MBA Company Project
Business Process Roadmap
for IoT Project Initiation
Kamil Baranowski 14-08-2018
Title: Bu siness Process Roadmap for IoT Project Initiatio n.
Author: Kamil Baranowski
Student number: 11420197
Date: 14-08-2018
Place: Amersfoort
The Netherlands
University: University of Amsterdam
Amsterdam Business School Address: Plantage Muidergracht 12 1018 TV Amsterdam The Netherlands Researched company: VMI Group Address: Gelriaweg 16 8161 RK Epe The Netherlands
Thesis supervisor: Dr. Ileana Maris-de Bresser
Company supervisor:
Abstract
Companies begin the Internet of Things journey with high expectations. However the digital transformation is one of the biggest hurdles and often ends up with disappointing results. The ability to digitally reimagine the business and achieve positive return on investment for the IoT undertakings is determined in large part by a strategic digital vision and clearly identified business goals.
In this paper I present a practical approach to business process map for IoT projects initiation proposed by Gartner Research – Leading the IoT (2017), concentrating my activities on finding company’s specific business goals which enable the development of IoT use cases that match company’s and industry’s particular requirements.
VMI Group, the company where the research was conducted, is a high quality machinery and services supplier based in Epe, the Netherlands. This research applies frameworks and methodologies to the company’s business line – VMI Services, allowing the department to identify main business objectives and prioritize digital opportunities around the most significant areas in order to develop IoT use cases that will deliver business goals and values initially expected.
Table of Content
Abstract 2
Chapter 1 9
Introduction 9
1.1 Motive and relevance 9
1.2 Researched company 11
1.3 VMI Services 12
1.4 Research strategy and goals 13
1.5 Data collection 14
1.6 List of abbreviation and definitions 16
Chapter 2 17
Theoretical framework 17
2.1 Leading the IoT 17
2.2 Digital transformation framework 18
2.3 Value proposition design 20
2.4 The elements of value 22
2.5 Digital ubiquity 24
2.6 Value drivers for companies to implement IoT 25
2.7 IoT and required infrastructure 26
Chapter 3 27
Application – identifying business goals 27
3.1 Organization insights 27
3.2 VMI Services profile – customers 29
Jobs 29 3.2.1 Pains 31 3.2.2 Gains 34 3.2.3
3.2.3.1 Business goal 1: management of data 34
3.2.3.2 Business goal 2: regular checks-up 36
3.3 VMI Services Profile – product and service 38
Jobs 38
3.3.1
Pains 43
Gains 48 3.3.3
3.3.3.1 Business goal 3: performance measurements 48 3.3.3.2 Business goal 4: standardization of technology 49
Chapter 4 51
VMI strategic plan 51
4.1 VMI actions 51 Management of data 51 4.1.1 Regular check-ups 53 4.1.2 Performance measurement 53 4.1.3 Standardization of products 54 4.1.4 Chapter 5 56
Recommendation and reflections 56
5.1 Process map – key deliverables 56
5.2 Closing the gap 57
Focus areas 57
5.2.1
5.2.1.1 Digital leaders 57
5.2.1.2 Talent management 58
5.2.1.3 New models of value creation 58
5.2.1.4 Building out the ecosystem 59
5.3 The design of IoT use cases 61
Value map 61
5.3.1
Value proposition canvas design for step 1 and step 2 62 5.3.2
5.4 IoT use case implementation 64
Customer profile 64
5.4.1
Value map 65
5.4.2
Value proposition canvas 66
5.4.3
5.5 Limitations and conclusion 67
Table of Figures
Figure 1. Technology suppliers and manufacturers answers to question: Is
disruptive technology seen as an opportunity? 10
Figure 2. Indicative quantification of value drivers (McKinsey&Company,
2015). 10
Figure 3. Business process map for IoT project initiation (Hung, 2017). 13 Figure 4. Step1 of Gartner’s business process roadmap for IoT initiation (Hung,
2017) – the identification of business goals. 14
Figure 5. Business process map for IoT project Initiation (Hung, 2017). 17 Figure 6. Cognizant’s digital transformation framework (Corver & Elkhuizen,
2014). 19
Figure 7. Value proposition design canvas (Osterwalder, et al., 2014). 20 Figure 8. Value proposition design canvas – customer profile (Osterwalder, et
al., 2014). 21
Figure 9. Value proposition design canvas – value map (Osterwalder, et al.,
2014). 21
Figure 10. Value proposition design canvas – FIT concept (Osterwalder, et al.,
2014). 22
Figure 11. The elements of value pyramid (Eric Almquist, 2016). 22 Figure 12. The B2B elements of value pyramid (Almquist, et al., 2018). 23 Figure 13. The evolution of service model (Iansiti & Lakhani, 2014). 24 Figure 14. The new technology stack (Michael E. Porter, 2014). 26 Figure 15. VMI Group – holding structure (VMI Group, 2018). 27
Figure 16. VMI internal processes (VMI Group, 2018). 28
Figure 17. Digital twin conceptual architecture (Parrott & Warshaw, 2017). 37 Figure 18. Reliability of machine without maintenance (VMI Group, 2017). 39 Figure 19. Reliability of machine with VMI Services maintenance support (VMI
Group, 2017). 40
Figure 20.Costs of VMI Services maintenance support (VMI Group, 2017). 45 Figure 21. Network architecture for MES data exchange (VMI Group, 2018). 52 Figure 22. Structuring architecture within VMI (VMI Group, 2018). 55 Figure 23. VMI vision behind structured method of building machines (VMI
Figure 24. Business process map for IoT project initiation for VMI Services.
Step 1 and 2. 56
Figure 25. Value proposition canvas created for step 1 and step 2 of Gartner’s
business process map for IoT initiation. 61
Figure 26. Value proposition canvas created for step 1 and step 2 of Gartner’s “business process map for IoT initiation” (Hung, 2017) with the FIT concept. 63 Figure 27. VMI Services profile – product and service: performance
measurement. 64
Figure 28. VMI Services value map – product and service: performance
measurement. 65
Figure 29. Value proposition canvas for IoT use case – performance
Table of Tables
Table 1. List of abbreviations and definitions. 16
Table 2. VMI Services jobs toward customers presented in the form of provided
customer value. 30
Table 3. VMI Services pains toward customers presented in the form of customer
value misalignment. 33
Table 4. VMI Services jobs toward product and service presented in the form of
customer value. 42
Table 5. VMI Services pains toward product and service presented in the form of
Acknowledgments
The Amsterdam MBA Programme was a great journey that planted a seed of inspiration and filled my head with exciting ideas. Right now the time has come to set them in motion.
