Industrials 2022: Q&A with Stephen Royle
Matt McNally speaks to Stephen Royle, Armstrong specialist with expertise in both Industrials and Aerospace.
Impact of COVID-19
“It’s allowed businesses to look at the whole picture and think about how to move forward in the next 5 to 10 years.” Stephen Royle
In the last 18 months, COVID-19 has had a big impact on the industrials sector as a whole. How do you think it’s impacted the way companies in the sector are thinking about the future? For example, is tech playing a greater role, and how are they adapting to supply chain issues?
The pandemic has been a double-edged sword. It’s been tough but it’s given certain sectors the opportunity to focus on digitalisation, and what we’re referring to here is the Internet of Things (IoT). A lot of the technologies have been around for some time, but the uptake wasn’t near the pace we’ve seen over the last 18 months. It’s allowed businesses to look at the whole picture and think about how to move forward in the next 5 to 10 years, in line with their strategies. The pandemic has also created a more collaborative environment; it’s helped companies drive out costs, become far more efficient and better at planning how their strategies will evolve and accelerate.
Digitalisation, IoT and Industry 4.0
“The opportunity is for those companies who not only have the digital ability and the smarts but can also integrate AI as well. It becomes a self-learning, self-perpetuating thing.” Stephen Royle
What are the current areas of focus within digitalisation?
If you go back 10-15 years, there was a drive towards automation. Automation is a generic term and now it’s a more focussed move towards the digitalisation of processes, which encompasses a lot of hardware and software. You’ve got increasing numbers of sensors and the ability to integrate AI which creates an optimum environment for becoming more efficient and driving out costs.
If you look at the software side of things, there’s been a massive boom in the security side. You’ve got different layers of security and the way the protocols are integrated means you can communicate machine to machine. That data is then interpreted to gain even greater efficiencies and this drives the hardware sector. For example, if you have a variable speed drive in a pump, you now have embedded sensors and artificial intelligence monitoring the piece of kit as well as it doing its job. It’s relaying that data to pick up all the little idiosyncrasies that go on within that environment. The hardware has changed to integrate the software, and the software has changed to increase and heighten security and importantly improve performance.
Does this focus on optimising the manufacturing environment mean that improving the manufacturing processes themselves is taking a backseat?
That’s true to an extent. IoT is across all environments and impacts everything we do and everywhere we are. It’s basically the integration of sensors and processing the data that comes from them, it’s all about connections. It’s not just about picking up issues, there’s also a drive for efficiency. Once you start to spot the inefficiencies that are in your production process, you can work out ways to improve that process by eradicating errors. This is smart manufacturing. When you talk about ‘smart’ within an industrial environment, it means to improve the quality and speed of your process manufacturing.
On top of that, you’re gaining invaluable data to feed into your R&D. For example, once you’ve worked out that a process is costing an extra 10 to 15 seconds per unit you will want to enhance it. You will ask your manufacturer to provide more data and move to a point of predictive maintenance. Soon, you get to a point where the system is starting to learn of its own volition.
A really big thing in industrial processes at the moment is how you can become more efficient. In the past the attitude was, ‘if it isn’t broken don’t try and fix it,’ but that has changed and they will fix and replace. What you’ll find is it will become a natural process, rather than a driven process of a conscious decision. Manufacturers won’t wait for failure.
Where are industrial sectors on the digitalisation adoption curve and are there particular sectors that are frontrunners?
We are in the Fourth Industrial Revolution and that is digitalisation. You can look anywhere and see that digitalisation is integrated within our society as a whole and that level of digitalisation is just getting smarter and better. It’s hard to know where we are on the adoption curve, because normally you have an endpoint and this doesn’t. The environments that are growing the fastest in this sector are mainly driven by the large corporations, like Amazon. In the past, superior technology came from aerospace or the defence sector, now it’s coming from commercial environments. That’s because they can move quicker, they have the investment and importantly it’s all that they do; they develop smart technologies and ecosystem environments.
