Lots of buzzwords fly around the industrial landscape when the idea of transforming a company from manual processes to a “digital” enterprise. Terms such as digitizing, digital transformation, and digitalization get tossed around alongside technologies that aim to drive those goals – industrial automation, robotics, Industrial Internet of Things, and Industry 4.0, to name a few.
Numbers vary on how many digital transformation projects end up failing – with estimates on failure rates ranging from 40% all the way up to 70% or 90% of projects. Reasons given for failures range as well – everything from a lack of consensus on what it means to digitally transform, to relying too much on the idea of digitalization as a savior for the company.
With robotics and industrial automation requiring a sizable capital investment, the last thing companies want is to embark on such digitization projects without being aware of potential pitfalls.
Robotics Business Review recently spoke with Patrick Bass, CEO of thyssenkrupp North America, about some successful digital transformation projects at the multinational conglomerate. With about 26 separate digital projects launched, Bass said only about 10% of these projects have failed, and even some of them have been redirected or deemed too early to see if it will fail.
Q: Tell us about the motivations behind the digital transformation efforts at thyssenkrupp and how you got involved.
Bass: My journey started a little over six years ago. At that time, I was the head of R&D and product strategy for [thyssenkrupp] Elevator globally, one of the four business areas in the region. I was based in Germany, and our focus at that time started to look at how could we transform and really drive forward with the use of data from elevators and our elevator service business as a whole.
So I started the journey literally as the lead from an R&D and product strategy basis, driving a digitalization project for that business. With the successes we had there, we leveraged that knowledge and the board decided to put me into this role, looking across multiple businesses here in the region.
[We] also needed to continue to focus on how we can be sustainable and continue to drive customer value. At the same time, to not be commoditized and be able to control some parts of our own value chain, to draw value for the shareholders as well.
Q: With a multinational business, how did you figure out what areas to focus on?
Bass: In North America, we have 42 businesses basically that roll up into four main business areas, but if you look at the individual businesses, there are some of them that have very similar business models, but they have different anchor points or differentiation points within their specific industry vertical.
Some of those businesses are either being disrupted or have the potential for disruptions, and they have the potential to be commoditized, where their capability to drive shareholder value, while at the same time providing customer value, wasn’t as viable.
We saw digitalization being a key point to where we could transform those businesses utilizing technology. Not as technology being a driver, but as a pure enabler to really differentiate, focusing on our competencies, while at the same time reinventing our products and/or the anchor point of the business model to drive it forward and be sustainable.
Technology as digital transformation enabler
Q: Usually when you hear about digital transformation, it covers several technology areas – digital twin, industrial automation, robotics, data analytics, Industrial Internet of Things, Industrial 4.0, and AR/VR. When you were driving your efforts, did you look at all of those areas, or focus on specific technologies at specific divisions?
Bass: The reality is that you have a whole set of tools out there, enablers from a technology front. For us, the technology is clearly an enabler – and I can say we’ve used the whole portfolio, depending on the particular business transformation project.
It really comes back to how you enable the technology to drive forward the transformation. Digitization, digitalization, digital transformation, Industry 4.0, IoT, all those different areas – for us, we had to put some context and definitions around what those mean to us as a company, and where we’d want to focus.
How do you know that you’re on the right track or path in regards to transforming? I attend a lot of these different conferences and we talk about this. You hear a lot of groups that are struggling and saying they’re having 40% on average failure of some of these key significant initial projects.
We’ve been very fortunate – we’ve only had essentially 10% on a failure basis, and even out of that 10%, essentially one was redirected, two are at still early stages to not known how they’re going to deliver and mature, and then we had two that we really had to shut down and stop.
What we realized was that in some of the early successes, the lessons we learned and what we leveraged led us to have an equation or methodology in how to assure that you’re driving the right point in the value chain to really transform.
The key piece to this is we realized early on with the very first project that I led, it was a little bit like a Texas hold ’em “all in” move. To navigate C-suites with Texas hold ’em all in moves is not easy.
You’re coming in and saying, “I’m going to invest typically single- to double-digit millions depending on the project, and I need 18 to 36 months, depending on the scale of the project, to do that. And at the end of that implementation, then I’ll start gaining this additional data asset that you may already have some data, but you need to parallel with. At some point, after I get to a certain scale of implementation of that data, then I can drive value back to you, and the value is going to be huge.”
