It’s a great time to live in Detroit and work in the automotive industry.  Not only are days filled with interesting and challenging work, but like many “company towns” party conversation often drives (autonomously?) to topics affecting the industry, it’s members and it’s customers.  As we’ve recently completed both the conference (activities in and around the Detroit Auto Show) and the cocktail party season, I’ve learned much, confirmed some opinions, and found that almost every conversation leads down a set of rabbit trails as complex as the notion of the IofT is overall.  In this series, I’d like to share some of these observations, not as authoritative commentary but as conversation starters, whether I’m talking to you, or you to others.

On the one hand, there’s strong anecdotal evidence that Metcalfe’s Law (“The community value of a network increases by the square of the number of it’s users), originally framed for telecommunications,  applies here as well.  Certainly there’s tremendous investment in anticipation of what might be realized.

But as a baby boomer, I can’t help but also cite another quote: “Shame indeed, but we must not allow ourselves to become too despondent. For, we must never forget that if there was not one thing that was not on top of another thing our society would be nothing more than a meaningless body of men that had gathered together for no good purpose….”  For those who don’t remember, this is from a Monty Python skit “The Royal Society for putting things on top of other things”, which aired in October 1970. Things on top of other things, or things connected to other things.. is there a difference?

I think there is, but perhaps not as much as some would hope.  And I think that in every conversation on the subject we need to remember that if there’s not value that translates directly into a better, more efficient, and less expensive experience for the driver then we have a non-starter.  One last quote, familiar to all and lacking any specific attribution: “if it has value, and you’re not paying for it, you’re not the customer, you’re the product”  Individual consumers in their cars may be OK with this, but they will insist on sharing in the value created.

Needless to say, there are a lot of places we can go just on that foundation.   For brevity’s sake, I’ll break the discussion into several posts.  First, this one as an introduction.  Second, the Business to Consumer dimension – how the IofT and connected car impact the relationship between the vehicle OEM and other consumer facing businesses and the driver.  The second, more of an “insider” look, will discuss connection between different on board systems controlling the vehicle, among OEM and Tier suppliers, and how value might be realized here for all that will increase reliability and lower cost.   The Dealer channel will show up in both.

So hopefully you’ll tune back in for both of these discussions, and contribute your shares and comments.

My last post introduced my perspective and the topics we’ll be exploring in this series.  So let’s get to it. I’ll start by recalling the recent “snowmageddon” event in New York that wasn’t.  Connecting our cars with the Internet of Things is kind of like that – we all know it’s coming, and we know it’s going to be big.  But we don’t know when it’s coming exactly, and the more specifically we try to forecast how big, the more likely we are to be wrong.  Your guess is as good – maybe better – than mine, but I’m sure it’s different.  For some great thoughts, see Joe Barkai's post on "2015 Connected Car Predictions": http://scn.sap.com/community/automotive/blog/2015/02/03/2015-connected-cars-predictions

Proponents of Google’s and others’ work on autonomous vehicles would suggest it’s close.  Analytical assessment of the current replacement cycle of vehicles on the road yield estimates that it could be mid-century before the entire fleet of vehicles on the road is fully connected.  Somewhere in between is critical mass, an automotive “singularity” if you will.  But what will that mean?

First and foremost, it must mean value to the owner/driver.  I’ve been talking to industry about this topic since I was in the CRM business circa 2000…. And even then it was all too easy to focus on how cool it would be to present the driver “relevant” marketing messages while they’re driving and provide opportunities for refueling or getting a bite to eat.  That’s all great, but it’s also invasive and permission based, and for the driver to accept such there needs to be a quid pro quo, for example providing free bandwidth for other, more welcome intrusions.  And remember, the driver does have a choice.  There’s very little I’ve seen offered outside of proactive maintenance via the connected car where a smartphone with the right set of apps can offer equally well.

That’s not to say that there’s not value to the driver in receiving targeted advertising and sharing data about their driving patterns, when coupled with in-vehicle voice technologies and connected to maintenance indicators, a connected vehicle has a unique opportunity to offer convenience, enjoyment and safety to the driver that a smart device can’t match.  But someone must be prepared to pay for the incremental cost in components, maintenance, and connectivity.  It’s hard to argue that the consumer will foot that bill.

So what is the maintenance aspect?  Plenty, and already well along.  Users of OnStar, and other manufacturer’s connected products, can already receive regular vehicle health reports that provide recommendations on major vehicle systems and scheduled maintenance within the vehicle and remotely.  That’s good, but there’s opportunity for more.  Like:

• What if sensors on lower level systems could deliver information on predictive maintenance.  Like when I had a bad rear wheel bearing last year.  I knew a sound indicated something wasn’t right.  It would have been great to know what, and where, and how critical.  It’s well within the realm of possibility.  We’ll talk more about the component level connection in Part 3
• What if my vehicle could tell me, and the dealer of my choice, what the DTC code readings and relevant other metrics were before I came in for service?  I could have an estimate based on probable diagnosis before even arriving at the service drive for a repair I already knew was scheduled and had parts available.
• And my personal favorite… what if, when I was experiencing one of those annoying transient failures that never seem to occur when you take the vehicle in, I could press a button that would immediately load all on board diagnostics to the OEM, who could use big data and analytical techniques to seek to isolate the problem.  This becomes even more critical as more and more of the content, and points of failure on a vehicle, are software related.

I’m sure each of you have your own list of favorites, all equally valuable.  The value is there.  But so is the cost.

Costs are not just the hardware, software, and bandwidth costs.  There are intangibles as well…. For example, data privacy.  That’s a whole topic to itself, and if there’s interest we can go there later.  In this context, though, while many stakeholders – OEM’s, component suppliers, finance companies, insurance companies, service providers, the government… - may want the data generated from an Automotive Internet of Things, and while there are many legitimate uses, there are also many concerns.

For some, it’s a matter of principle.  As we’ve noted earlier, if there is profit from my data I want to share in it.  For others, it’s privacy, they may not choose to have their activities tracked.  The recent news about NSA and license plate scans only skims the surface.  One might personally like the idea that on board sensors could detect a pattern in another driver consistent with impaired driving and alert the local police. But I’m betting there would be legal challenges to that in a hurry.

So why is everyone so excited?  May I suggest they (we) are because with each challenge comes opportunity.  There will be a generational shift between current state and ubiquitous acceptance, but when given the freedom the automotive industry has a history of incorporating what drivers want and excluding what they don’t.  And doing so in a way where the value is fairly shared.  The content per dollar in a 2015 automobile is unprecedented in history.  No one’s ever seriously applied Moore’s Law to cars the way they do to microchips, but there’s a similar phenomenon at work.