I would like to offer my special thanks to Dr. Ileana Maris-de Bresser for her assistance and supervision during the research, valuable and constructive suggestions all the way through the planning and development period of this research.
I am very grateful for the opportunity given me by VMI Services to visit their offices and observe their daily operations and to all VMI employees for their patience and openness during conducted interviews.
Special thanks to my family for their support and unshakable faith in me.
Finally, my deepest gratitude goes to Paulina who listened patiently to my never-ending MBA talks, discussed with me many academic concepts and ideas and for her overall warm support during this intensive time.
Chapter 1
Introduction
Chapter 1 – explains thesis subject decision, elaborates research motive and relevance. It introduces company where research was conducted and its goals toward digitalization. It describes as well research statement and methodology and gives to the reader basic information about abbreviations and definitions used in the text.
1.1 Motive and relevance
Internet of Things is considered a new phenomenon which has the potential to create new value proposition, not yet understood and captured by the majority of companies. The phrase “Internet of Things - IoT” emerged to explain smart, connected products and is an umbrella term for a broad range of underlying technologies and services. Fundamental difference of new capabilities of IoT devices, a part of 4th industrial revolution – cyberphisical systems, compared to 3rd industrial revolution – automation (McKinsey&Company, 2015) is not the Internet only, but the new nature of the thing, which allows to exchange information between itself and its operating environment, its maker, its user or between other product and system (Michael E. Porter, 2014). The IoT will have a great impact on the economy and will definitely create or change many business models, improve efficiency and ultimately benefit businesses and customers. However, this digital transformation is among the biggest hurdles to success for many companies (McKinsey&Company, 2015). Disruptive technologies can impact a company in many ways and according McKinsey Industry 4.0 Global Expert Survey (2015), suppliers and manufacturers view it as an opportunity.
Figure 1. Technology suppliers and manufacturers answers to question: Is disruptive technology seen as an opportunity?
The chance for manufacturing sector seems to be very promising, especially in two value drivers presented in the graph below: services/aftersales and asset utilization, where the promise of potential gains by digitalization is the highest (McKinsey&Company, 2015).
Figure 2. Indicative quantification of value drivers (McKinsey&Company, 2015). This research aims to unveil possible implementation of Internet of Things analyzing a manufacturing company’s current situation and to map business goals in order to increase the value of product or service by a suitable IoT application. The leverage by disruptive technology should be supported with previous analysis of current jobs and pains that company has with a promise of possible gains thanks to the IoT.
1.2 Researched company
VMI Group is a high quality machinery and services supplier based in Epe, the Netherlands. The company would like to enhance its products and services by implementing new digital technologies. VMI handles innovation on a daily basis and is aware that to gain significant benefits in the fields of the IoT, as for example using resources, optimizing processes, improving quality or current level of its digital ecosystem (Manyika, et al., 2015) it is desirable to build a business roadmap that can help to overcome and speed up identification and implementation process of the most beneficial IoT applications.
VMI was founded in 1945 and through a connection with Dutch Railways, initially specialized in repair and small construction work. Its manufacturing expanded as it entered the rubber and tire industries.
Its current activities are divided between 5 business lines: - VMI Tire,
- VMI Rubber, - VMI Can, - VMI Care, - VMI Services.
VMI is operating on the global market with eight facilities on four continents: - Europe, Epe, the Netherlands – HQ,
- Asia, China,
- North America, USA, - South America, Brazil.
It provides proven, reliable equipment, services and solution, cooperating closely with a majority of the top tires manufacturers. Its mission is to make customers more successful through innovative technology.
1.3 VMI Services
VMI as a global leader is looking to leverage its machines by connecting them, using new technology as the IoT, to tap into new digital business areas to improve current solutions. The IoT subject is especially interesting for VMI Services, the department in which the research was conducted. This VMI business line was created to make sure that VMI customers have all necessary services to operate machines with the highest performance. VMI Services offers wide range of services for customers all over the world and is available for them 24 hours a day, 7 days a week, to guarantee a rapid on-site response whenever it is necessary.
In order to be able to support customers with a required speed and quickly identify machines operational state it would be helpful to have online capabilities to monitor, control and optimize each machine. The IoT technology gives to physical assets a new type of connectivity which serves as information transfer channel between machine and its environment and its manufacturer. This additional data, transferred by the IoT, could be acquired by VMI Services and used to improve its business processes. It has a potential of significantly increasing the quality of its support and response time what would positively influence VMI customers in their manufacturing processes.
But before stepping into the digital world of smart sensors, it is reasonable to create company’s roadmap in order to validate VMI Services current business goals, requirements, identify the department’s inefficiencies and get proper insight on internal objectives. All these activities are supposed to develop a proper IoT use case that will be a legitimate solution, crafted for VMI Services. To meet this aim of VMI Services the research will put attention on developing a “business process roadmap for IoT project initiation”, focusing on a first step from Gartner’s “business process map for Internet of Things project initiation” (Figure 1). In the first Gartner’s step the company identifies and re-evaluates business goals and objectives that are essential for its strategical needs. From VMI Services point of view it is essential to primarily identify a wide range of business goals by analyzing current situation, with a focus on different aspects as activities, risks and issues to create the most valuable foundation for implementation of the IoT technology. Every IoT use case should be supported with clear evaluation and has to resonate with company’s business
roadmap what will help avoiding unexpected problems and unanticipated obstacles in deployment phase.
Figure 3. Business process map for IoT project initiation (Hung, 2017).