To pick out one sector is difficult. Two high growth areas are cyber security and areas capable of operating across multiple platforms. If you go back 10 years, industrial manufacturers would have their own protocols which made communication between machines difficult. We’re now seeing a flattening out of that playing field with a single line of protocols, everything can communicate with everything. The opportunity is for those companies who not only have the ability and the smarts, but they can also integrate AI as well. It becomes a self-learning, self-perpetuating thing.
For specific sectors, I would probably go with those that are in the electronics and electronics sub-assemblies environments that are integrating sensor technology and then further down to the integration of AI. On top of that you’ve got to house the data and that data needs to be secure and accessible. That’s another environment that is growing massively, data centres. If you can extrapolate that data, learn from it with AI and then use it for redesign or new R&D; that’s a really strong position to be in.
Industrials today encompass huge amounts of smart technology and digitalisation. You can’t survive in an industrial environment without adopting some form of smart technology that integrates into the IoT, you just won’t survive.
Rise of the data specialists
“It’s almost like we’re moving to a consortium environment.” Stephen Royle
Often the interpretation and insight from data is something companies are also looking for from external providers. Is this the case for industrials or does in need to be done in-house because they’re the people who are on the ground and are going to be focused on driving efficiencies, what they can do to improve production etc.?
A lot of these organisations are now looking for providers that are going to inform them of what they’re looking for and give them realistic solutions to it. The reason is a lot of those smarts have gone from in-house. They’re focusing on the job in hand and their core competencies. These environments are looking for specialists that can come in, interpret their data, tell them what’s really going on, tell them where they’re efficient, and then put forward processes and plans for improvement.
It’s an interesting sector, 10-12 years ago someone like Siemens would sell pieces of kit and an additional support package alongside it, that was their value add. Over a period of time, companies didn’t want Siemens coming in and interpreting their data because it cost three times as much, and often they’d come up with a recommendation for further Siemen’s technologies. Businesses are looking for independence.
They want their advisors to be industry specific and who know their sector inside and out. They want people who come to the table with this is what you’re going to need to do and you can buy it from X, Y and Z. It doesn’t end there, they want them to come forward with complete proposals and then be able to implement it, manage the installation and measure the efficiencies so that they can demonstrate how much money they’re saving.
Sounds like we’re going down the route of consultancy and professional services into industrials, rather than purely the technology. It’s about the design, the implementation, the technology you need, how you interpret it, etc. My immediate question around all consultancy businesses is, to what extent do you think those businesses can scale?
Number one is you need to be very specific, almost niche. But bear in mind that niche nowadays means in the whole IoT environment, you can cross over into multiple different sectors. Your smarts can actually be appreciated in another environment, there will be natural crossovers. On top of that, it’s almost like we’re moving to a consortium environment. There are the people that understand the technology, who have the smarts and they can go in and interpret for the businesses in whatever field that may be. Then there are the practical aspects like the hardware involved and software development. A lot of that isn’t going to be governed and held by a consultancy. They will take a consortium approach and be aligned with two or three other software houses or hardware houses and package it up for their clients as a complete solution.
The benefit of that is twofold, firstly it’s managed by the consultancy, so there’s one point of reference and secondly, you’ll be getting the latest and the smartest technologies that are available. What you tend to find is the lower tier suppliers are much more agile. When you start dealing with tier 1s, you’re talking a lot more money, they come with prepacked solutions and they keep their smarts in-house. Effectively by going further down that field and using the consultancy consortium approach you get more. They’re able to do the measurements, set the benchmarks, spot inefficiencies and tell you what you need to be doing, whether it be hardware or software. You can pay them manage those projects, implement them and use them to monitor as you go forward. I think the days of being a one trick pony as a consultancy are gone.
What they are looking towards now is how to diversify and add more value into that process.