It’s going to be a wild ride.  Enjoy pondering the possibilities, and please share comments.

In my last post we considered the impact of driver-centric connections orchestrated by the Vehicle.  This time we’ll look at the car connected across it’s on board systems, and how this level of connectivity extends to the business relationships among the material and software providers.  There are a lot of moving parts, and I’ll confess in advance it’s the area I find most interesting…

There are many seeking a seat in the car, some traditional industry players and many new entrants attracted by the smell of profits, not exhaust fumes.  How these parties collaborate will dramatically affect adoption, attractiveness, and value realized across the ecosystem.

There’s no dispute that the OEM’s will continue to drive.  Essentially serving as the “channel master”, it’s safe to say that OEM’s will add systems integrator to their portfolio as the information technology content of a vehicle increases.  And it will.  I’ve seen quotes estimating current software content at anything from 20-40%, and that a fully autonomous vehicle will be 90%.  No one really says how that’s measured – Cost?  Engineering time?  Warranty claims? Sure not weight!  But there’s no disputing that there’s a lot of code on board, and it’ll only increase.

It is, and will remain, the OEM’s job to make sure all that on board stuff plays nice.  It is, and will remain, a challenge. I’m sure most recall the old – and Snopes-debunked – GM press release in response to a Microsoft claim on the relative advantages in the two industries.  Kidding aside, electronic systems already represent one of the most significant warranty and serviceability issues and this will only increase as vehicle systems morph from mechanical to mechatronic.  Haven’t seen much on “drive by wire” lately, have we.  And as one who has just been presented with an $800 bill for a new Engine Control Module, I’m thinking that it had better save a lot of fuel relative to a carburetor to amortize the cost.  Reliability, serviceability, and cost will be as important as convenience and safety in driving broad adoption of connected vehicle applications.

As we move into the future, this will impact not only the currently connected systems, but many more aspects of the vehicle.  Some will be necessitated by increasing autonomous driving or assisted driving features, some by driver comfort and convenience, and some by safety and maintainability.  Divergent standards could create havoc.  Fortunately, SAE (Society of Automotive Engineers) has long experience in promulgating collaborative standards for vehicle technology, and they’re going be no less important in connectivity.

But there’s another aspect to vehicle systems that I haven’t seen discussed as frequently – how much intelligence over and above what’s necessary to enable operation needs to be on the vehicle.  The amount of data collected in real time as a vehicle operates begs the question of how much, and how often, this data is shared with an entity or entities the vehicle is connected to.  And can the frequency and content be dynamically adapted by any intelligent node?

We have today use cases where comprehensive real time telemetry is sent from race cars to engineering teams, and a constant stream of data is needed here.  But for an ordinary passenger car, the burden on bandwidth suggests something less.  The tradeoff is that the ability of the OEM and other partners to use big data technologies to assess vehicle metrics is predicated on sufficient data to tell a story.  For comment’s sake, let me hypothesize that in addition to some cadence of polling, we will see some level of on board computing on the vehicle itself, perhaps with a subset of “big data” technologies to capture and keep history for some period of time, monitor behavior on board, and determine when a situation merits sending data back to the mothership.  The two systems acting in collaboration could then determine whether to ask for additional history or more frequent sharing going forward.  Seems reasonable to me, what do you think?

Finally, we’ll need to consider sharing of data collected from a vehicle.  This will put the OEM in the position of being an “information broker”, as suppliers of vehicle components and systems who are asked to include sensory or intelligent devices in their products will expect to see not only the data from their content, but likely also collateral information to assist in problem resolution, warranty, and quality improvement processes.  This seems rational, but I’ll bet will lead to some interesting discussions in the procurement offices of the major OEMs.

Gosh, this is going to be fun!

We have all heard how the connected vehicle is creating new business opportunities for the industry and new possibilities for the customer.  All of this is reasonably true.  From where I sit, there are really three aspects of value regarding connected vehicles; Commerce, Quality/Safety and Operational Optimization.  We will deliberately not discuss autonomous vehicles in this blog.

On the visible side, there is what is often called “commerce” or maybe even “the vehicle is a wallet”. Convenience services like parking, fueling, navigation, traffic, refreshment, etc. are all viable and visible. These services are significantly important to some vehicle operators and vehicle operators in some geographies.  There is a lot of “visible” attention being paid to these “Commerce” services and monetizing them.

There are two not so visible but extremely important uses of data flowing from connected vehicles. The combined value of these far exceeds the value of commerce.  Let’s discuss these hidden (not so obvious to the driver) gems.

Data flowing from the vehicle while in operation can provide a wealth of valuable insight.  Telematics data can be used to understand not only how vehicles are being operated but also how the vehicle is responding and reacting based on that use, the geographical location, climatological conditions, and other parameters.  This insight can be interpreted to deliver a real picture of how the vehicle is performing.

Potential failures and service needs can be predicted in real time.  Many times the first indication of a real problem is when a vehicle warranty repair claim is recorded. The warranty claim is processed after the vehicle is repaired…long after the failure occurred.  By capturing real time telematics data, real time understanding of the vehicles performance can be achieved and early indications of failures or even opportunities for product improvement can be gleaned from that data.  This can reduce the latency in problem reporting and prevent defects from being designed into future products due to latency, i.e. “not knowing”.

And of course safety is a prime improvement opportunity and one everyone can appreciate.  Imagine if we knew that ignition switches were turned off, or vehicles that accelerate, supposedly unintentionally, were clearly the result of no brake pressure but rather throttle pressure.  Real time data can be significant in resolving defects, improving quality and enhancing safety.

The third unseen and very valuable aspect possible with vehicle connectivity is operational efficiency. Based on telemetry, the driver can be alerted that there is a possibility to improve fuel economy by paying closer attention to a driving mannerism.  It is also possible, based on operating parameters and location, altitude for example, to make a change to the fuel management program to increase fuel economy or performance, all unknown to the driver…and great for the environment. 

Based on geo-spatial location the driver can be alerted to potential traffic issues and alternative routes chosen, saving time, fuel and avoiding incremental traffic congestion and all the frustrations and risks associated with it.

Operational performance can be further improved by using telematics data to detect wear and tear from operation.  Keeping vehicles operating at peak efficiency is an unseen and perhaps underappreciated value!