That’s a tough sale, so you really have to break it down into key factors. One – can you tie it directly to your business model in regards to what you’re going to transform. That’s really a significant key point, because that can be not your business case, but can be your key motivation – your mantra on why – really concrete the why.
For the business case, you have to boil it down into something very specific – I almost hate to use the word simple, but it really does have to be simple enough to understand, and tangible enough to justify the investment.
Once you get through those two processes, you really have to break this into an agile development process, where it’s quick work streams so you can show tangible results as you migrate through this journey.
Q: How did you measure success in some of these projects? If you have numbers about success and failure, then you must have had metrics to measure those.
Bass: There are three points to say if a project is successful, whether it’s a digitalization project, an R&D project, or otherwise – for example, are you meeting your timeline scale? That’s why I say the agile development method works for this. Because you’re going to have failures – you’re going to do something that hasn’t been done before, you’re going into this where you don’t know what you don’t know.
How you manage those risks is definitely through partnerships – you really have to go in with an open innovation mindset and drive partnerships. We’ve done that with a key strategic partnership with Microsoft in multiple instances.
You don’t know what you don’t know, so you have to be bold and brave enough to really approach open innovation, and strike partnerships to create value on both sides. – Patrick Bass, CEO thyssenkrupp North America
With metrics, ask what are your deliverables for your timeframe, and you don’t want to measure just the end deliverable – you have to measure your progress as you go through, maybe you mitigate through multiple workstreams to get there.
Your key deliverable is your business case. Are you realizing your business case? Are you tracking your investment to your return? And hopefully, if you’ve done the proper work with your partner up front, you’re also going to be able to understand where you can have quick and early wins.
We’ve really focused on that – do a proof of concept [PoC] right up front. A proof of concept isn’t something that’s six months, 12 months, or 18 months out – proof of concept has to be three months or less.
By the way, it’s not just an R&D project team doing the PoC, you have to include the touch points. Is it service mechanics? Is it line workers? Is it your sales people? Is it your delivery logistics group? All those people who it touch better be in that PoC up front, and have input.
Q: Obviously, it feels like you would need to get buy-in from these employees.
Bass: Absolutely. That’s a key trigger point when I said you put definition behind digitization, digitalization and digital transformation. You can digitize pieces of your business, and you can do it without a significant change management process – there’s still change management, but you don’t have to have 100% of the buy-in.
To digitalize is basically saying that you’re going to take that process outcome or output, and make it one source, one truth, real time, that empowers the employee. It has to have all four of those factors.
When you’re taking something from analog to digital, you have to talk about an end-to-end integration to be able to accomplish those four points. When you then digitalize that analog piece, how do you say that it’s transformational? That transformation has to go back and link to the business model of:
- Is it re-anchoring your differentiation point?
- Is it creating a new business model?
- Is it creating a different business model that has a parallel revenue stream out of your data asset?
That’s where you can really say that you’ve done something transformational, and only then, in our view.
Using robots and automation
Q: Can you discuss some specific projects that included robotics or industrial automation that you consider a success?
Bass: We have two different key robotics projects. One is transformational, and one is solving some key problems, but I don’t know if I would call it transformational yet – it could be transformational in regards to how the employee empowerment happened.
You can see today in the economy, and you see it everywhere – companies challenged by the lack of available human capital to drive and realize the growth opportunities out there. We’re facing this front and center. We’re trying to fill tech positions, trying to fill warehouse workers, on-the-line workers – it’s a challenge today.
So you can go two paths for this – you have to be able to stay up with the growth of your customers – if you can’t, you’re in trouble. So you can go the full automation, $250,000 big full-on robot that does it all for you. That’s a pretty rough investment and that’s a longer-term payback that is hard to justify. Let’s be honest, the implementation of that takes months and months, maybe even years.
So where we’ve focused is on a different path. We looked at collaborative robots, at the $40,000 device that can be programmed not by a whole slew of manufacturing and mechanical and systems engineers.
So we said let’s take maybe a high school intern, an experienced line worker, and a supervisor, and do a training class with this collaborative robot. We empowered them to say how could this be utilized for a line worker, for them to be able to eliminate repetitive injury risk, to be able to speed up the line, to be able to consolidate steps in the line, and have them directly involved and empowered in the process to say how it can make their job and life better.
We started with two different facilities, with one or two robots in each, and applied this method. What was transformational was the labor – our teams, our most valuable assets, were so empowered that we literally started with one, and I think now across our two facilities we’re somewhere around 32 of these collaborative robots.
