Creating the Industrial Ecosystem

A couple of weeks ago I was invited to the Siemens Innovation Day. I really appreciated it, yet it took me time to absorb all that was provided, over these past two weeks.

One outcome is this post. I am grateful to have had the time to translate this in my mind. We all move on far too quickly and not have the time to sufficiently reflect, and that can be a huge mistake.

The day before the main event I was included in the Industry Analysts visit to the Siemens Technology Center, at Neuperlach in Munich. We were provided a variety of insights in different presentations and demonstrations, of the technology they are working upon.

The time spent in the Siemens Technology Centre was far too short, in getting the depth I would have liked. Yet, by accessing and re-evaluating all the presentations I have collected over the recent years, I pieced much of it together, into the clarity that I wanted, well actually needed, to understand where Siemens was positioned and going.

I came away from my visit to Siemens greatly impressed, now I am busy filling in the blanks.

The opportunity to attend has certainly triggered a lot of thoughts and connected me into Siemens, a whole lot more. They do seem to be are on a good path for growth but to make it a path that fully connects to exploit all the opportunities it can explore, Siemens needs to exploit Ecosystem thinking a little more. Surprisingly, I felt they lacked a more holistic view of innovation; a clear innovation process, and dedicated focus on this, which is required. Innovation is certainly central to the future of Siemens but it seems to me not to have the core positioning it should have.

Often you come across a dominating mindset of engineers, scientists, and technicians, who often have the mistaken view that they know innovation well when actually they only have a terrific depth on a given subject, not the breadth or broader comprehension. This comprehension is often missing by not having both fully connected and available, or consciously built in.

If you take a more holistic view of the all the connected parts of innovation that value-add, built on customer need, etc., that a structured innovation process offers, the result is more than likely to be more radical in final design and end-result. More radical in design and outcome The whole process to capture and translate options, to minimise the gaps, and leverage the critical opportunities, fully needs a system, a connected system.

I can’t prove it, in a very limited visit I had at Siemens but I certainly felt, they might value a more detailed review of their innovation environment, some more, it might potentially benefit them.

It is partly due to this classic missing “T” you expectations often fail to recognize a growing imbalance.  To build a more comprehensive innovation capability and capacity, does take for a very dedicated focus, especially when it is based on building digital solutions. Innovation expertise is as specialized as engineering for example.

Also if the innovation is not well-defined at the starting point, conceived often in a lab or internal group but not knowing fully the customer ‘real’ needs, you can lose an awful lot of energy and opportunity. We often confuse invent and innovate, each has its place. For me discovery and execution need a lot more robust “working through” the innovation process, to drive a diversity of ideas and concepts through to a final value point. How does Siemens balance invent and innovation?

If you don’t reflect on the holistic contribution of a connected innovation, a complete connecting up of the innovation process, you can limit your potential. Time to market suffers for one. Knowing customer need can be another. Silo’s of knowledge can lock out new potential opportunities. The Innovation process needs to be robust in structure, commitment, and resource. My limited time trying to appreciate where innovation fully fits within Siemens was clearly constrained, but from my past experience using the word “innovation” is different than its application. I felt innovation needed a more holistic focus.

Siemens is in some highly competitive industrial markets. Like many others, they are embracing digital as strongly as a number of other companies I have been following. I did get some disconnects still at the event and this post is attempting to elaborate on these. Among these was that I was not able to understand the differences (if any) in their platform offering, Mindsphere. I had to come away and dig a little deeper myself and subsequently produced this post “There is a growing force in Siemens Mindsphere as it gears up for 2018″

Although Mindsphere was featured prominently as the core of all their digital work, surprisingly, it was little featured specifically, in the Siemens technology center presentations and on the following day at the Innovation Event.  I think there are some reasons for that. Partly they, Siemens, have lived with Mindsphere for some time and it has become embedded in where they are going, perhaps forgetting the significant lag the outside world has to this, to relate or appreciate or make those essential comparisons. Customers are working through a variety of choices in selecting the platforms they require, there is unease with the risk of “lock-in” for all involved, to understand and evaluate “gain and return”.