So Commerce is good and indeed visible, BUT, Quality/Safety and Operational Optimization, while not quite so visible, create or protect much more value for a motorist.

I admit it…I am a crusty old guy who has been around automobiles for the better part of six decades…pretty sure I knew it all.  But then things changed…in 2010 Google decided they want to create a self-driving car.  And now we are learning that Apple, with their huge pile of cash, wants to produce a vehicle. 

We all are fully aware of the encroachment of one industry on another.  Technology is crucial for automobiles to thrive.  We all know that the lion’s share of innovation comes from software that manages the vehicles operation; innovation in the arena of components is becoming less frequent.  But the technology kings building cars?  Google piloting ugly autonomous vehicles today, Apple producing an EV by 2020; it is just too much to consider rationally.

But let’s put aside all of the if’s, ands, but’s, when’s, maybe’s and simply ponder on the why?

It can’t be that Apple with the largest market cap in the world wants to participate in an industry that has low margins, tremendous and onerous compliance burdens, and is always the subject of intense scrutiny.  They would have to know how to design and build cars from scratch and equally important, how to sell and service them in the traditional and accepted manner customers have come to depend on. 

I think it becomes clear when you think about it.  Connected devices are the fabric and foundation of today’s society.  Connected devices and connections are ubiquitous.  IOS and Android are the life force of today. They really do contribute to the seamless kind of life the world seems to want, well a lot of the world anyway.

Think about the vehicle for a minute…and the clumsy computing that is included in today’s vehicles and yet touted as innovative.  And recall the defection from connectivity with OnStar and the struggles and reinventions of Ford Sync.  In vehicle technology is indeed an orphan in today’s world. 

I agree that the motive of Apple may be less about building vehicles and much more about creating the anchor technology in the vehicle that further contributes to influencing that seamless kind of life.  I fully believe that they are pushing only to open eyes and minds…sometimes extreme measures and, indeed, risks are necessary to affect change.

And from the automobile manufacturer’s side, there is certainly reluctance.  Giving up absolute control is not a normal or accepted behavior. A lot of arguments abide here, from risk avoidance to brand differentiation to compliance matters.  All of these arguments are reasonable but not necessarily road blocks.

I believe that Apple wants to make the point that the always connected seamless kind of life they espouse needs to extend to the automobile and the driving experience.  Think about the possible upside to that.  Could IOS be the anchor of not only in vehicle connectivity but indeed the anchor of the entire automotive bus?  I don’t know…but think about the integration capabilities brought to the table!  Could we be on the verge of an upgradable in-car interface?   One that is infinitely upgradable and modifiable? And what impact might that have on the design innovation and manufacturing cycle, indeed the entire industry?

Sure it is a lot to consider for an old guy.  The OEMs want exclusive control, the technology companies want in.  Seems like the conflict is over the wrong things…harmony is the key.  Connectivity will bring about a “seamless kind of life”…it is inevitable.  Apple is simply forcing the point into yet another facet of living, the automobile and transportation!

For further commentary on where the “connected vehicle” is heading and what roles they might play in our lives please join us on the Future of Business on Game Changers Radio sponsored by SAP.  Our connected car program will air is March.    http://spr.ly/SAPRadio_FutureofBiz  This link will take you to the schedule as well as recordings of past programs.

By now some of you may have listened to SAP Game Changer’s Radio on March 5, where I had the privilege to share a panel discussion with Josh Greenbaum and Joe Barkai.  Both are senior analysts covering our topic, and I thought it worth capturing in this blog some of the discussion.

Perhaps most important, and least surprising, was the consistent consensus among the panelists on both the opportunities and the challenges.

And no surprises on what we all agreed on:

•   The topic is important and will be part of the industry’s conversation for some time to come

•   Fully autonomous vehicles are not something we’ll see in any quantity, any time soon

•   The land grabs will continue as traditional and new entrants to the market compete for a share of the value stream

Josh opened the discussion with an important quote – “We already have driverless cars – they’re called buses”, noting that merely providing autonomous vehicles does not address the broader societal challenges of delivering efficient and environmentally friendly mass transportation.  One can propose that the broader discussion of driverless transportation could also be expanded to other interests such as Uber, an organization that is already leveraging data science to optimize the deployment of a set of loosely connected vehicles.

“Loosely connected” parallels Joe’s comments on the individual’s “digital identity”, an important part of the driver’s experience generally considered resident in their personal mobile device, and not something many will want to surrender to a vehicle.  This sparked a lively, if not conflicted discussion as all agree that the vehicle’s connectivity should complement, not usurp, the capabilities already resident in an iOS, Android, or other device.

In fact, we speculated that perhaps neither Google nor Apple are really interested in building a car.  With the current market capitalization of both, they could easily just buy a company.  Instead, perhaps the battle between these two is to define the architecture for the integration of the driver’s mobile device and the vehicle itself.

My take on this is that there will be two categories of systems on board a vehicle.  One, the foundation that controls the vehicle operations, manages the performance and safety components, and interacts with the environment must and will remain the domain of the OEM to manage in collaboration with key system suppliers.  Brand image, not to mention warranty and liability issues, will leave no choice.  Connectivity from this perspective will focus on real time data streams needed to ensure quality, maintainability, and safety and instantaneous response will be a requirement, at least for on board systems.

But the foundational vehicle systems will continue to interact with more personalized, optional, capabilities best described as an extension of the ways in which Bluetooth currently links smart devices to a vehicle.  This is where Apple and Google stand to gain or lose the most.

I suspect my fellow panelists would agree, we talked about this with enthusiasm.  We also talked about the underlying driver – where does value come from and to whom does it accrue.  Josh was the most vocal on a topic we all agreed on – that connecting a vehicle does NOT give permission to anyone to market to us while driving.  While there may options analogous to what Pandora does today – either pay a nominal fee or agree to receive advertising.  This comes back to Joe’s comments on digital identity – there is strong consensus that we’re not going to surrender this, or compromise respect for our privacy, without receiving commensurate value.  Those seeking to monetize the connected car are well advised to remember this.

Finally, and again not to anyone’s surprise, we all agree we could have continued this discussion, and perhaps will in future airings of Game Changer’s Radio..  but for now, I’ll sign off and invite comment.

I admit to walking on this earth for a long time.  Ever since I was young I heard how the world was getting smaller.  As I grew I realized this was true and why it was true. Connections increased, travel and commerce was expedited and accelerated, it was easier to communicate and traverse the globe in reasonable time.  Today there are over ten billion connected devices with the future expectation that 99% of everything we produce will be connected to the Internet.  Pretty amazing!