No pushback from employees about having them replace their job – in fact, they accelerated it. The efficiencies and the capacity scale that we’ve been able to meet and continue to provide our customers, the growth that they’re demanding, has been realized. And we could never have done it without those robots.
Q: Who did you work with on the robotics projects, and did you utilize a systems integrator?
We worked with Universal Robots, Mobile Industrial Robots, and Dematic on some automated guided vehicles, based on some of the various different tasks we were looking at. We worked directly with the robotics companies, we did not use a consultant or a system integrator.
Q: Is this because thyssenkrupp is large enough where you’d work directly with them?
Bass: Yes. They were very generous of giving us access to some of their existing customers where we could get some ideas of implementation, but I think we were very unique in the fact that we implemented it through our front-line workforce rather than having some big manufacturing engineering committee or outsourced group to drive that.
Q: Why do you think that contributed to the project’s success?
Bass: To me, that’s the one piece that you could then start to label as transformational, because it’s empowered your workforce to really do something to meet the growth and energize them to where they’re excited and engaged in automation, which is one of your biggest challenges.
Q: What applications or tasks have you used with the cobots?
Bass: There’s such a variety – not only what we’re doing with automation in regards to the cobots, but all of the tooling and equipment you need to do the fixtures and so forth. We engaged at the same time on a whole 3D printing approach. We have now across multiple facilities 3D printers spread out throughout the factories, which are continuously printing at all times various fixtures and tooling and consumables that you deal with for the cobots. So it’s really a significant change in the mindset activity and approach in how you can radically innovate on the factory floor to drive capacity to meet your growth.
Using digital assets to create new products
Q: What was the other robotics/automation case that you implemented?
Bass: We used automation and robotics, utilizing our digital assets across multiple companies. We took a look at what digital assets we had from a competency base – we took those digital assets and different models, processes, technology, and so forth, and we packaged them in a way through automation to approach the automotive industry on how to solve their bottleneck in putting seals on car doors, and car doors on cars, which is one of the biggest bottlenecks that every manufacturer has.
We are aware of [the problem] because we’re in their facilities doing various different process technologies and logistics supply chain solutions. We recognized this through our awareness and used our digital assets, along with automation, to solve the problem in a way that’s never been done before.
We now have developed a whole new product, and we can now go to them and say, “Here is something we have to offer” rather than waiting to say “We have a process engineering group that received this specification that will execute to their demand.”
So it changed their relationship with us and them as a customer-supplier scenario, and allowed us to show the digital twin technology leveraging our existing data and digital assets.
Q: Did you go into this thinking that you’d end up with a new product, or was this an unintended surprise?
Bass: When you have a digital asset and you go to a manufacturing facility – even when you own that facility – and you say, “Give me your data because I want to utilize it in a way to drive something,” they’re not necessarily engaged to say, “Oh, sure, here you go. You’re going to use this against me and my data is my secret sauce, I’m not going to give it away.”
So what we did is say, “Look, we have some ideas and some problems we’re aware of because of our competencies – give me this digital asset and this digital asset.”
We didn’t take one whole thing from any one entity. We took various different pieces with the idea of what could we come up with that was new, and prove that our digital assets have significant value. So that was absolutely our mindset with that project, and it worked very well.
This particular project ran across corporate, because it came across seven different business units, mostly in our automotive sector businesses, and in the end it provided value and a product offering for our systems.
Transforming analog processes with AR/VR
Q: You also found some success in the augmented reality / virtual reality space, correct?
Bass: We have two key examples for AR/VR, where we’re utilizing Microsoft HoloLens. We were one of the very first HoloLens enterprise partners because of our strategic partnership with Microsoft that we had from the IoT side. We got to go in and sit with their top executives, strategy, and R&D groups, and consider what technologies they’re trying to leverage, and what our needs are, and have that strategic exchange.
During that process we got to see the HoloLens – we said we wanted in and were one of the very first partners. In fact, we took the very first production shipment of HoloLens to implement our service organization in the elevator business unit.
Q: What project did you initiate with these devices?
Bass: The transformational project is called HoloLinc. We create stair chairs for customer’s homes, where they need to have support to access the other floors in their homes. So you can imagine when you get a phone call it’s not because they just want it, it’s because they need it and have to have it. And every house’s stairwell is a little bit different.
We’re not the only player in this industry – there’s multiple players – everyone has this challenge of using a measuring stick, and maybe a digital picture process to try to translate what a custom stairwell looks like to understand how to design a product to fit with the least amount of impact or restriction within a house, and how it looks and feels.
