Technology intensity defined
Technology intensity has three components:
- Rapid adoption of hyper-scale cloud platforms
- A rational business decision to invest in digital capabilities
- Relentless focus on building technology that customers can trust—relying on credible suppliers and building security into new products.
As Microsoft CEO Satya Nadella notes, “We must adopt technology in ways that are much faster than what we have done in the past. Each one of us, in our organizations, will have to build our own digital capability on top of the technology we have adopted. Tech intensity is one of the key considerations you have to get right.”
Technology intensity as a critical enabler
Simply put, technology intensity is a critical part of business strategy today. I meet regularly with leaders from companies around the world. In my experience, high-performance companies invest the most in digital capabilities and skillsets. In fact, there is a productivity gap between these top performers and their lesser performing counterparts that directly correlates with the scale of digital investments.
Other research shows that technology spending into hiring developers and creating innovative software that is owned and used exclusively by a company is a key competitive advantage. These companies cultivate the ability to develop their own “digital IP,” building exclusive software and tools that only their customers have access to. Resources are always scarce, and these companies build differentiated IP on top of existing best-in-class technology platforms.
By putting customers at the center of the OEM supply chain, a report from the Economist Intelligence Unit (EIU) sponsored by Microsoft, Lorenzo Fornaroli, Senior Director of Global Logistics and Supply Chain at China-based ICT Huawei Technologies, highlights an advantage of embracing technology intensity: “…as an ICT company, we have the internal resources needed to identify new technologies early and deploy them effectively. Skills and experience with these technologies are readily available in-house.”
New business models
Manufacturers are increasingly using technology intensity principles to extend their supply chain well past the point of delivery. They are creating smart, connected products and digitizing their businesses with Azure IoT, Microsoft AI, Azure Blockchain Service, Dynamics 365, and Microsoft 365.
Rolls-Royce, for example, takes a monthly fee from customers of its jet engines that is based on flying hours. Sellers of industrial machinery such as Sandvik Coromant and Tetrapak are exploring the concept of charging customers for parts machined and containers filled.
Using the data that connected products transmit back about their condition and usage, manufacturers build new digital services. For these forward-thinking manufacturers, the extended supply chain is an opportunity to move away from selling products to customers based on a one-off, upfront purchase price, and to charge for subscriptions based on performance guarantees. This is “technology intensity in action”, as manufacturers become digital software companies.
Technology intensity in action
Bühler is a global market leader in die casting technology and has adopted technology intensity for connected products. Looking to continue driving innovation in the die casting process, Bühler aggregated data from different die casting cell components together under a single cell-management system. Bühler can now monitor, control, and manage a complete die casting cell in a unified, easy-to-use system. The company is also exploring additional avenues for digital transformation including real-time fleet learning by fine-tuning its Artificial Intelligence (AI) models to generate new insights.
Lexmark, a manufacturer of laser printers and imaging products, now offers Lexmark Cloud Print Infrastructure as a Service (CPI). Customers no longer manage onsite print infrastructure. Instead, Lexmark installs its own IoT-enabled devices and activates smart services, creating an always-on print environment. To roll out CPI, Lexmark worked with Microsoft to quickly adopt new Internet of Things (IoT), Customer Relationship Management (CRM), AI and collaboration tools to successfully grow their internal digital capabilities.
Colfax is another great example of a manufacturer embracing technology intensity. A global industrial technology company, Colfax, recognized the need to adopt industrial IoT technologies and the importance of embracing a comprehensive digital transformation initiative to expand the offerings of two of its business platforms—ESAB, a welding and cutting solutions provider, and Howden, an air and gas handling engineering company. Working with Microsoft and PTC, the company adopted advanced cloud technologies while building up a digital skillset.
Investing in new digital skillsets
Savvy manufacturers harness data from connected products and combine this with data from many other sources, in unprecedented volumes. The copious amounts of data require mindset shifts, requiring organizations to build skills for a new digital era. Most manufacturers concur that they need to expand their internal capabilities in this manner.
“Senior supply-chain professionals have typically been accustomed to working with a fairly limited set of data to drive their decisions—but that’s all changed now,” says Daniel Helmig, group head of quality and operations at Swiss-Swedish industrial group ABB in the EIU report putting customers at the center of the OEM supply chain. He continues, “but being able to take advantage of the huge volumes of data available to us— and these are growing every day—demands a mind shift among supply-chain professionals, based on using new levels of visibility to respond to issues quickly and decisively.”
From the same report, Sheri Henck, vice-president of global supply chain, distribution, and logistics at Medtronic, a US-based manufacturer of medical equipment and devices, commented “In the past, a great deal of supply-chain decision-making was based on intuition, because data wasn’t available. Today, there is plenty of data available, but there’s also a recognition that skills and competencies for supply-chain leaders and their teams need to change if we are to make the most of data and use it to make data-driven recommendations and decisions.”
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