Communication is virtually instantaneous across the globe.  Travel is not only relatively fast but very comfortable, limited only by our propulsion methods and infrastructures.

“Connected” combined with “fast” also implies opportunity for the automotive industry.  The Internet of Things (IoT) is connected and fast, opens many doors for the industry constituents.  These doors can create accurate information and enable insightful and intuitive automotive decision making in real-time.  They can enable mutually supportive and collaborative automotive business networks.  Networks can evolve that even extend outside the traditional boundaries.

Opportunities for automotive companies also include real time collaboration and product innovation, manufacturing efficiency, supply chain visibility and transparency and the ability to plan, optimize and protect the supply chain are presented.  Improved quality and safety actions and reporting come to life, as well putting the customer at the center of the automotive universe, achieving customer and vehicle centricity.  New business models can evolve; transportation as a service for example.

Knowing “everything there is to know” in real-time and discovering even more opportunities to gain business value…Wow, how the world and time shrinks.  OK, so what is all this noise?  Promises of what might be, dreams that may or may not be realized, empty rhetoric? 

No, these things are real and more opportunities are rapidly being created, recognized and capitalized on today.  Come see how SAP is creating this smaller, faster, simpler and more intelligent world today.  Join us at SapphireNOW in Orlando, May 5th through May 7^th, 2105 and visit the SAP Automotive demo table in the Discrete Industries Campus to learn how we are creating this new world and how you can join in.  See you at SapphireNOW.

A little less than a year ago we were preparing the launch the first version of Integrated Business Planning for Automotive Suppliers at Sapphire 2014: (http://scn.sap.com/community/automotive/blog/2014/04/28/integrated-business-planning-finally-a-reality-for-automotive-suppliers)

We were gratified with the interest at both the Automotive Pod, and in several general sessions.  Interestingly, though the sessions were titled for Automotive Suppliers, attendees came from a broad range of industries and interests and the discussions tended more towards adapting the tool for a variety of industries.

I’ve found this an interesting thread, and in the time since have built upon the initial work product in several directions:

    • Completing a “Version 2” of the Automotive Supplier Model, which will be showcased at Sapphire this year,

    • Adapted the sell side of the process to embrace product sales through a dealer network, and

    • Developed a similar industry variant for Engineer to Order

In the process I’ve learned that while Key Figures in the IBP model will vary significantly from company to company regardless of industry, it is the set and structure of planning levels in the model that correspond to industry characteristics, particularly related to demand modeling.

For those new to the IBP modeling process, Planning Levels correspond to levels of detail at which numeric values for a key figure are defined, calculated and aggregated.  An individual data value can be no more granular than the lowest planning level at which it is defined.

Planning levels are defined as a combination of attribute values and time periods, where the attributes are established as master data in the model.  For example, in a simple case the planning level PERPRODCUST would mean data values tracked at the Period – Product – Customer level, with reporting and aggregation available via other attributes associated with either the Product or Customer…

OK, this is a blog post, not a tutorial.  If you want more detail on this, come see me at Sapphire. 

For our purposes here, though, the most important differentiator across industries is how this lowest level of detail for demand needs to be expanded to accommodate the differences across industries.

For example, in the Automotive Supplier case, demand for a product is not just Product and Customer, it may also need to be associated to a Model Year, a Customer Plant, a Customer Vehicle Model, or a Customer Program.  Product/Customer becomes an aggregated level, not the base.

Similarly, in an Engineer to Order context, association of demand to a specific Project rather than just a customer or product is critical, among other issues.

Fortunately, these kinds of differences are easily accommodated in the IBP model, providing a unique flexibility in understanding not only the kinds of data (Key Figures) that need to be included, but also the structure of the enterprise.

The current version of the Automotive Supplier model provides a great example of how this structure enables creation of a tool that supports industry specific business processes, and gives us a framework to discuss how the specific requirements of a supplier are supported.  I’m guessing that – like last year – it will also provide a platform for discussion of how to do the same for other industries…

Join us at Sapphire to see these exciting enhancements to Integrated Business Planning, Session ID 20744, May 5 at 1:00 PM and May 6 at 11:00 AM in the Discrete Industries Campus.  See you at Sapphire!

NOTE:  The following is a prelude to the upcoming microforum discussion, "Embrace the New Real-Time Enterprise", scheduled for SAP Sapphire on May 5 in Orlando.

How can we benefit from new technology today?

I was asked this question during a recent user group meeting.  A small group of manufacturers talked about the their perceptions (and misperceptions) about topics such as in-memory processing, big data, the Internet of Things (IoT), Industry 4.0, Machine-to-Machine (M2M), and a few other hot topics that the media is bombarding us with these days.

While everyone agrees that these new technologies have the potential to dramatically change how we run our businesses, two questions rose to the top:   "What does it mean to me and what should I do right now?"

Many of the attendees of this user group meeting are people with responsibility for managing the enterprise systems for their companies.  Many are entrenched in their ERP systems.  Some see a vastly different future in the next 10 years when enterprise systems will be very different, but they aren't sure just how different.  Most of the conversation was centered on the things that can be done today with minimal possible disruption to take advantage of these new concepts and technologies.

Managing planned versus unplanned events

The answer to the questions will likely be in the area of managing unplanned circumstances and events.  Most ERP systems today are good at taking a snap shot of the current situation (i.e. inventory status, customer orders, etc.) and determining a good plan for meeting customer requirements at an acceptable cost.  And since an MRP run can take hours to complete, it will be run at night so that a new set of schedules are available in the morning.  Many times,since receipts and other inventory transactions are not recorded as they physically happen, the perpetual inventory is not accurate and therefore cannot be used confidently throughout the rest of the day.

But unplanned events can happen all day long; unplanned events that threaten on-time shipments to customers, as well as threats to profit margins as incremental costs are incurred in order to make those shipments.

How do we use new technology to manage unplanned events?