1.4 Research strategy and goals
The identification of company’s business goal is a complex process that may be executed in a variety of ways. For this research I combined two approaches presented by two global research and advisory companies: Gartner and Cognizant, to propose one, the most suitable for the researched case. I analyzed VMI Services activities in two areas presented in the digital transformation framework of Cognizant, in order to find business goals from the first step of Gartner’s “business process roadmap for IoT initiation”. In each area I created a VMI Services profile. Creating a complete profile, where I could identify clearly core processes, problems and business goals and later properly address each of them with potential values, became difficult, especially during the interview process, in terms of structure and data organization. Therefore, I found really helpful to base each profile on “Customer Profile” methodology proposed in “Value Proposition Design” (Osterwalder, et al., 2014). In this way, I evaluated VMI Services portfolio, core processes and organizational structure and derived and categorized information in three groups:
1. Jobs – actions and responsibilities that VMI Services is trying to get done for its customers and for service provided.
2. Pains – problems, risks, undesired outcomes and interruptions that stop or prevent VMI Services from executing expected jobs.
3. Gains – desired outcomes, benefits that VMI Services seeks in a specific area of interest, which are a representation of business goals of VMI Services department.
Figure 4. Step1 of Gartner’s business process roadmap for IoT initiation (Hung, 2017) – the identification of business goals.
Jobs and pains that I identified while researching the service department were categorized in terms of values that they are supposed to provide or value that is lost due to service inability. The value assessment is created based on the extended theory of Maslow value pyramid, created by Eric Almquist in “The Elements of Value” (Eric Almquist, 2016).
The main deliverables that are aiming to support VMI Services are summarized as business goals in paragraphs related to gains (4.2.3 Gains, 4.3.3 Gains). The business goals were identified based upon jobs and pains of selected areas of VMI Services activities and are presented in a form of a canvas (Figure 4), which is the representation of the first step of Gartner’s “Business process roadmap for IoT initiation”. Based on these key takeaways the process of IoT use case generation can be initiated.
1.5 Data collection
The collection of necessary data to generate VMI Services profiles, described in paragraph 1.4, was conducted by multiple methods.
The first one, indirect data collection, was executed by researching shared departments’ documents and available media information:
Customer Jobs Pains Gains - Business Goals 1 - Business Goals 2
Product and Service Jobs
Pains
Gains
- Business Goals 1 - Business Goals 2
- VMI Services customers’ brochures, - VMI Services department documentation.
The second one, direct data collection, was based on interviews with VMI employees. In order to obtain objective data I methodologically surveyed employees that are executing different tasks, in order to be able to gather wide range of information that will reflect current business activities on different levels and perceive potential areas of problems seen from different angles. Each interviewed person was asked to explain their daily jobs, assignments which they are trying to complete every day. The job category included important tasks or projects which need to be performed and finalized. Next to each job I asked to evaluate situations that prevent them from executing indicated jobs, for example all difficulties and challenges that they encounter during daily processes with all undesired additional related consequences. I categorized this information as pains. The last part of each interview was related to gains, combined outcomes and benefits that are required, expected from listed activities. In this pool I asked for all expectations that are obligatory, desired or even unexpected.
List of employees interviewed:
VMI Services – vice president: Riaan Diener
VMI Services – group team leader: Jan Dirk Visser
VMI Services – coordinator: Gerhard Wieberdink
VMI Services – remote support engineers: Michael de Lang and Mark Jan Zijlstra
VMI Services – support engineer: Thijs Nelemans
VMI R&D Tire – manager: Erwin Zweers
1.6 List of abbreviation and definitions
IoT Internet of Things
VMI Velvse Machine Industireel
VMI Services Business line (unit) of VMI Group
R&D Research and Development
OE Order Engineering
FS Field Service
VMS VMI Maintenance Support
VES Verification of Equipment Specification
CoO Cost of Ownership
OEE Overall Equipment Effectiveness
PLC Programmable Logic Controllers
HMI Human Machine Interface
MES Manufacturing Execution Systems
AI Artificial Intelligence
VR Virtual Reality
Chapter 2
Theoretical framework
Chapter 2 – summarizes a literature review in domain of the Internet of Things, digital disruptions, digital business models and other theoretical frameworks that are used in order to support the research in the application part.
2.1 Leading the IoT
Gartner Research in his “Insights how to lead in a connected world” (2017) presents a practical approach how to chart the path for IoT implementation. Although it shows the IoT technology advantages, explaining it using basic benefits framework, which focuses on external and internal benefits of the IoT technology, it pays as well close attention to the fact that it is often a misleading simplification that the IoT is a silver bullet for companies’ problems. Every integrator should “move beyond viewing the IoT as a general technology wave by applying an industry lens to identify relevant use cases” (Hung, 2017, p. 7).
In their approach toward the IoT, they encourage companies to apply both pragmatism and strategic vision in every of IoT projects and clearly identify, in each one, business goals and objectives by business process roadmap.
Gartner divides mapping process into 6 steps before any application.
Figure 5. Business process map for IoT project Initiation (Hung, 2017). Gartner Research emphasizes that step one is the most critical, because only after properly executed first phase, company is able to properly architect and create
an IoT use case (step 2), where with a validation and a loop back process, firm is able to build solutions that will deliver expected business goals. In “Identify Business Goal” step a company needs to deeply map own business objectives and visions in order to be able to sketch a solution that will help to capitalize technological opportunities provided by the IoT. This process helps to plan additional activities that are indispensable for IoT projects executions i.e. human resources or technological capabilities as cloud infrastructure. It defines an adequate scheduling and resource allocation for each defined goal, so execution process will stay on track while an IoT project progresses. Based on findings from step 1, companies are able to develop the most adequate IoT use cases that will provide expected values with properly addressed core business processes and designed architecture that will be able to be incorporated in firm’s structure. Next step, “Create IoT Vision and Roadmap” is a consequence where developed use cases need to be adapted into company’s internal vision, accepted and supported by the management level. Step four and five are focused on building the first, pilot concept - POC (Prove of Concept), where an IoT application is built, results are measured and feedback is used in an iteration process to improve final solution. As soon as solution passes company’s internal validation, the whole process may go further into step 6 – implement initiative. Thanks to such constructed business process roadmap, from Gartner’s experience, companies are able to predict most of problems, related both to complexity of the IoT technology and to unanticipated obstacles in a modern organization structures.
2.2 Digital transformation framework
IoT has the potential to significantly shift the way companies interact in a standard B2B environment. To realize fully this potential of digitalization Cognizant is introducing a framework which is a practical tool to drive companies through fuzzy and undefined topic of digital transformation (Corver & Elkhuizen, 2014). Authors, Quido Corver and Gerard Elkhuizen aim in their paper “A Framework for Digital Business Transformation” (2014) to put structure and rigor into companies’ digital processes, by analyzing business goals related to digitalization and help them figure out what type of problems they have to deal with.