Equally, they are perhaps still lagging others in what they can provide as application solutions. I would reckon 2018 will be a huge ramp up for them. One outcome from my research has been a dedicated a post on Siemens MindSphere, over on my dedicated Ecosystem and Platform site, as they have one or two edges that, if exploited well, will give them some ‘competitive edge’

The one ‘thing’ that really caught my attention, is still under the mainstream of Siemens corporate attention I would speculate. It was showcased in the technology center, it is going to be vital for the connected innovation I see as our future.  This deserves a dedicated post on what I consequently learned, not through Siemens, but in a conference that Siemens presented at, in November 2017. These insights set me off on a new train of thought and the presentation gave me what I needed on (Industrial) Knowledge Graphs for the initial depth of understanding I was seeking.

Thankfully the trigger was on my visit to their technology center. This was not even mentioned at the Siemens Innovation Event the next day, on recall, so it is presently flying under the Corporate radar, still to be integrated into the offering of Siemens. It is seemingly ready but I feel is yet another 2018 rollout, or should be. Still, a dedicated post on Knowledge Graphs follows this one in the next few days. This excited me in its potential.

Let’s explore this a little more, partly on my tweets of the day and after, in reflecting

Getting Physical and Digital as the twins we all need. The need to go way beyond.

The Siemens Innovation Event was digital all the way. Of course, the CTO, Roland Bosch hosted the event and it was all about the value of connecting the digital into the physical but the over-emphasis prompted me to tweet some different thoughts not just simply reactions:

Yet the one biggest feeling on listening at this Siemens Innovation Event I tweeted.

“What is going to give @Siemens the edge in the future? Digital dominates #InnoDay but the #UnlockThePotential is the quality of their combined results of product + service + design + digital as the bundled solutions. Let’s remember it is the potential #Innovation power of ALL”

Getting the balance right is crucial for all Industrial digitally aware organizations.

Siemen’s I don’t think has the present emphasis wrong but perhaps the balance needs to be recalibrated, going forward. They have the digital momentum clearly, they are mastering the physical and digital domains in the “twin enablement,” to generate greater innovation and growth options. Yet I just felt they are not aligning these two ‘worlds’ as comprehensively as they could or should be.

Then in my reflecting post event, I came across a recently published article from BCG

With Martin Reeves as one of the authors. I always pay attention to his thinking; I draw a lot of understanding and connection from these. The article was “Getting Physical: The Rise of Hybrid Ecosystems”. This made many of the connections I was thinking about that Siemens needed. It bridged a gap in my thinking, perhaps it also would in their thinking, if they see what I see (or don’t see- ask!).

The articulation of the Siemens Ecosystem was missing at the Innovation Event, it was lacking as a central aspect, in its recognition of the value potential (in my mind) and the real connecting value it offers. The platform and digital solutions tend to dominate the (present) thinking at that Siemens Innovation Event. Siemens needs to think deeper about the Siemens Innovation Ecosystem and its management, in my opinion. That can truly #UnlockThePotential!

Let me explain why Ecosystems need a greater focal point that Siemens ‘seems’ to presently lack.

Siemens is like many other Industrial Organizations, in first love with digital. They look at the valuations and impact that Amazon, Facebook, Apple, Microsoft, and Google as platforms and this does have some “digital envy.” Industrial applications are very different from the Social application. You can never lose sight of where the sustaining value comes from, in physical products that need to perform consistently, over a product lifetime, and need to be deeply trusted and well-supported.

Of course, the phenomenon of digital and the platforms that we have all embraced and embedded in our daily lives, has been stunning, in what I see emerging from Siemens and many others. It has transformed all of what we refer too, in recognizing connections and interactions and give us a potential for a whole new ‘connected’ value. Technology offers us a whole different way of managing our daily lives. Yet the industrial world feed off this even more, in distinctive ways of need?

Certainly, Siemens can and I expect do, constantly look to build on what they have, with digital driving the impetus of change, it can force transformation and growth. We need to determine that Industrial platforms are different, significantly different, in how they create and connect value in radically different ways for their customer’s needs. As an end result, it has to be far more sustaining and not built on ‘instant’ reaction or gratification.