The advances made in in-memory proicessing have made it possible to better manage unplanned events.  The following are the four steps of an issue resolution process for detecting and resolving unplanned events:

1. Monitor and Alert - Instead of relying on casual observation and word of mouth to be aware of potential production issues, the enterprise system should be used to monitor for situations and events that will possibly create production issues.  For example, immediately notify the right material scheduler as a cycle count transaction reduces a required inventory item, or send an alert if a freight carrier is delayed (read Internet of Things here) immediately notifying the right person so that resolution work can begin.  The sooner a problem is known, the less disruptive it will be and the less expensive the resolution will be.
2. Resolution Determination - If three different people are faced with the same issue, they likely could come up with three different remedies.  Each option could have different results, as well as different costs.  A key initiative today by many companies is the definition of Standard Operating Procedures that provide guidance on the preferred way to handle issues.  Instead of this being a paper document that rarely sees the light of day, the enterprise system should present not only the issue to the right person, but also deliver a suggested course of action in accordance with the standard operating procedure.
3. Option Simulation - When multiple options exist for issue resolution, the enterprise system can be modeled to determine the best solution by computing the expected impact on key performance indicators (KPI's) for each option.  For example,the system could determine the potential impact on customer service levels or incremental costs for each option.  A manager can then select the option that is most appropriate for the company.
4. Corrective Action - Like the preceding three steps, resolutions to unplanned events are almost always handled through manual methods today.  This may involve telephone calls, emails, preparation of analytical spreadsheets, manual rescheduling, etc.  With simplification and standardization of corrective action options, more and more routines can be become standard parts of the company's standard operating procedure and automated within the enterprise system.  For example, a production line stoppage today may involve many time-consuming phone calls to suppliers and freight companies to slow or stop inbound material.  A fairly simple application could be created to use in-memory processing to quickly compute a revised schedule and immediately broadcast the revised plan to suppliers and transportation companies within minutes.

These processes are probably in effect today at about all manufacturing enterprises, but most likely as very manual processes.  Enterprise systems have not had the power to continuously monitor for potentially hundreds of unplanned situations that pose a threat to the established plan.  And effective simulation of resolution alternatives certainly is not practical with disk-based database systems.

Big benefits by complimenting existing enterprise systems

Deploying this sort of issue resolution system does not need to be a major implementation project.  An enterprise could select a single KPI to focus on, and model the system to monitor for issues that negatively impact that partulcar KPI.  Monitoring for opportunities can also be modeled in this fashion.  Early detection of issues and opportunities will greatly improve management's ability to make on-time shipments with less cost due to unplanned downtime, material shortages, customer demand changes, and so on.

Further, this sort of real-time issue resolution process can be deployed without a wholesale switch from disk-based systems to in-memory systems.

It is time to begin moving forward

In conclusion, many manufacturers are left scratching their heads when it come to how to benefit from from in-memory processing and the Internet of Things.  But some manufacturers are beginning to embrace these new technologies as opportunities to run their businesses in different ways and far better than ever before.  While existing enterprise systems are very good at planning based upon known or expected events, they are not capable or are not used appropriately to manage unplanned events in a real-time manner.

The most forward-thinking, creative, and innovative manufacturers are leveraging these new capabilities to better monitor and manage their operations and gain competitive advantage over the IT laggards.  And this is just the beginning of reinventing the "New Real-Time Enterprise".

Please join me at Sapphire on May 5 in Orlando to discuss how your company can reach a whole new level of real-time performance management through the adoption of in-memory processing and the "Internet of Things".

Research suggests that large IT projects are at far greater risk of failure than smaller ones. McKinsey revealed that 17% of IT projects budgeted at $15 million or higher go so badly as to threaten the company’s existence, and more than 40% of them fail.

However, regardless of business size IT projects are failing everyday – some are big budget and high profile and make the headlines, others receive less attention, but can be equally damaging to those concerned. But why and what can you do to prevent failure?

Partho Bhattacharya, MD & President, Invenio Business Solutions discusses the top five reasons why IT projects fail.

1. Devil is not in the detail…

The most important factor in success of a project (or failure) is top management commitment in the project (or lack of…). It’s not the operatives but the top management who need to have steadfast focus in seeing a project is successful.

Intel’s CIO, Kim Stevenson, recently commented, “There are no IT projects, only business projects”. Whilst we may become engrained in the day-to-day intricacy of delivering IT that works, we should never lose sight of the bigger picture and the impact of successful IT projects on the business as a whole.

In the digital, hyper-connected age, IT underpins all that we do within an organisation and therefore has the power to transform business processes from the ground up. This means you need buy in at all stages from a variety of stakeholders. Map who these individuals are and ensure that they are a part of the process from the beginning and that their needs and job function have been considered. IT has the power to transform businesses but only if the employees are part of the journey.

2. Project management, skills and experience

It’s no secret that smaller projects are easier to manage and control, but how can this be replicated into larger organisations to ensure the number of failing projects is reduced?

Having the right project manager and supporting PMO team in place is crucial. Too many managers and there’s likely to be conflicts and contradicting priorities, too little and resources will be stretched.

Ensuring project managers have the right skill sets for the role is also crucial. Great project managers will know how to bring together the right team of skilled individuals, and will be able to motivate and inspire even when the pressure is on. The same is true about the team members. The right skills in the right composition is key to project success. At Invenio, we are a team of dedicated SAP consultants so we can provide our customers with the expertise and insights they often don’t have internally – something they find invaluable.

3. Inaccurate timings

Timelines need to be realistic. We’re all familiar with the IT project that was required yesterday, so by setting realistic time scales at the outset – including buffers for testing phases – then projects will be more successful.

It’s better to get it right first time even if it does take slightly longer. Rushed projects can cause hassle down the line so it’s about planning and future proofing your investment to ensure results and success is for the long term.

4. Data & Interfacing

Often ignored at the start of the project is data that the new system needs to use. Often data from old systems is incomplete or inconsistent and this needs to be tackled from day one. Data cleansing is time consuming, tedious and sometimes just not compatible with the system. Too many good projects fail because of useless data that are input and ultimately make the system unusable. If you use the wrong fuel in a world class car, it will inevitably fail to start.

Touch points between systems are another trap often ignored. Interfaces need to tried and tested from both sides thoroughly. A faulty interface can often be the death trap for a good implementation.

5. Keep it real

During the planning and roll out of an IT project there are often unrealistic expectations around what will be delivered and when, by whom and for what reason. Along the journey too, there can be confusing or changing requirements.

Throughout the process, expectations need to be set and reassessed every step of the way to ensure there are no surprises. Total transparency between the partner and the customer is absolutely essential. Through building close relationships with suppliers they can become partners on this journey to ensure full visibility from day one. This will also allow a value added service to be provided.

Choosing a supplier that allows for flexible contracts will enable greater ability to adapt and change along the way, it makes the process easier and ensures projects are delivered as expected achieving the goals set out at the beginning.

