The era of convergence
Companies have to deal with an unstoppable convergence between sectors if they are to remain competitive. More than this, they must participate actively in this movement. After all, how to grow and continue to innovate in an increasingly fluid and interdependent world?September-November | 2018
Globalization and the growing interconnection between technology platforms have, in recent years, boosted the trend of tearing down walls that have once separated companies from different sectors. It is increasingly difficult to define, for example, where the action of a financial institution ends and the one of a retail network begins when offering and operating credit; what will be the essence of the activity of an auto manufacturer that increasingly works with leading technologies to build autonomous cars; or yet to establish the boundaries and levels of dependence between telecommunications, media and technology companies in the development and commercialization of digital interpersonal communication devices. The convergence between industries has brought a new reality, changing production and operation patterns, especially as the integration between the physical and digital environments advances, under the sign of Industry 4.0.
Instead of a single product offered by different companies, there are innovative services created by organizations that complement each other and bring totally different experiences to their consumers. The convergence of sectors is no longer a trend and already makes companies review their most basic concepts to survive in these new times.
Instead of stopping a particular machine for maintenance every 1,000 hours of work, as recommended by safety manuals, it is possible to deal with any problem only when they appear, perhaps with exactly 1,132 hours, 36 minutes and 24 seconds of service. How to achieve such a degree of precision? Software, applications and sensors allow for an even greater convergence between the technology sector and other sectors of the economy.
For Tim Hanley, Deloitte’s global leader for the Industrial Products and Construction sector, we are living a time of synergy between existing technologies, which is delivering exponentially better results. This movement reflects the convergence of sectors, as in other moments of the Industrial Revolution. “Disruptive technologies, either from first to the third industrial revolutions or nowadays, have to do with a perhaps unexpected gain through entirely new increments. We are not inventing the internet, for example, but turning it into something totally new to business”, he says.
“Several companies already use smart factories to test ideas that are worth more and more money”, continues Hanley. “This allows them to know the exact scale of their products in a number of areas, how to optimize their costs, cut unnecessary expenses, better manage their supply chain and even deal with cyber security issues. The more different sectors are able to interact, the more ideas will be tested by these laboratories and the more scale those products can have.”
In Brazil, there are companies that already have clear benefits from this new era of convergence of sectors. Fabiano Assunção Sant Ana, director for the Digital area at BASF for South America, says multinationals, like any chemical company, will find it easier to adapt to the new times because they have faster access to new technologies – many of which will end arriving in Brazil as well.
BASF is working on two major automation fronts with partners in other sectors: augmented reality with interaction and predictive maintenance. “In the case of predictive maintenance, we anticipate breakages and the need for maintenance. We have equipment with sensors, algorithms and software that allow us to work more reliably on the equipment. For example, we have motors that needed maintenance every thousand hours. Now we monitor them in real time and only intervene when there is a change in behavior”, says Sant Ana.
The great difficulty in understanding intelligent plants that combine different sectors in their products, according to Sant Ana, is the preparation of our workforce to use this technology. “We are testing virtual reality and mobility within the company. We are now choosing areas for testing. There is a learning curve until we reduce the loss of performance, have more stable equipment and reap more efficiency and safety”, he says.
Industry 4.0, defined as a new stage of the Industrial Revolution and responsible for much of this ongoing convergence, came as a plan German Chancellor Angela Merkel presented in 2011 at the Hannover Fair. Already in that conception, the industry’s future would also depend on digital convergence connecting machines, systems and other assets in order to create intelligent networks throughout the production chain.
Thus, the German plan said, companies would control the production modules autonomously, with the advantage of reconfiguring maintenance, anticipating flaws in the processes and adapting to what was needed. “Today, Industry 4.0 is not just a name or a mere German idea that ended up taking off. Industry 4.0 is very tactile, it’s a new way of production”, explains Wolfgang Falter, Deloitte Germany’s leader for the Chemicals and Specialty Materials industry. “The transformation and convergence of industries is a new stage in our development. Robots, applications and sensors bring a new industrial revolution. It is not a simple advance because the gain is not marginal, it is exponential. It is a process that is accelerating, it does not go at the same pace in all countries and industries, but it is real.”
Daniel Da Rosa, CEO of one of ThyssenKrupp’s divisions, sees Industry 4.0 as “a menu of digital technologies in all areas, driving convergence.” “Here we apply the 4.0 menu with machine-to-machine communication and big data. Now we have the history of each item. The machines generate data and, with the algorithms, we get to the history of the part, the trends within it”, says the executive.
ThyssenKrupp is betting on the potential of convergence, even considering that the environment in Brazil is not yet fully ready for this reality. “We want to keep the same level worldwide. Here there are challenges in infrastructure and labor. It takes a cultural change to accelerate convergence. However, from the market’s point of view, we have been able to advance with the new technologies”, argues Da Rosa.
George Warnock, Deloitte’s global leader for Country Services Groups, agrees that there are challenges to the flourishing of convergence in emerging countries such as Brazil. “Companies still face systemic and sectoral risks to adopt new technologies. The environment is not ready for a more solid integration, but this is still going to happen.”
Beyond company boundaries
The convergence between sectors is not prohibitive for companies with less advanced technologies, as long as the mentality of their leaders points to a more integrated future, says Reynaldo Saad, Deloitte Brasil’s lead partner for the Consumer industry. “The convergence of technologies will be the focus of many of our economy’s leading sectors from now on. Automakers already produce their vehicles with technologies that aim to connect with the car owner’s daily activities. In the area of education, colleges have started to work with distance education with tools that, in addition to evaluating their students’ performance, provide soft skills training and coaching based on the results of these assessments.”
The companies’ growth in the new competitive landscape will increasingly depend on the strength of convergence and the innovative mentality of organization leaders., Reynaldo Saad, Deloitte Brasil's lead-partner for the Consumer industry.
Jack Ringquist, Deloitte’s global leader for Consumer Products, points out that in this industry, convergence requires a stronger integration between both financial and commercial teams: “If the financial side previously supported products and services, it is today a partner in this convergence model and is part of the inter-sectoral business plan. Many of the technologies that drive the industry today come from the interaction between the financial industry and the product or service available to customers.”
Hanley, also from Deloitte, sees three keys to the success of implementing convergence wherever it may be: realizing that failure can lead to the best innovations, accepting that the manufacturing industry is going through drastic and non-incremental changes and, finally, embracing convergence as the key to unlocking the search for new values.
“People think these steps are trivial, but they are not. It’s a big challenge to make companies change their mentality and get closer to innovations. The executives I talk to around the world think leadership is what drives this new industry view. Innovation is increasingly dependent on collaboration and on leaders committed to looking beyond the boundaries of the company itself”, concludes Hanley.