Real value can come from scoping your Ecosystem holistically

Digital is central to create value, it is the primary focal point in most organizations at present. Industrial organizations are perhaps drawing more from the ‘pure’ digital organization, they are only getting comfortable in their own “digital skin”. Certainly, the external consulting advice is constantly relating to the ‘best practices’ to these purely digital orchestrators of their digital ecosystems, but this can be equally, damaging and constraining. If you focus too much on other parties practices, they are not your own “emerging practices”, they are someone else’s practice, operating in a totally different business contexts and market conditions. We must never lose sight of this.

I am not saying Siemens is lacking, in recognizing differences; of course, they are consistently working at finding those. They have a growing perspective from a digital view of the value-add, presently digital is 10% of their total business, nicely growing at 20% plus a year. The question here, though, is this: are there are real differences that, perhaps, they have not yet recognized or studied, clarified or validated, as robustly as they could? They need too, earlier than later.

Clients and markets quickly define differentiation and prospective value, that always needs shaping and influencing. I’m not sure Siemens is defining what they do as clearly as they can; do they want to be a leader or fast follower of others, or contain themselves to specific domains of expertise, others will find hard to mimic? What will be the cost or even better, the “Value@Stake” analysis, a real measure of opportunity identification? Taking a further step back on where ‘true value’ lies might yield different results, some years into this digital initiative by having a more focused innovation perspective might. More an ‘open question’ here in my mind.

Why I related to the BCG article is it attempts to break out the difference in operating need.

For Siemens or any other industrial producer of physical goods, the physical is the bedrock. Digital is a different building value proposition to take the product forward, offering new and highly innovative ways, if the innovation system is structured and fully in place.

In the BCG articles, they suggest digital ecosystems to dominate, have three factors that make the competitive environment dynamic:

1. Zero marginal cost and positive network effects are increasingly coming at virtually no extra cost. I can recall the CEO of Siemens, Joe Kaeser, commenting on that in a past article.
2. Unprecedented Data Accumulation and Analysis gives the “data flywheel effect,” as this grows, you accumulate more data that fuels improvement on services if you can manage this. This has a “reinforcing effect”, strengthening the virtuous circle even more
3. Seamless and Comprehensive Digital Experience happens at scale, that over time progressively satisfies multiple needs on a single platform if it recognizes, evolves and adjusts, to this demand.

These are the foundation rules in a winner-takes-all dynamic of competition. How do the Industrial Platforms and their Ecosystems relate to these? This requires a comprehensive ecosystem management. I think this is still understated in Industrial solutions. It is capturing and engaging but it needs a greater attention, time and value correlation

Digital ecosystems have seen physical assets as only complementary. It is the need of the Industrial players aspiring to “orchestrate and lead” to work the physical and digital in different, much tighter ways, the “twining” becomes vital.The physical channels are well-established in their need and outcomes in performance, reliability, and consistency of result, so as to be well understood and drawn into the ecosystem in more comprehensive ways to capitalize on different value-creating options.

We need to shift from a focus on digital as our central “play” into the intersections of the digital and physical in new ways. Siemens is well on their way but it is this thinking more deeply, about combining the two even further, in new ways that connect the whole innovation experience, to explore different outcomes that clients are looking for or transform their understanding, can result in this more ‘holistic’ approach.

BCG suggests AI is a wedge but this is where having a more robust Knowledge and Innovation structure sitting alongside, and managing the physical and digital world as twins, becomes a clear value making point. Translating knowledge into innovation is key.

Suggested by BCG are three factors that need to be managed,  with my added thoughts:

1. New Frontiers and Unexploited Opportunities will be greater battles in the physical realm, using the combination of technology, digital, knowledge, and innovation as the combinations.
2. More connected hardware is allowing for encroachment from new sources of competition. It is the power of the ecosystem management that will orchestrate the competitive edges, constantly evolving and needed in dynamic market conditions, based on a highly flexible platform
3. More Real-World Data is enabling the physical world to catch up on the digital-only world.

This, as BCG suggests, is giving birth to the hybrid digital-physical ecosystems.