Too many IT projects are failing unnecessarily, so businesses need to choose a partner that can best support the needs and requirements of the business. A partner who can ‘hold their hand’ through the early stages, minimise implementation drama, provide expertise and go above and beyond to make the project a success.

Last week there was an interesting question and opinion put forward by Keith Crain of Automotive News.  His position was that determining who owns vehicle generated data is becoming more and more complicated.  And it will get worse!

Challenges are certainly going to be created around the concept of data ownership.  Courts have made an attempt to decide…they decided in favor of the customer in most cases. But I agree with Crain…probably not a closed book.

Let’s think about a few scenarios.  First, every vehicle produced for the last couple of decades has what is in effect a “black box”.  This records many data points in the last few seconds before a vehicle crash. Who owns that data? It could be potentially in criminating…and we have the Fifth Amendment prohibiting self-incrimination.  If the customer owns that data, that data could be off limits.  On the other hand when drivers secure an insurance policy they waive their right to privacy in the narrow process of crash investigation…meaning they give up their right to privacy (implied consent is the legal term) of that black box data in exchange for the insurance policy.  Insurance companies can and do use that date to determine fault, and “amount” of fault, or to determine if insurance fraud is in play. Not simple, but straightforward on this data ownership question.  The vehicle owner is the rightful owner of that data, unless they have given insurance companies their implied consent to provide that data!

But what about data streaming from sensors on vehicles? Can it be gathered and used by manufacturers and suppliers to predict service needs or failures? Can it be collected and used to improved design and quality?  It has been clear that data has value…I wonder if such data, perhaps rightfully owned by the vehicle owner, can be provided to the manufacturers or suppliers in exchange for something tangible in return…money, incentives of some kind, other consideration?  I believe such data is invaluable in improving quality, design and prediction…but should the owner of a vehicle operating and generating that valuable data share in the value creation?  This is certainly a point to ponder and not quite to simple!  Well maybe it is to me…but!

Then there is the matter of self-driving vehicles. Wow…this one really gets complicated. If a collision occurs with a driverless vehicle it may be difficult to determine what went wrong sand assign fault with no human driving.  Who owns the data that “could” determine if the system designed by the supplier is at fault?  Who owns the data that “could” determine if the manufacturer is at fault?  Keith Crain asks a very provocative question…”Does the operator of a self-driving vehicle have a responsibility to stay in control even if the vehicle is on auto pilot?  How does data ownership play into that question?

The question of who is responsible is a huge one?  We will address that in my next blog.

It will be fascinating to see how our legal system deals with the complexity of data ownership and “how it can be used”.

And we are only in the infancy of data creation and the related problem of “ownership” from automobiles!

Malcolm Gladwell, author of the tipping Point and other best sellers, gets it.  He concludes that an obsession with defects in vehicles undermines efforts to address far more significant causes of highway fatalities.  In “The Engineer’s Lament” he writes that the variables that really matter have to do with the driver and not the car!  He gets it!

The elephant in the “safety” room is the driver!

We spend all of the collective energy of NHTSA focused toward problems that do in fact exist but are so small, in this writer’s opinion that they barely show up in terms of the monstrous proportions of the existing mayhem on our roads.  And NHTSA is pretty small in the grand scheme of things.

As an investigator in the unintended acceleration charges against Audi in the mid-1980s I quickly learned that the real culprit was driver error.  Combine that the human’s natural inclination to displace fault elsewhere and you have a safety defect owned by the vehicle manufacturer.  Same thing for Toyota’s unintended acceleration charges from recent past…nothing was found, even by the NASA rocket scientists! 

Sure there are things that come into play from the vehicle designers, like pedal placement, floor mats, etc…but let’s be clear…learning where the pedals are is a responsibility of the driver…and floor mats and their condition and location is the same.

Driver responsibility.  The public and NHTSA’s approach to safety is preoccupied with what “might” go wrong mechanically or electronically!  But the chief factor always is “how the driver drives”.

We have tremendous capabilities in terms of managing all of the data generated by sensors in vehicles. We have the ability to analyze that data and make predictions based on the data.  All of this takes us further down the path of product improvement!

But the elephant still exists.  The driver and how they drive…I believe we need a national discussion about safer driving…about personal responsibility in driving.

With all of the sensor data emanating from vehicles today…wouldn’t it be an outstanding idea to include sensors that monitor the driver and their behavior?  And report on it?  Today with our ability to sense, collect, store, manage, analyze and predict…let’s consider shifting some of our focus from things to people, from measurements to behaviors and actions.

Of course we get into the data ownership and self-incrimination matters…but this seems to pale in the bigger picture. 

We are uniquely positioned to be able to deal with the elephant’s behavior and begin that discussion on safer driving with those that actually do the driving.

The state of enterprise systems today

With the Internet of Things (IoT) and the ability to manage Big Data, manufacturers can look forward to all sorts of new and improved business processes. Machine data coming from sensors and telemetry will let us know what’s happening in real time so we can make better decisions, faster. We’ll be able to predict future issues and opportunities and use that insight to take the right actions earlier. Manufacturers can be more responsive to customer needs, while also gaining greater profit margins as costs are better managed.

Sounds great – but is this reality yet? On the “crawl, walk, run” spectrum to continuous improvement building on the IoT, most manufacturers today are hardly crawling. Many operate their current “real-time” systems in batch mode with batch planning, batch input of production quantities, batch input of receipts, and so on. When inputs aren’t entered as they occur, the ERP system can’t be relied upon for real-time information for issue analysis or decision making.

Why does batch processing continue?

Many enterprises are stuck in batch mode because their systems struggle with real-time transaction processing. Multihour material requirement planning (MRP) runs are very common. Even regular day-to-day transaction processing can take a long time when product structures are complex. Add to this questionable inventory and bill-of-material accuracy, and it’s no wonder many companies are forced to handle day-to-day manufacturing issues manually. When time comes to make an important decision, the ERP system can’t be trusted for reliable information.

The key question is whether a manufacturer has the ability to operate its enterprise systems in real time. Can receiving, production, and shipping transactions be immediately processed so there is always an accurate perpetual inventory? Is visibility of inbound shipments reliable? Are customer requirements always current? Only by truly operating in real time can the system reveal what is actually happening – and just as important, what isn’t happening when it should be!

What does real time mean?

“Real time” means that the enterprise system is updated with data as things happen. Receipt quantities are visible at the moment items are physically received. Production postings are recorded as product is produced. Shipments are recorded as they leave the dock. Changes in customer requirements are recognized as soon as the customer communicates them. And when possible, plans and schedules are updated as things actually happen that justify or require replanning.