Cognizant’s digital transformation framework distinguishes four areas of company’s business goals: customer, products and service, processes and systems, organization. In these four fields the goal is to research the role of digital technologies that will have the biggest business impact in its competitive environment. Each field may contain some customer specific elements i.e. customers – digital omni-channel strategy, but they advise to tailor the framework to an industry, a market and an organization in order to achieve proper fit.
Figure 6. Cognizant’s digital transformation framework (Corver & Elkhuizen, 2014).
Cognizant by its digital re-mastering of business scope, simplifies a strategic approach for companies that are looking for a digital leverage. Digital transformation framework helps to bring attention to modern digital trends, incorporate smart processes to better understand customers. Application enables to create a modern organization with products and services which main objective is to maximize value for customers and simultaneously positively impact the performance of firms in a virtual environment.
2.3 Value proposition design
Profitable companies act with clear business goals, clear vision and value proposition that define their actions. An identification of business goal that supports companies’ offering is getting nowadays paramount to their success.
“Value Proposition Design” is a useful framework created by Alex Osterwalder and Yves Pigneur and by Greg Bernardo and Alan Smith (2014) and is supplemented with a very intuitive design by Trish Papadakos. It takes two critical dimensions of “Customers Profile” and “Value Map” and zooms them to explore how companies can effectively create value for customers.
Figure 7. Value proposition design canvas (Osterwalder, et al., 2014).
“Customer Profile” starts with mapping customers’ jobs – an important issues or tasks that customers are trying to solve or perform in their work, continuing with pains – which describe anything that they encounter during jobs execution both related to not working solutions and i.e. frustrating emotions caused by difficulties that emerges. Last part charts gains – required, expected and desired that customers would like to get from performed task or service. “Customer Profile” may be created for specifically: segmented group of customers, department’s daily responsibilities or firm’s offer.
Figure 8. Value proposition design canvas – customer profile (Osterwalder, et al., 2014).
The second part of “Value Proposition Design” is “Value Map”. With it we list products and services that company’s value proposition builds on. We describe in which way these products and services relief pains mapped in related “Customer Profile”, how they reduce, minimize or eliminate pains customers care about. We outline in which way they are gain creators, how they produce, increase or maximize outcomes and benefits that customers expect, desire or would be surprised by. “The Value Map” makes clear how products and services get rid of pains and generate gains.
Figure 9. Value proposition design canvas – value map (Osterwalder, et al., 2014). Framework supports its user with a well-designed, up-front testing and analysis principle that helps company’s products or services that are being developed by “Value Map” resonates with described needs in the “Customer Profile”. When clear connection is created we achieve “FIT”, what means that customers’ pains and expected gains are satisfied by pain relievers and gains creators of firm’s offer.
Figure 10. Value proposition design canvas – FIT concept (Osterwalder, et al., 2014).
2.4 The elements of value
Products and services are constantly evaluated by customers. What companies deliver, addresses basic human needs in four areas: functional, emotional, life changing and social impact. “The Elements of Value” of Eric Almquist, John Senior and Nicolas Bloch (2016) paper present an extended theory to basic Maslow’s hierarchy of needs.
Authors’ research has proven that “in general, the more elements provided the greater customers’ loyalty and the higher the company's sustained revenue growth” (Eric Almquist, 2016, p. 3).
Follow-up research of the same author showed that business to customer experience with the elements of values can be translated into business to business environment (Almquist, et al., 2018). Although these values may vary for different industries, cultures and geographical locations, a valid identification and implementation in projects can deliver positive financial results of a company that bases its services and products on these essential human and business needs.
2.5 Digital ubiquity
In their paper, Marco Iansiti and Karim R. Lakhani (2014) explain how connections, sensors and data are revolutionizing businesses calling this phenomenon: “digital ubiquity”. The trend was first spotted in the transformation of software companies i.e. General Electrics, Microsoft or SAP, switching from product to service revenue streams, but it is also gradually seen in dozens of industries and companies with a core business outside software. Showing an example of GE and its digitalization process, authors (Iansiti & Lakhani, 2014) bring out that “adapting to ubiquitous digital connectivity is now essential to competitiveness” (Iansiti & Lakhani, 2014, p. 3).
Figure 13. The evolution of service model (Iansiti & Lakhani, 2014).
Changing the digital business model is not an easy task and companies are facing many challenges along it. First, because of digital innovations business model that served for decades no longer works as desired. Second, every attempt to create a new digital change in company’s structure requires as well internal disruption. Such process of shifting customer value proposition for GE was inevitable in order not to lose market shares, but it required to re-think and re-develop technical choices and commercial offering.
2.6 Value drivers for companies to implement IoT
There is an extensive acknowledgment among leaders in manufacturing industries that the role of the IoT is rapidly shifting from being marginal trend to an enabler of new prospects and values. McKinsey&Company Survey (2015) presented that proper implementation of IoT technology enables in general two types of opportunities for companies:
- Transformation of business processes, - Authorization of new business models.
With those types of transformation companies are able to eliminate digital inefficiency and unlock potential along 8 identified value drives: resources and processes, assets utilization, labor productivity, management of inventories, quality improvement, match of supply and demand, reducing time to market, service and after sales support (McKinsey&Company, 2015, p. 25).
The area with the largest improvement potential depends on the company and industry. In the first step the company should identify the value drivers that have the highest impact on its performance and are the most important for the industry characteristic and cost structure (McKinsey&Company, 2015, p. 28).
2.7 IoT and required infrastructure
In order to enable implementation of smart connected products companies have to build a new technology infrastructure, which may be composed of multiple layers.
Figure 14. The new technology stack (Michael E. Porter, 2014).
Michael E. Porter and James E Heppelmann (2014) put a lot of emphasis on the fact that current companies are not ready to implement IoT technology in their structure. They are expositing that new technology is cross-cutting all areas of enterprise and it will be vital for companies to create new digital ecosystem. In their framework they present area of interest where companies should focus on its internal activities in order to prepare their structures for a new large-scale digital era. The wide-spread transformation should start in multiple aspects of business i.e. infrastructure integration, systems security or data management, providing changes that will enable companies both technological and cultural transformation, alter outdated regulation and address industry requirements related to digitalization (Michael E. Porter, 2014, p. 6).