Challenges for technology adoption
“I would say that in the past few years, we’ve probably doubled levels of adoption. And it’s only going to continue.” Stephen
Are there any threats or inhibitors to the continued adoption of this sort of tech?
I think up until two years ago, there was fear of change. Industrials has always had the philosophy of ‘if it ain’t broke, then don’t try and fix it.’ Whilst people had been investigating these technologies, the barrier was when to implement them, how to implement them and what the impact of that implementation would be. In the past two years that’s been removed because people had a lot more time and space to consider how to move those things forwards, especially having been hit hard financially. They’ve had to look at ways in which they can improve efficiencies and their bottom line. It’s as simple as that.
It was also a possessive environment and there was fear about data being elsewhere, whether sitting in the cloud or a third-party data centre. That has changed now. The level of support that’s been shown and demonstrated by those environments is something that’s more globally accepted. We do it on a daily basis in our own personal life, so why wouldn’t we in a business or industrial environment? That whole closed environment has been opened right up, and a lot of that is because the fear factor has been removed.
We’ve also got a different generation that’s coming through and this is their world. They’ve grown up in a digitalised environment and the fear of digitalisation is gone. The benefits to efficiencies and the bottom line have been proven time and time again and you can’t ignore that. Companies need to be in an environment where they can compete, be profitable and stay ahead of the market trends. Understanding market trends as what’s happening in your environment is the IoT. As soon as you put a sensor on something you’re able to start anticipating what’s happening in the future.
A good example is the defence environment, it has always been incredibly closed door and everything was held by the MoD. Now the commercial environment is further ahead and leading the way. If you’re in the defence sector, the first thing you do is go out into the commercial environment and see what’s available and, as long as you can get it secure, then there isn’t an issue. They’re now pushing much further down that chain into smaller technology specialists because it gives them an advantage and drives down their costs.
I think there’s been a degree of failure to adopt because there have also been cost inhibitors. That’s no longer the case and that fear of losing heads is not there either. If you look at the environment that we’re in now, headcount is increasing. Fear, siloed thinking and cost were the previous inhibitors, I don’t feel that they’re there anymore.
It sounds as if we’re getting to the stage where companies can’t afford not to do it or they risk being left behind?
Effectively, yes. If your competitors are embracing digitalisation, and they’re in your marketplace, who would you go with? You’d go with the one that’s more secure, the one that’s improving efficiencies, lowering prices year on year and improving quality. This isn’t a race to the bottom either. This may be efficiency driven, but it’s to get to a desired end result and remaining ahead of the game. I would say that in the past few years, we’ve probably doubled that level of adoption. And it’s only going to continue.
Is ESG and specifically climate change a factor as well?
They’re very much on the agenda. Climate change will always drive efficiencies and efficiencies will help climate change. There are carbon targets and obviously this is an area that a lot of processes are focussed on because otherwise you get fined. It’s as simple as that. There’s a flip side of course; when you create vast datasets that need to be stored in data centres, you increase energy consumption. It’s a balance between the two. Either way if you’ve got a whole bunch of sensors and you’re able to interpret that data, you’re going to be more efficient by nature.
There are still certain pieces of kit that you can’t swap out, they’re too integral to a process. When you’ve got a failure that’s when you get the new one that’s more efficient. That will start to prove itself and that’s when a lot of process engineers start looking at it and think how to increase levels of efficiency and drive down costs even further. The rates of return can be phenomenal.
If you look at the lighting sector, 10 years ago, LED lighting was really expensive, now it’s not. The lighting sector has probably bottomed out as much as it possibly can do. But then you’re looking at the next generation of lighting and that’s actually going to be charged at a little bit more of a premium but ultimately your lighting bills and your return on investment on those was super-fast. In some instances, in seven to eight months. You’re going start to see the same thing in the industrials environment, and it’s already here and it’s already been taken up.
Please speak to Matt if you would like more insights on the industrials sector.
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