The potential benefits of a truly real-time manufacturing system are enormous. An obvious benefit is being able to access information through reports and displays that represent what is actually happening right now. A not-so-obvious benefit is the ability to monitor for events and conditions that threaten plans, and proactively alert the right people of the possible issue. Think of how much premium freight could be avoided if material shortages were detected a day before the shortage occurred and a materials employee were alerted. The basis of this alert might be a supplier undershipment revealed by automatic shipment notification (ASN) data, or a probable late receipt revealed by a GPS location transmission from the inbound freight carrier.

How many automotive manufacturers are ready to adopt IoT applications so they can reap these benefits? If they’re only “crawling” today, what’s needed for them to walk, then run?

In-memory database makes capitalizing on the IoT practical

Database processing capability is critical. Disk-based databases may be sufficient for collecting enterprise transactions, but they’re many times too slow for real-time transaction processing of complex product structures, the planning or replanning of operations (such as MRP), or the collection, storage, and processing of the huge volumes of sensor data from machines.

It takes an in-memory database to make real-time processing of IoT information possible. Used with data collection technologies such as RFID, barcode scanning, and machine sensors, in-memory processing lets manufacturers operate a real-time system , collecting and analyzing data not only from the plant floor but also from sources outside of the plant – for faster insights, more effective actions, and better day-to-day decisions.

Want to learn more about this topic as it relates to manufacturing? Attend the SAP Manufacturing Industries Forum, June 23-25, 2015, in Lombard, Illinois. View the event brochure to learn more.

It’s been said that no man is an island.  And, in the ever-changing automotive industry, that’s never been truer.

Broadly speaking, in the 20th century, a vehicle’s parts were the key elements that defined it.  Each individual part did its function and wasn’t designed to be compatible with, or responsive to, everything else.  It was taken for granted that parts were, and would always be, the fundamental building blocks of the automotive equation.

Today, however, with new electronic control systems (auto braking, lane-change warnings, transmissions and fuel management), system engineers are evolving vehicular design in groundbreaking ways.  Today, a vehicle is essentially an I/O bus with wheels.

The fundamental shift in automotive technology means people with mechanical abilities can no longer work their way through various makes and models and simply “fix” all problems.  The common denominators of vehicular design are becoming a thing of the past.

Now, systems rule.  And, people who could once wrap their head around most automobiles are finding it beyond their abilities.  Increasingly and rapidly, as new standards and technological advances arise, simply rolling up one’s sleeves and working in some elbow grease won’t cut it.  In fact, the notion of an automotive system is being redefined – the whole is no longer just the sum of its parts.

In today’s automotive industry, everything is designed, engineered, and integrated, and is specified to work as a system.  New demands call for interoperability.  From original equipment manufacturers (OEMs), and throughout each new vehicular system, customer expectations for innovation drive change.  And depending on how the industry responds, that has the possible outcome of either creating real value or unsatisfying imitations of value.

So where does new technology leave the industry moving forward?

Between the Internet of Things (IoT) and interconnected devices, there comes a deluge of data. There’s more data created every ten seconds than in the first hundred years of the Industrial Age.  And, there is great potential to make intelligence out of that data.

But what’s needed are ways to take it, understand it, and create simple suggestions or predictions that can be acted upon.  If we can’t do that, we fail.

A need for design that’s simple and intuitive, and that creates real business value, must go beyond the hard sell.  This is the conundrum of today: how to simplify in a world of complex systems and boil decisions down to yes or no answers.

Fuel management systems are good examples of trying to serve the underlying value.  They’re being designed in ways that can adjust to personal driving habits or particular conditions.  Vehicles learn and adjust to the driving patterns of individual operators. Did you know vehicles that travel into mountainous areas can adjust to altitude changes to save fuel?

Another example is Tesla’s ride-height suspension.  The vehicle adjusts chassis height, responding to speed and road conditions.  And if there’s ever a problem with that system, it sends a universal software upgrade alert, adjusting the vehicle to fix that problem.

Other industry trends are demonstrated by the way a company functions.  BMW designs its models, but increasingly, it’s the suppliers who are actually building them.  In time, this could lead to a new business model where vehicles are more about a sum of intellectual properties than component parts.  Design and innovation are where the business opportunities are.

Simplifying for the future

Whatever advances come along, there will be fundamental questions to keep the automotive industry in check: Is the technology creating something that is relevant to the driver?  How much technology and simplification does one person desire versus how much the next is willing to consume?

Automotive manufacturers will also have to ask themselves: What business value does Big Data analysis provide to customers?  If a value proposition isn’t fully recognized, there will be a whole lot of ‘so what?’

In the new networked economy, with billions of data points and ubiquitous vehicular systems, the industry ultimately needs to create actionable, simplified intelligence.  Platform solutions like SAP HANA can handle and manage the amount of information needed, while arriving at simple decisions.

Want to learn more about this topic as it relates to manufacturing? Attend the SAP Manufacturing Industries Forum June 23-25, 2015 in Lombard, IL. View the event brochure to learn more.

Industry watershed moments happen when technology finally catches up with a customer need. For the automotive industry, one of the main challenges is cost planning on the side of suppliers and manufacturers. Imagine that you’re an automotive supplier. Your departments are spread across continents – and every department works in a silo with its own tools and databases – so you’re spending extra money and have no single source of truth to show for it. It’s a frustrating and all-too-common scenario – but it’s about to change.

Automotive companies can now monitor product costs and control them from early engineering through the complete lifecycle. How? The watershed has arrived in the form of the SAP Product Lifecycle Costing solution (to be released before the end of the year).

Drive down costs when you pick and choose the most profitable scenarios

SAP Product Lifecycle Costing uses the design and horsepower of the SAP HANA platform to enable real-time simulations – giving automotive companies carte blanche to run any number of cost simulations and quickly see results. Beyond simply weeding out unprofitable scenarios, you can also:

• Standardize the costing process
• Rely on one platform that can work with different inputs
• Cut the time needed to generate quotations

Streamline the path of an automotive supplier

Every new product, no matter how innovative, has to be profitable. A part number might not yet exist and details are nothing more than a plan in the engineer’s mind. You still need to calculate cost factors for skeletal bills of material while they are taking shape, and continually adjust and enhance them.