Chapter 3
Application – identifying business goals
Chapter 3 – presents the application of frameworks into corporate world of VMI Services in order to identify business goals that are essential before progressing with implementation of the IoT technology.
3.1 Organization insights
VMI Services is a business line of VMI Group, the leading global manufacturer of machinery. Service business unit partners with customers to determine their maintenance requirements, perform regular equipment check-ups or upgrades, support them by remote support call center and provide technical trainings related to products or processes. VMI has a global presence, therefore its service department supports customers around the world with the main goal to maximize customers’ productivity and minimize their operational downtimes.
VMI itself is a part of TKH Group NV, the partner corporation of an international group of companies specializing in innovative telecom, buildings and industrial solutions.
Figure 15. VMI Group – holding structure (VMI Group, 2018).
VMI internally is structured as portfolio organization which means that each business unit, called “business line”, i.e. VMI Tire (Passenger, Truck), VMI Rubber (Millroom, Extrusions, Retreading), VMI Care (Medication Packaging, Cosmetics Cotton Pads) and VMI Can, has its own Research and Development (R&D), Order Engineering (OE) and Field Service (FS). Being a mature corporation with a
multi-units structure, where engineering processes of machines are conducted by many departments creates a compound environment for VMI Services line. Within its activities it has to supports machines that are developed in R&D, customized by OE for specific customers and installed and commissioned by FS department.
Figure 16. VMI internal processes (VMI Group, 2018).
In such divergent environment mapping business goals before initiation of any new process becomes essential. VMI Services situation, due to mentioned variety of relations, requires identifying and analyzing both internal and external practices as well as analyzing structures and influences between all engaged entities in standard work conditions. According to Gartner’s findings, proper setting of objectives enables properly overcome first step of business process map for an IoT project initiation, without unexpected and unanticipated obstacles that need to be worked around or have influence on performance and on final costs of project (Hung, 2017). Many companies begin the Internet of Things journey with great expectations, but only 20% of all IoT implementations is able to monetize IoT data (Kranz, 2017).
The path of choosing a competitive strategy in a smart connected world that a company wants to follow is a trade-offs of choices that every company must reflect on, based on own unique circumstances (Michael E. Porter, 2014). In this research I have implemented two dimensions of Cognizant digital transformation framework: “Customers” and “Product & Service”, in order to simplify the process of finding VMI Services business goals and to unlock the potential of the IoT in its
3.2 VMI Services profile – customers
Customers, as for each company, are clearly the most important stakeholders for VMI. VMI Services without any doubt is the most customer-centric department within the whole company structure. VMI, as a machine manufacturer, during the years, has established a high position thanks to technological advantage, innovation and proven solutions. VMI Services as a relatively new department needs to earn customers trust. In order to achieve it, its service portfolio is crafted to answer all customers’ requirements. Below I analyzed VMI Services jobs, pains and gains related to its customers.
Jobs 3.2.1
Jobs shortly explain the reader what products and services VMI Services provides to its customers.
Support
Main activity is to help in unintended interruption in customers’ production. Together with remote guidance, they are provided to customers by support engineers to save time in case of emergency and to ease customer effort of solving problems.
Maintenance
Regular maintenance checks-ups are designed to reduce risks of customer machines failures, simplify and keep control of necessary procedures based on regular schedules. The whole service principle sums up in customer’s eyes in lower cost of ownership of assets.
Trainings
As remote support is able only to point the root of problems, customers themselves need to solve it. It means that proper knowledge acquired by training is necessary to solve issues effectively and fast. VMI Services trainings are designed for particular customers and have different levels of guidance.
Parts
As a supplier of spare parts, it is essential for VMI Services that the customers are able to order parts in the most effective way and that delivery time of parts, modules or assemblies is in expected time frame, for an acceptable price.
Support Provided value Importance High Importance Low Maintenance Provided value Importance High Importance Low Trainings Provided value Importance High Importance Low Parts Provided value Importance High Importance Low
Table 2. VMI Services jobs toward customers presented in the form of provided customer value.
Pains 3.2.2
Pains are the difficulties that appear during execution of tasks that VMI Services provides to its Customers.
Support
Culture
VMI operates on all continents and tries to enable its services for all customers, all over the world. The cultural problems arise when i.e. an office located in Europe needs to support a customer from Asia. Language difficulties, cultural differenced in understanding technical procedures and clearance of communication makes the process of finding the solution longer and more difficult.
Offline support (Phone support)
Customers are frequently complaining that it is difficult to obtain trustful diagnostic data from machines, because of excessive messages generated and presented by machine. VMI machines for example Tire Building Machines - TBMs (VMI Tire), are installed all over the world in the majority of tire manufacturers. Most of them are not connected to the Internet and consequently VMI’s engineers cannot remotely identify problems that customers are encountering. Because of the complexity of the design as well as often lack of professional training on customer’s side, identifying the root of the problem via the offline remote support is time-consuming and problematic.
Online support
The situation when the support engineer is able connect online with a machine, there is an established Internet connection between the machine and VMI helpdesk, even then the support is given when the error already happened, which puts a high pressure of time on remote support engineer. With an online communication another problem arises for customers related to the security of their intellectual properties i.e. recipes that machines are working with. Even though VMI is a secured partner there is a probability of 3rd parties to hack and steal valuable information. This is the most common reason why customers are afraid to allow VMI Services access to their machines network.
Maintenance services
Customers’ staff
Some reasons of non-effective plant operation that are reported to VMI are caused by unskilled personnel that are not able to properly identify the root cause of a problem. Without proper proactive actions, non-planed stops of machines happen and create downtime situations. The human factor, in spite of extended digital messages that are available, plays a major role in diagnosing and identification of problems.
Maintenance plan
In many cases collected for this research it was clearly stated that if only there were proper maintenance plan, executed by a qualified, trained maintenance engineer, the majority of problems might be discovered before creating a downtime situation for a production.
Parts
Delivery
Customers tend to keep low levels of spare parts, partially to minimize costs as well as space, which forces them to buy replaceable parts from local, not original suppliers, because delivery time for some parts or modules from VMI is definitely too long.
