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How to do digital

IC

ABB In Control (IC): Is digitalization optional or inevitable? What separates the hype from reality?

ML

Matthew Littlefield (ML): According to our research, 60 percent of industrial companies will have a digital transformation initiative in place by the end of 2017. 

Much of the hype comes from the concept of the Fourth Industrial Revolution. Although we have had three previous revolutions, none of them was completed in one year, or even five years. They took many decades to complete. But the reality is that the revolution has already started, and many companies are already well down the path of digitalization, so if companies don’t move today – or in the very short term - they will fall too far behind to catch up.

IC

From your perspective, what is the state of digital adoption in power generation today?

ML

The power generation industry is quickly transforming. New intermittent energy sources coming online, dynamic pricing pressures and more data than ever coming from upstream demand; the opportunities and challenges are unprecedented.

According to LNS Research survey data, the low hanging fruit of implementing next-generation digital technologies are: predictive analytics to optimize asset performance, and remote monitoring and collaboration tools to address the lack of skilled workers.

Longer term, new data architectures and advanced analytics – artificial intelligence and machine learning - will provide opportunities for new business models and optimized decision-making across generation, trading, transmission and distribution, and energy efficiency.

IC

What are the best practices for a power generation company to follow when starting digital projects? How should a company do digital? 

ML

To be successful, digital transformation has to be more than a technology project, it has to be a business initiative. It requires a formal framework to drive organizational structure and decision-making that impacts all levels of the business.

Digital transformation needs a CEO vision for how these next-generation technologies will impact strategy. It needs to build on existing operational excellence initiatives to ensure people, process and technology capabilities are aligned; it needs technologies to ensure there is an architecture in place to bring together both IT and OT; and it needs business leaders to build local business cases and select the right technology solutions that meet the needs.

Digital Transformation Framework - In Control 01 17

IC

What are the biggest challenges or lessons to be learned in industrial digital that power generation companies should be aware of? 

ML

The biggest challenge to date facing digital transformation in the power generation industry is not technical, it is business-related: how to effectively build the business case and secure the funding.

IIoT Challenges - In Control 01 17

Much of this comes from the fact that the promise of digital transformation lies in the unknown. It is built on the idea that with more data and better analytics, companies will find previously unknown relationships – driving better business performance, all of which is very hard to quantify.

Early adopters bought on faith several years ago, which is good for them and the broader market. Now, more conservative companies don’t have to buy on faith, they can base decisions on what other similar companies have already experienced.

IC

We hear a lot about 'ecosystems' in the context of digital partnerships. For example, some automation vendors are positioning their platform as the only one to use, whereas others like ABB expect to be part of a diverse ecosystem that will connect many stakeholders and likely consist of many platforms. How should power generation companies select their digital partners and decide which platforms to invest in? 

ML

There has been a lot of talk over the past several years about the emergence of Internet of Things (IoT) platforms and, even more specifically, of Industrial IoT platform providers. 

"If companies don’t digitalize today – or in the very short term – they will fall too far behind to catch up."

By the LNS definition, these platform providers are attempting to bring together and deliver as a service a rich set of capabilities across connectivity, the cloud, big data analytics and application enablement. To date, no single company is delivering all of the needed capabilities across IT and OT, hardware and software, and across products and services to meet a power generation company’s complete digital transformation needs.

For these reasons, it is important for power generation companies not to look at one specific vendor when making technology decisions, but rather the complete ecosystem and defined partnership between technology vendors that can be trusted to deliver a complete solution.

IC

Does digital hold benefits and potential that we have yet to experience or see?

ML

In our most recent research the benefits of digitalization have been significant. Across our use cases we have seen improvements in productivity, maintenance, reliability and more that exceed 10 percent; whereas often many companies without digitalization have been struggling to find 1-2 percent improvements year on year.

"Digital transformation needs a CEO vision."

Looking ahead, we expect more and more companies to digitally enable more and more of their plant assets. Not just critical assets like turbines, boilers and generators, but equipment that is traditionally considered too marginal for investment in digitalization, like motors. However, with an IIoT platform approach, the marginal cost of digitalizing each asset quickly falls to almost $0 and the return on investment rises to nearly 100 percent. Some early adopters are already digitalizing all their assets - even the so-called marginal ones - and the results are very impressive.


About LNS Research

“Our mission is to enable digital transformation for industry. We are the leading research and advisory firm delivering technology insights for business executives. Our analysts focus on identifying the metrics, leadership, business process and technology capabilities effecting change. Our practices focus on the needs of:
• Quality leaders
• Environment health and safety leaders
• Manufacturing and operations leaders
• Maintenance, reliability and engineering leaders
• Digital transformation leaders.”

LNS Research is based in Cambridge, Massachusetts.
www.lnsresearch.com
Matthew Littlefield

President and principal analyst of LNS
Research, a leading research and advisory firm on digital transformation, gives his views on what makes a successful digitalization program in power generation.

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Index: In Control - 01 | 2017

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