So everyone deals with the same process, it’s very laborious, and has a very high degree of error. To translate the stairwell into a design, to then go back and install took on average 12 weeks for a customer who’s basically saying they need this now, and “Can you show me what it’s going to do to my house?” When you have an analog process, it’s pretty hard to show that.
So we had the idea to take the HoloLens to measure, record, and digitally capture the stairwell. Not only were we able to change the analog process to digital, but now we have an immediate full digital footprint and 3D digital grid of the whole area. A four-hour analog process to measure [a stairwell] now is basically 30 minutes with the HoloLens, and at the end you can immediately show a customer digitally what the stair chair will look like within their house, on the application.
This is what’s really radical – if the customer says yes, we immediately download the design to our production facility and go into production. We took 12 weeks or more from the time you sign the order and moved that to a 30-minute measurement process, and two weeks later we could deliver the product and install it.
When you talk about re-anchoring your business model and differentiating, simply taking an analog process through the technology of HoloLens and making it a full digitalization process, that’s your front end piece. It radically transformed every aspect and end of that business.
Q: Given that success, do you then go back and ask what other areas can you use HoloLens in, whether it’s across the same division or different divisions? What do you do next?
Bass: We have 26 flagship cases of taking the technology as an enabler and driving a transformation digitalization project. We’ve basically learned that we have this process, this methodology of how to apply whether or not you can take a technology and enable this change. With the HoloLens we did the HoloLinc project, did a broad launch and scale, and big marketing piece in Germany.
We said what other analog processes can we change that could radically transform the end-to-end model. The latest one we’re in the middle of deploying right now is called Virtual Pick and Pack.
The warehouse distribution side of a business exists in a lot of businesses, and it’s one of the least sexy. It’s painful, it’s human capital-driven in many cases, which today is difficult to have access to, and it’s one of those areas where you fight and scratch and claw for tenths of a percent of efficiency gain, just to drive your cost increase in that area through the business.
So we had an idea of whether we could replace a scan gun, or digital keypads or checklists – all of these different things that take an additional step that you have to do as a warehouse worker. You have a pick list, which us usually a printed sheet of paper, or maybe it’s displayed on a tablet. We said, “What if we took all that and just put it in a VR HoloLens device? Because you’re looking at everything you’re touching and handling anyway, so if we could scan from the HoloLens at the same time you’re looking at it, it could replace the scan gun. So capital-wise, it’s a simple business case – they replace it one for one.
But if I could then display my pick sheet on the HoloLens, I could then also show the worker where to go in the warehouse through virtual beacons. I could then also not only scan the code, but then have a digital footprint of this products or box, and quickly check whether the scan code matches the box.
We quickly realized we could do this by fitting every one of the warehouse workers, rather than just using [the HoloLens] for training. If we could not just train them but embed it into their day-to-day activities, and drive efficiencies and behavior, that would be quite something.
We found a 30% efficiency gain for the average warehouse worker. You can take a brand new employee, spend 30 minutes on how to train with the HoloLens and interface, and you can put them to work and be productive on day one.
You have a lot of small businesses that can’t afford conveyors, or you might have products such as heavy equipment that aren’t easy to convey or robot pick – with [HoloLens], the size of the warehouse or scale of the product doesn’t matter. You can apply this immediately and drive that level of efficiency with limited capital investment, because your HoloLens is the same cost as the high-end scan gun, and since it already has to have a Wi-Fi grid, it also supports the HoloLens.
But here’s the really big payback, the “ah-ha moment” that came out of this. You have a full digital footprint of everything that comes in and goes out of your warehouse at any given point of time – you never have to do physical inventory again.
Remaining challenges, advice for others
Q: What challenges remain for you with these projects?
Bass: Your biggest challenge in any transformation base is the change management process. You really need to continue to engage your middle management teams, because they’re the ones who can make it work and thrive. So you have to continuously drive through building the trust, building the awareness, and building the skillsets, and getting that buy-in to move forward.
One of the biggest things besides market pull is business recognition that really can help that change management process to accelerate these projects.
Q: What advice would you give to industrial manufacturers looking to be more successful?
Bass: Don’t fall into the technology trap of, “Build it and they will come.” Realize it’s a journey and you have to basically embed this into your operative business. If you treat it as a separate IT project or you treat it as a one and done project, it will not be successful.
You don’t know what you don’t know, so you have to be bold and brave enough to really approach open innovation, and strike partnerships to create value on both sides.