Culture Value misalignment Severity Extreme Severity Moderate Online support Value misalignment Severity Extreme Severity Moderate Online support Value misalignment Severity Extreme Severity Moderate Customers’ employees Value misalignment Severity Extreme Severity Moderate Maintenance plan Value misalignment Severity Extreme Severity Moderate Parts Value Misalignment Severity Extreme Severity Moderate
Table 3. VMI Services pains toward customers presented in the form of customer value misalignment.
Gains 3.2.3
3.2.3.1 Business goal 1: management of data
From analyzed jobs and pains it clearly emerges that diagnostics data management of machines is a severe problem for VMI Services. Data issue has its roots mainly in VMI machines design and lack of standardization of output information from wide range of portfolio products. The amount of diagnostic data that is being produced by VMI’s machines, from users’ point of view, in many cases, is coming too fast, from too many sources and in too many formats what becomes incredibly difficult to maintain it and find information that is really valuable. It could be summed up with a saying: “It is impossible to drink water from a fire hose”.
The problems related to proper data understanding translate into needs of customers. From Table 2 we see that the most essential elements of value that VMI Services wants to deliver to its customers by support services are responsiveness, risk reduction, time saving and simplification (3.2.2. Jobs, Table 2). These are the core elements of customers’ needs in performed day to day activities. From the other side, we see problems with providing expected values by VMI Services (3.2.3 Pains, Table 3). Altogether, it creates values misalignments between customers’ expectation and VMI Services delivered service. It is worth to remind that if the values that the firm provides by its services if they resonate with customers’ demands, it translates into a successful performance and positive financial results (Eric Almquist, 2016, p. 3).
New business model
VMI Services wide range of support creates an offer to customers to decrease a total cost of ownership – CoO and to share risk. This goal requires from companies to change their current service model and to move from Transactional – Break/Fix to Contractual – Risk Reduction/Reduced CoO or even further to Expanded Customer Outcomes (Iansiti & Lakhani, 2014). As VMI Services remote support service is dedicated to be available 24 hours a day, 7 days a week and whenever there is a problem with a machine, customers demand rapid response from VMI Services that identifies and solves the problem with a minimal impact for the production. This evolution of service model requires from VMI Services a new approach in data
management and implementation of new software capabilities that allows dynamic control and real-time analytics (Iansiti & Lakhani, 2014).
In general machine insight by data acquisition may be achieved in minimalistic way by applying certain analytics and KPIs to validate machines functions. But to enable new functionalities ones needs more than technology. Company needs to adapt comprehensive approach to evolve current information management practices (Zeid, 2014).
Comprehensive approach
A data management on a daily basis is an essential activity that each company has to maintain in order to be able to run its normal activities. With new business models it becomes inevitable to leverage conventional wisdom quicker and more effectively and create value for its customer using new capacities. The proper transformation should start from the root, by extracting useful data from machines with standardize procedures and use it in a way that it helps to give better service.
New capabilities
Extracting useful data requires new software capabilities that were not available before or simply not exploit in such way. The new capabilities are required in order to enable technology transformation (Iansiti & Lakhani, 2014). By leveraging data acquisition and analysis VMI Services response would be based on omni-channel strategy of Cognizant framework and would be able to improve remote support services not only by post failure support, but as well by proactive intervention, whenever transmitted and analyzed data would give a signal to react. Extended data synthesis would solve problems with support time and would diminish value misalignment from Table 3, saving necessary time of repair and reducing unwanted risk, the same re-creating alignment between Table 2 and Table 3.
3.2.3.2 Business goal 2: regular checks-up
Next challenge that emerged from collected opinions during interviews is management of maintenance activities. Every machine, no matter how technologically advanced requires regular supervision. For VMI Services it is fundamental that provided service guarantees promised level of reliability. It simply means that machines have to be serviced regularly and by well-trained staff.
Maintenance management
Nevertheless, it becomes problematic to detect and diagnose some problems that happen during production cycles. With well planned maintenance proposition, customers do not have to remember all necessary check-ups; these activities are simplified, managed regularly and standardized. But even then there are some situations that standardized procedures are not able to discover. We can observe here value misalignment between VMI Services commitment to reduce risk and cost reduction (3.2.1 Jobs, Table 2) and extremities that appears and are causing waste of time and exposure customer to unpredicted threats (3.2.2 Pains, Table 3). Some processes require instant supervision and quick reaction. In this crisis situation we see that lack of connectivity which would allow information to be exchanged between product and its operating environment, which plays here a crucial role. A remote alert situation would allow to control and create an action to possible i.e. overload conditions, allowing maintenance adjustment or quick reaction that could prevent blackouts before they occur (Michael E. Porter, 2014).
Maintenance thumb rule
Service of VMI machines is described in manuals which customers obtain when they buy them. This information of required inspections across asset life time is an empirical data, what translates into high potential deviation between machines. It strengthens unnecessary risk and consequently creates higher costs of production.
Trainings
To minimalize described hazard situation, VMI Services proposes extended trainings for its customers. Having in mind an assumption that staff that is better acquainted with machines is able to detect problems on an early stage and react
Create value for customers
When assessing current VMI Services situation and potential business values in presented business goal, we see a misalignment caused both by customers’ needs and by technological level of VMI machines. A solution might be the usage of IoT technology, which resonates in categories of necessary values with presented case. Deloitte presents potential improvements in areas of “Customer Insight” (Corver & Elkhuizen, 2014) by proactive and accurate issues detection, performance of manufacturing equipment and identification of products in the field by creation extended software capabilities called “digital twin” (Parrott & Warshaw, 2017).
Figure 17. Digital twin conceptual architecture (Parrott & Warshaw, 2017). Only by VMI Services regular check-ups machines are sustained on highly efficient level. Conditions inspections, predictive and corrective maintenance are executed in planned periods, but without extensive diagnostic data and proper communication systems unexpected situation that affect overall equipment effectiveness can occur. The next step for VMI Services related to “Digital Marketing” (Corver & Elkhuizen, 2014) is a new value proposition by optimizing assets and operation. The utilization of available data and analytics to provide maintenance services that foresee needs and requirements of machines and the possibility that customer is able to get far more out their physical assets for an acceptable price.