These require deep domain knowledge and dense business relationships and a growing comprehension of the ecosystem effects.

The unique combinations of forming an Ecosystem need understanding

This will revolve around exploiting 1. Technology and Relationships, extending 2.Depth and Breadth of Knowledge, 3 Forming and 4 Extending Connections, 5. Experimenting and exploring  6. Creating and participating in New Ecosystems and 7. Paying attention to the Rejuvenation of the Old, as a constant need.

That consistency of evolving, challenging and reshaping even faster, with this Ecosystem perspective, will drive the ’emerging’ digital solutions of the Industrial Organizations, for the likes of Siemens, as well as a number of other Industrial companies, looking to lead and continue to grow.

Of course, Ecosystem development and management are a whole lot more than just and seeing complex systems that can be built out from the ones briefly outlined.It is fully appreciating the dynamics within the system, always adapting, emerging and resolving at different rates, to explore and exploit innovation as the central concept of Ecosystems, that needs greater attention.

For me, it is the management within the broader Ecosystem that will leverage fresh knowledge. Being able to apply context and domain expertise, worked through digital platforms and applied technology, that focuses on co-creation, so as to deliver on the potential of new insights, that are leading to innovation with a real difference. This collaborative “orchestration” will determine those that will emerge as winners within the Industrial environment as they form really unique competitive edges based on reliance, trust, and deepening partnerships.

Closing thoughts

The need is for the application of Ecosystems in multiple contexts and forms. Just equally consider the Interconnected Parts of an Ecosystem. Are we truly clear on what is reshaping entire industries? This requires not just a robust understanding of Ecosystems but also of the power and strength of your platforms, in its adaptability and flexibility to respond, not just to simply build but to shape. An ecosystem that is highly collaborative and that shifts the relationship dynamics, will require a deepening of the co-evolution.

This co-evolution is a significant difference between ‘pure’ digital ecosystems, where the winner is constantly looking to take all, and the emerging Industrial Ecosystem, one that forms and deepens relationships around trust, reliability, and performance, with its clients and partners over time, in final product solutions.

Industrial Ecosystems will be designed differently, they need ‘infusing’ differently than just building these internally only. Those that learn the new dynamics of Industrial Ecosystems first will actually win the long-term race, not just in having a “me-too” platform, but in its unique design and adaptability. One they can articulate and others can see the clear value in joining. An Ecosystem that evolves and is constantly connecting in radically new ways, of thinking and proposition.

We are entering this new era of innovation, where connected highly collaborative relationships, form the ecosystem to build unique value propositions, that deliver the new competitive edge. I wrote a series of posts on this “new innovation era, one can become the opening reference point to reflect on this “Advancing my Applied Innovation Thinking” as it helps in developing a more, open, fluid design of innovation.

Moving along an evolutionary path

We are getting somewhere along an evolutionary path in what I saw and heard at Siemens, but it needs a more radical blueprint of ecosystem design. Who will pioneer this new game, where management skills will be based on ecosystem understanding, building and managing needs, to be thought through and fully connected?

As we presently focus on the digital platform, let’s not forget, it is the strength of connecting and understanding the ecosystem that will actually be the difference between winning and losing, and that’s relationship-based, as much as technology-based.

Ecosystem management needs far more articulation, well beyond what I heard at the Siemens Innovation Event.  I thoroughly enjoyed the event but it has prompted my necessary reflection here, as I saw opportunity gaps that would accelerate innovation more effectively. In the next twelve months, Industrial Ecosystems will evolve and it will become highly critical to be mastered and articulated, in ways that show their connected innovation value.

Going beyond present thinking to build Industrial Ecosystems by design

This post only “points the way” to separate out the present thinking, to extend it in structured ways, on what needs to be thought through to build Industrial Ecosystems. Industrial Ecosystems that combine not just the digital with the physical, but also fully leverage the connected relationships that prosper by co-evolving and striving to deliver innovation in new exciting ways, those that advance collaborations and seeks out constant growth.

 

• Updated on 28th December to link to other posts of relevance or extend a point or two, as well as correct one or two errors.