Accelerating Industry 4.0 Adoption: Q&A With QiO Technologies

February 2018

To dig deeper into best practices and hear first-hand how manufacturers are integrating Industry 4.0 on shop floors and in executive suites, BDO’s Manufacturing & Distribution Practice Leader and Industry 4.0 Co-Leader Rick Schreiber sat down with BDO client Baz Khuti, Co-Founder and CEO of QiO Technologies, a global software company based in the UK that focuses on applications for accelerating Industry 4.0.

Rick Schreiber: How did your career bring you to launch a venture for industrial companies?

Baz Khuti: I’ve been in the industry for 30 years, starting on the shop floor, then moving into software development. I’ve worked with many well-established companies, including GE, Emerson Electric and Invensys. These stalwart companies are unique because they have a long heritage and pride themselves on the quality of their services to customers from long-term engagements. The more complex the product, the more important the relationship between the manufacturer and the customer becomes. Some products have very long lifecycles and can be operational for more than 20 years, and I saw first-hand the challenges that are associated with this longevity.

Industry 4.0 has the potential to fundamentally alter the dynamics between manufacturers and customers in a way that benefits both. As the industry overall shifts towards mass product customization, the relationship will evolve and deepen with new and different challenges emerging. Manufacturers will need to provide unique services, training and maintenance for their products—transitioning from a seller of products to servitization or a product-as-a-service business model. Further, the use of low-cost smart sensors means factories and products will generate significantly more data requiring new software platforms and applications to enable a dynamic supply chain and real-time customer service. For example, insight on how products are performing, predicting maintenance and production—there really is no limit.

These changes necessitate a greater need for secure and scalable data solutions, such as cloud-neutral services and cloud-native software platforms. I saw a market need in helping manufacturing and industrial companies accelerate their adoption of these new technologies, create new business models, and regain control of their data and customers.

RS: In your view, what are the primary drivers of Industry 4.0, and how should CEOs respond to this evolution—or revolution, as many are calling it?

BK: A few competitive forces are fueling the interest in Industry 4.0. First, factories in Asia and other emerging markets have learned how to make products cheaper, faster and of comparable quality to traditional manufacturing economies. Second, integrating software into products has become such a driver of growth that not using software could threaten the stability of long-term business contracts, which again, can stretch years or decades and represent considerable value. Third, the average age of manufacturing workers is increasing, and the labor pool needs a different skillset to operate the advanced technology and software required to enable smarter, faster production. In many tech-savvy workers’ eyes, manufacturing isn’t as attractive an industry as others they may be qualified to enter, so hiring talent, retraining and retaining existing employees can be incredibly challenging.

The first step to survival is vertical integration and fostering a tone at the top that encourages collaboration and trust between functions that historically operated in silos. CEOs must put a strategic framework in place to drive Industry 4.0 solutions across functions that can provide a customer lens into the factory, where transparency unlocks trapped productivity, or they will risk being left behind by competitors. One strategic play to consider is acquiring capabilities and software that are wrapped around products so the customer gains more value from associated services and the manufacturer creates differentiation. Growing software capability in-house and upskilling engineers to become “digital” can help manufacturers drive operational efficiencies and improve safety, which are the primary goals of digitization.

RS: What about mid-sized businesses whose resource constraints may not allow them to scale their Industry 4.0 integration as quickly?

BK: We are working with some businesses that are at the early stages of their path to Industry 4.0 adoption. The key to balancing and prioritizing investment is to start with the low-hanging fruit. Engage in a dialogue and pick an area of focus where you want to see added value in the customer relationship. Think about those elusive questions that have been difficult to answer in terms of business outcomes and pick high-value use cases where investment in digitization will drive a measurable outcome. For the mid-market, a limited proof-of-concept period of four to six weeks can be used as an intermediate step before scaling the solution.

“Think big, start small and scale fast” is the mantra we communicate to our customers.

What does this look like in practice? Consider a legacy steel manufacturer with decades of customer data, quality data, inventory data and purchasing records. Such a firm could create significant value by using cloud-native advanced analytical tools to mine their existing data for trends and insights to improve plant safety, customer relationships or manage inventory and production more efficiently. Once the concept has been validated, the next step could be investment in additional factory and machinery sensors to expand their data collection and drive further value.

For example: We worked with a manufacturer whose machinery continuously collected real-time data, but only stored the data for three weeks before overwriting it. They had already made the investment in the equipment and asked themselves, “What if we could extract the data, analyze it and use it to inform our production cycles?” We enabled them to capture this data and improve productivity.

Another approach we have taken at QiO is to create self-service applications for small to mid-market enterprises. For example, if you want prescriptive maintenance, it can be difficult with a small team, limited tools and disparate data sources. However, using a self-service cloud-based tool, growth-minded companies can improve business outcomes rapidly. A similar approach can then be applied to prescriptive production and prescriptive energy templates.

RS: How should manufacturers address the cybersecurity concerns associated with cloudbased solutions?

BK: Cybersecurity is the number one reason companies are cautious about adopting cloud-based solutions and there is still a significant amount of education to be done in this area. The initial questions to ask are: “How strong is your cybersecurity today? What challenges exist in your cybersecurity architecture? Are you patching correctly?” Only after a company has identified and strengthened its current (internal) cybersecurity should it consider scaling to the cloud. Investing in the cloud before identifying and closing known internal security gaps will only create more issues.

Once you have strengthened your internal security, then extend these security practices into your cloud services. Just as you would keep the door to your data center locked, it is important to monitor and appropriately secure cloud operations. Antivirus, patching and other security operations, including external penetration tests, must be mirrored and re-created for the cloud. You need to ensure that you know who is accessing your data at any given point in time. Other requirements include the need to monitor access in real time and ensure you know where your data is. Furthermore, should there be a security breach, what risk mitigation plans do you have in place?

RS: Is there a manufacturer you have worked with who has risen to the challenge of digitization particularly well?

BK: A client of ours based in the Middle East opted to completely digitize the business end-to-end. They did that because they wanted to scale up and grow their market share in the face of a major market opportunity. It was a “door-be-outdone” inflection point for them. Scaling up required significant process change internally, such as automating many manual processes, and change management became necessary.

In the case of this client, large projects were being managed manually and their traditional enterprise resource planning (ERP) products were not flexible. Leveraging the data trapped in their ERP system, we enabled them to create and act on realtime production optimization scenarios that improved plant safety, product quality and customer service that translated to significant savings. The key to their success: an Industry 4.0 partner whose applications are built from the ground up to empower rapid and radical improvement, a carefully curated roadmap and a suite of digital solutions that will enable them to achieve, and continue to achieve, safety and operational efficiency improvements.