3.3 VMI Services Profile – product and service
VMI Services has a portfolio of services built on experience, knowledge and understanding of own product and related to its necessary service processes. Nevertheless each customer has their own priorities and business goals toward maintenance services that demand from VMI Services to be flexible with own offer and adapt it to customers’ fundamental values.
Jobs 3.3.1
Support in general offers two options: - VMI Remote Support - VMI Remote Guidance
VMI Remote Support was created to help customers diagnose and solve problem remotely with a help of support engineers. For customers who want more than only phone call explanation VMI Services introduced a tool VMI Remote Guidance, which is a video conference tool with elements of augmented reality. Support engineer is able to see customer actions, lead local engineer, explain and facilitate procedure giving real-time advices. Both services help customer mainly when an emergency situation already occurred.
Maintenance
Maintenance procedures try to proactively keep customers’ machines in good conditions. VMI Services offers four activities that are performed by engineers in customers’ manufacturing plants. These are:
- VMI Corrective Maintenance - VMI Condition Inspection - VMI Preventive Maintenance - VMI Calibration Service
In normal conditions machines reliability drops down along with operational time which causes higher costs for customers. In order to sustain proper reliability of machines, a specific maintenance has to be executed. To avoid an increased cost of maintenance VMI Services tries to introduce specific maintenance plans that are supposed to be seen as an advantage in meaning of after service equipment
Figure 18. Reliability of machine without maintenance (VMI Group, 2017). Mentioned above four kinds of service create called: VMI Maintenance Support. VMS plan aims to provide customers with full inspection of machine executed two times a year, where the first visit is a main inspection and the follow up visit is internally called a top-up inspection.
One part of VMS actions is Verification of Equipment Specification where multiple inspections of alignment, applications and adjustment are performed together with cycle time checks when relevant data is measured based on specific machine setup and under specific conditions. Mainly it begins with data acquisition where VMI engineers measures machine performance during normal production cycles. Main KPI that is an outcome of these measurements is Overall Equipment Effectiveness. OEE are global standards for measuring manufacturing productivity. It identifies the percentage of manufacturing time that machine is truly productive (Vorne, 2018). If its value is 100%, it means that machine is producing only good parts, as fast as designed with no downtimes. OEE indicator takes into account 3 main reasons of losses: availability, performance and quality.
The next step is the execution of all planed actions. Required actions are communicated a priori by the customer or are being observed a posteriori in the results of performed machine tests. After confirmed identification and repair actions VMI engineer repeats all measurements to verify if service brought any positive results to measured KPIs. All findings are noted in Final Service Visit Report. The ultimate goal of VMI Services maintenance is to keep the machine on a high level of reliability and quality of product.
Figure 19. Reliability of machine with VMI Services maintenance support (VMI Group, 2017).
Parts and logistic
It is an area of VMI Services that provides all necessary equipment for machines: a. VMI Quality Parts
b. VMI Tooling
c. VMI Spare Parts Kits d. VMI Consumables e. VMI Depot Repairs
In order to enable an easy tool for its customer to order spare part, modules and assemblies and simultaneously ensure that parts are available VMI Services supplies to customers’ software, where they can identify necessary part by unique VMI code and order it easily. There are 2 different groups of parts:
General spare parts are easy to replace by first line of maintenance personnel.
They are categorized in three groups. Each group gives customer information regarding guarantee time, life-time and maintenance plan:
- SP1 - Excluded from guarantee
- SP2 - Corrective maintenance (immediate failure – replacement cannot be planned),
- SP3 - Preventive maintenance (gradual failure – replacement can be planned).
Critical spare parts are not easy to replace and cannot be replaced by first line of
maintenance personnel. They are categorized in the same way in three groups as General Spare Parts.
Trainings
They provide essential knowledge about machines as well as extended technical information and are divided in two levels of expertise:
a. Basic b. Advanced
The main goal of trainings is to provide deep understanding of machine and all processes in order to build a team of skilled and motivated personnel that is able to handle all maintenance necessary situations. Level of expertise of trainings ranges from basic to advance in multiple disciplines. They are trainings for operators as well as for maintenance crews in disciplines as mechanics, electric and software trainings.
Management software
It is a management tool that allows VMI Services project planning, tracking life cycle operations of asset and create plans for required check-ups. The software is used only internally by VMI Services, to monitor actual state of own activities.
Support Provided value Importance High Importance Low Maintenance Provided value Importance High Importance Low Parts Provided value Importance High Importance Low Trainings Provided value Importance High Importance Low
Management software tool Provided value
Importance High
Importance Low
Table 4. VMI Services jobs toward product and service presented in the form of customer value.
Pains 3.3.2
Remote support
Data
In order to identify and provide solutions support engineers need to have correct information. It is necessary to properly identify what was the reason of a failure. Because of the complexity of VMI machines and a lack of proper trainings of customers’ staff, it happens very often that maintenance is not able to properly explain and navigate support engineer. Plenty of accessible information from machine i.e. messages, diagnostic data, lights indicators are often not related to a failure itself and are misleading the operator. Multiple information sources create a huge hassle for customers’ employees in process of solving the issue.
Remote guidance
New technologies
New technologies as augmented reality system that VMI Services introduced in its own service portfolio, still meet some reluctance form customers’ sides. Remote guidance requires the customer to buy a tool and a software subscription. It is expected that the added value provided by a tool facilitates maintenance process and incurred costs can pay off in a form of quicker service. In many cases it is difficult to prove that service was shortened because of the additional VR tool. Augmented reality technologies as every new technology requires from VMI Services as well new skill sets of its employees and constant communication with developer of software. Software that VMI Services uses requires frequent updates, modifications and changes to support engineers and to enable easy exchange necessary information during service procedure.
Maintenance
Performance results
Even though, there is a wide spectrum of services, customers often cannot clearly see the benefits of VMI Services offering. Most of the customers have their own maintenance service that is available 24h/7. It is very difficult to prove that qualified VMI Services engineers are able not only to help during a failure but as well to boost performance of machine after the service. It is due to high variety of
manufactured products i.e. different recipes of tires and due to lack of available information from machines that would be collected and analyzed after the service during production cycles.
