More Than Just Machines – Part II

More Than Just Machines – Part II

Part II: Pushing machines to the ‘Edge’

The first front in the transformation of machinery: software and automation. Imagine air conditioners becoming complete indoor climate solutions; pumps, flow solutions, and conveyors complete material handling solutions.

In the 2022 edition of their annual Global Machinery & Equipment Report, Bain & Co. discusses several major facets of the transformation of the machinery industry, especially in building a digital solutions-based future that can help increase the resilience of supply chains as well as offer specialized Machinery-as-a-service models that are both more efficient and more sustainable.

This transformation is to be on three major fronts; software and automation the first and most important of the three.

Software and Automation

The most unique thing about this generation of industrial machines is how far up the technology stack they are.

Consider industrial robots from about three decades ago – their value, Bain writes, “came from their mechanical elements and controls. The addition of sensors and more advanced software made features such as pattern recognition and trajectory corrections possible, increasing robots’ “intelligence.”

Since then, the industry has noted a step change in collaboration capabilities. Robots working alongside humans on factory floors, increased mobility, and the ability to teach them skills easily – without having to write complex code – has been central to this change. The acquisitions of ASTI’s Mobile Robotics Group by ABB in 2021 and Mobile Industrial Robots (MiR) by Teradyne in 2018 are emblematic of this trend.

Today, we note the new trend of transformations: robotics companies focusing on external software systems as much – if not more – than the tech inside robots. Greater investments in software optimizing entire fleets of autonomous mobile robots across factory floors, or ones which easily integrate customers’ other software tools (such as enterprise resource planning systems or warehouse management platforms) are clearly representative of this shift in paradigm.

The above is clearly underscored in the increased rates of M&As of machinery companies with R&D investments. Bain reports, “M&A focused on software, cloud technologies, or data analytics made up 44% of all machinery deals from 2016 through 2020, up from about 28% during the previous five years. Machinery companies’ patent applications in these technology areas increased 27% during that same period.”

Image: M&A deals with R&D software, cloud or analytics investments is up substantially;
Source: Bain & Co. analysis

Further advancements are all set to continue to produce even more intelligent manufacturing execution systems which will be capable of both controlling as well as fully guiding machine networks across entire factory floors. This is a major shift towards the ‘edge’ infrastructure of governance close to the machines (as opposed to the ‘cloud’).

Bain & Co. makes an interesting point: “The takeaway is that even the most technologically advanced machines aren’t safe from disruption. There’s always an automation layer above where direct competitors, automation players, or disruptive start-ups could swoop in with an innovative solution.

The question all machinery executives are wrestling with isn’t whether their company should move up the technology stack, but rather how much of the stack they need to control in order to win. For now, the evolving hierarchy of factory automation remains up for grabs. Industrial software and other tech companies are well-positioned, but there are plenty of opportunities for machinery manufacturers and even component makers.”

The winners of this automation ladder climb will be those companies that will expand products’ range of capabilities beyond themselves, ensuring they connect seamlessly with other pieces of equipment on the factory floor. Imagine air conditioners becoming complete indoor climate solutions, pump flow solutions, and conveyors complete material handling solutions if machinery makers establish an adequate system automation layer. There are many software capabilities and go-to-market strategies yet to explore.

(To be continued)

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