 2 years
Implemented reverse mentoring programs
Launched an incubator program for mobile startups
In a digital world, a rethink of organisation and resource deployment is needed…
Copyright © 2014 Capgemini Consulting. All rights reserved.
19
Build it yourself
Innovation process inside
Bet the ranch
Ownership is key
Resources strongly held in business
Fitting opportunities into existing structures
Capital budgeting mindset
Resources allocated by a central governance mechanism
Organise around opportunities
Real option mindset
Experiment & learn
Access is key
Leverage external resources
Open innovation
From To