VMI Services uses several KPIs to present positive outcomes for customers. These are: availability, performance and quality which are elements of OEE. The first two variables an engineer is able to collect, from the machines, but the last one comes from the other part of whole production process and in order to collect this data supply chain integration activities are necessary. The quality data needs to be provided by customers, when products pass along the quality control. Another problem with measurements of OEE is availability. VMI Services engineer is able to execute the test only when is on customer’s side and performs measurement itself. Such situation is inconvenient in meaning of possibility of collection data to proactive intervention with support when it is necessary.
Complexity of VMI portfolio
Services in general are supposed to be both easy to conduct by VMI employees and be able to identify all issues to protect machines from unexpected stops. This is difficult even for experienced VMI engineers, because of the complexity of the design. VMI machines offer is highly developed. VMI Tire business line offers nine standard machines:
- VMI Tire
o Passenger
§ Maxx (tire building machine) § Exxium (tire building machine) § 240 Series (tire building machine) o Truck
§ Vast (truck tire building machine) § Millex (truck tire building machine) o Component production
§ Edgiq (steel belt cutter)
§ Tpcs (textile ply cutter/splices system)
Standardization is an Achilles’ heel of VMI organization. Technical culture among business lines focuses more on a product than on a process. There are strong differences in standard solutions for machines in many levels of productions: documentation structure, mechanical, electrical or software design. A source of this discrepancy at the beginning laid in a lack of common synergy group which caused VMI business lines (responsible for machines development, for different market segments) evolving separately and during that time creating their own internal standards. Nowadays, VMI tries its efforts, by creating a special unit called “Structure Group” to encourage divided islands to use common best practices, to make current state processes uniform and transparent as well as optimize industrialization processes. But this process due to internal tensions and lack of committal attitude is seen by VMI employees as non-effective.
Services prices
Customers complain that the costs of VMI Services examinations are too high. VMI responds with argumentation that though at the beginning cost are higher than average, later they are decreasing, because local maintenance crew is taking over responsibilities and is as well properly trained and empowered to execute all necessary actions. Yellow line: Customer inspections frequency. Blue line: VMI Services inspections frequency.
Parts
Parts prices and delivery time
Although VMI strives to ensure that its part pricing is competitive and parts are of the highest quality, customers sacrifice quality over price and choose local alternatives. Quite often a part that customer requires is an assembly, which means that instead of a single component the whole module needs to be replaced. This of course increases price from customers’ perspective and create the offer less attractive.
Support - data Value misalignment Severity Extreme Severity Moderate
Support – new technologies Value misalignment
Severity Extreme
Severity Moderate
Maintenance - performance results Value misalignment
Severity Extreme
Severity Moderate
Complexity of VMI portfolio Value misalignment Severity Extreme Severity Moderate Services prices Value misalignment Severity Extreme Severity Moderate
Parts prices and delivery time Value misalignment
Severity Extreme
Severity Moderate
Table 5. VMI Services pains toward product and service presented in the form of customer value misalignment.
Gains 3.3.3
From the first glance it becomes clear that the same challenge related to data management is highly important to both analyzed categories: customer (paragraph 3.2) and product and service (paragraph 3.3). We can conclude that data management is a global issue that causes problems across the whole process of service both when it comes to customers and products and services. As it was already identified as business goal in previous paragraph (3.2 VMI Services profile – customers) I will not repeat the same argumentation.
3.3.3.1 Business goal 3: performance measurements
VMI Services tries to valuate benefits of its services based on performance measurements. This strategy currently works under certain conditions. Tests need to be completed locally, at customer place, which from global market reach reasons is very problematic and costly. VMI Services misses in this equation capability of constant analysis of performance data from machines, on a daily basis, in order to create a reliable source of information and build on this statistics, cost versus benefit calculations that could be presented to customers to prove its hypothesis.
Such approach of data management, mentioned in section 3.2.3.1 Business goal 1, in this case requires creating a whole new technology infrastructure that is able to collect and share required amount of data generated inside and outside the product. It starts with new capabilities of product itself, where two main components, hardware and software, need to be altered in order to enable a transformation. Michael E. Porter and James E. Heppelmann (2014) call it “technology stack”, which is a technological foundation that in this case would support business goal and create new insights for the firm.
In VMI Services case the scale and scope of the opportunity becomes clear. Machines already have necessary KPIs. Software is capable or requires small adaptation to collect valuable data. There are already tools available for service engineers locally to collect it. The struggle emerges with the convergence of IT activities and transfer of data in a remote way. Although VMI Services is able to connect remotely with a machine, using special hardware that enables online connection, many times customer’s infrastructure and IT does not enable it. In minor
performance, to i.e. increase integrated customer service. This solution is being used only randomly when a major problem occurs, mostly related to software unrecoverable fault, that local maintenance is not able to solve. A digital optimization that might be applied here is able to build an end-to-end information flow that helps the digital monitoring of the end product in operations. By redesigning existing networks, in general, companies are able to move closer to customers and thanks to new capabilities of automation technologies, they are more responsive, which gives new potential to meet customers’ expectation, measure performance and be present in any location with a zero commutation costs. Information transfer for adapting manufacturing process is just the beginning of a flexible and more modular production, in many sources called Industry 4.0. This modern approach is essential to allow companies to react faster on measured KPIs, extend their remote competences to optimize their customers’ business (McKinsey&Company, 2015).
McKinsey&Company in his report “Industry 4.0 How to navigate digitization of the manufacturing sector” (2015) showed that new software solutions that allow technicians to establish a secure remote connection to industrial equipment to carry out a diagnosis without visiting the site improve not only resource and process information availability, which is identified as a pain point of performance measurements in Table 5, it boosts as well quality of end product (McKinsey&Company, 2015, p. 27). This is another misalignment found between VMI Services jobs and pains which in current situation is impossible to be measured. It creates, as described in paragraph 3.3.2 Pains, a deadlock for VMI Services who does not know how quality of end product was affected by completed service.
3.3.3.2 Business goal 4: standardization of technology
“Every one of our products had a different underpinning platform, architecture, technology and set of vendors” said William Ruh senior leader of GE before he started a new strategic process of building standardized software capabilities in GE (Iansiti & Lakhani, 2014, p. 7).
Providing a high standard of support and maintenance service to every business line requires from VMI Services extend knowledge of machines, modules, hardware