The advantage of one platform and its integration with ERP is that it helps bring all the parts of costing analysis together for greater efficiency and visibility, including:

• Master data related to the product structure that typically comes from CAD or product lifecycle management systems
• Logistics valuation of the product, including the routings and line design that come from the manufacturing planners
• Activity rates and overhead costs provided by the controller
• Purchasing group that incorporates the purchase contracts among other factors

When you can more accurately calculate costs in the early stage of the product lifecycle, it’s easier to identify cost drivers and areas for improvement to create savings so costs don’t snowball down the line. With the added ability to create and compare alternatives in a real-time, intuitive interface, ROI is basically guaranteed.

Design with the customer, for the customer

SAP Product Lifecycle Costing was developed with customers in the discrete industries as part of a co-innovation process. This collaboration has made all the difference in producing a product that beats to the pulse of market needs. We developed the Excel-like user interface because that’s what customers requested in a survey. Role-based, individualized, and secure access to product cost structure versions and related collaborative tasks are incorporated to accommodate various responsibilities within the automotive structure.

By listening to customers first, we’ve minimized disruption and paved the way to smoother user adoption – so you can realize a fast ROI from this industry watershed moment.

Most everyone agrees that in the world of IoT (Internet of Things), that the specific topic of vehicle telematics offers huge value for manufacturers, dealers, and vehicle owners. This especially applies to trucks and the various forms of heavy equipment; vehicles that are relied upon day after day to move products, dig building foundations, pave roads, plow and harvest fields, and bring raw materials to the surface of the earth.

It is time we get very practical and begin to benefit from all the possible uses of IoT technology. We need to get beyond the hype and put new capabilities and business processes into place.  The technology exists today and many high-value applications should be considered low hanging fruit for the vehicle manufacturers that have the courage to move forward; to change the way they operate, the way they interact with customers, the way they design and improve products, etc.

The first course of action for getting high value from your telematics strategy is simply by capturing and storing the vehicle data, and then using the data to gain knowledge and insight about the performance of the vehicle as well as other information such as driver habits, vehicle utilization, etc.  SAP HANA is the data platform that provides the data access and processing tools for managing and leveraging the massive amounts of data that a vehicle telematics program can generate.  SAP Lumira is then utilized to design easy-to-use user interfaces, in both desktop and mobile formats, for the various manufacturing roles, as well as for dealers and vehicle owners/operators.

Individual vehicle components such as electrical components, drive train load, and exhaust emissions can be evaluated over the life of each vehicle.  Correlations between multiple vehicle performance characteristics can be determined to improve the ability to diagnose specific vehicle issues.  Huge potential repair and warranty savings are possible when fewer parts require replacement as the manufacturer is better equipped to know more precisely which components in which vehicles are potentially faulty.

Once parts are repaired, replaced, and/or re-engineered, the manufacturer can then remotely monitor the impacted vehicles to validate the effectiveness of their corrective action. Without telematics for this purpose, the manufacturer would likely need to wait for future warranty claims and customer complaints.  The use of telematics analysis allows the manufacturer to be much more proactive and less reactive to customer and product issues.

The second course of action is to combine the telematics data with data from other sources.  Data such as vehicle production details from ERP and MES applications, customer data from a CRM system, customer interaction and service history from dealer DMS systems, as well as data from public sources such as social media can round out a more complete view of vehicles, customers, and dealers.  For example, a quality assurance technician may want to analyze the frequent occurrences of a particular DTC (diagnostic trouble code) on a particular model.  He or she will want to see other information such as service history, vehicle configuration, and component lot numbers in order to determine a course of corrective action which best resolves the issue at the lowest cost to the manufacturer.

The third course of action is the integration of the telematics program with other enterprise applications.  Outputs of the program can provide inputs to other processes.  For example, rules could be set up to trigger product quality alerts to the enterprise quality management system.  Other examples include the automatic creation of maintenance orders when specific vehicle performance issues are detected, or the creation of a service lead for the appropriate dealer when a potential customer machine issue is predicted.

While nearly all manufacturers of trucks and heavy equipment are installing sensors on their products for data collection, most have just started to scratch the surface in terms of the many possible ways to use the data to better interact with customers, build better products, increase revenue, and reduce costs.

SAP continues to work collaboratively with our customers to bring the promises of IoT to reality for some of the world’s best manufacturers of truck and heavy equipment vehicles. If you would like to learn more about this topic, please attend the SAP Manufacturing Industries Forum June 23-25, 2015 in Lombard, IL.  View the event brochure to learn more.

I admit to walking on this earth for a long time.  Ever since I was young I heard how the world was getting smaller.  As I grew I realized this was true and why it was true. Connections increased, travel and commerce was expedited and accelerated, it was easier to communicate and traverse the globe in reasonable time. Today there are over ten billion connected devices with the future expectation that 99% of everything we produce will be connected to the Internet.  Pretty amazing!

Communication is virtually instantaneous across the globe.  Travel is not only relatively fast but very comfortable, limited only by our propulsion methods and infrastructures.

“Connected” combined with “fast” also implies opportunity for the automotive industry.  The Internet of Things (IoT) is connected and fast, opens many doors for the industry constituents.  These doors can create accurate information and enable insightful and intuitive automotive decision making in real-time.  They can enable mutually supportive and collaborative automotive business networks.  Networks can evolve that even extend outside the traditional boundaries.

Opportunities for automotive companies also include real time collaboration and product innovation, manufacturing efficiency, supply chain visibility and transparency and the ability to plan, optimize and protect the supply chain are presented.  Improved quality and safety actions and reporting come to life, as well putting the customer at the center of the automotive universe, achieving customer and vehicle centricity.  New business models can evolve; transportation as a service for example.

Knowing “everything there is to know” in real-time and discovering even more opportunities to gain business value…Wow, how the world and time shrinks.  OK, so what is all this noise?  Promises of what might be, dreams that may or may not be realized, empty rhetoric?

No, these things are real and more opportunities are rapidly being created, recognized and capitalized on today.  Come see how SAP is creating this smaller, faster, simpler and more intelligent world today. Join us for the Best Practices for Automotive Conference, the Premier Industry Conference for Organizations using SAP, happening October 12-15, 2015 at the MGM Grand Detroit, MI.

And, in the ever-changing automotive industry, it’s been said that no man is an island and that has never been more true!

Broadly speaking, in the 20th century, a vehicle’s parts were the key elements that defined it.  Each individual part did its function and wasn’t designed to be compatible with, or responsive to, everything else.  It was taken for granted that parts were, and would always be, the fundamental building blocks of the automotive equation.

Today, however, with new electronic control systems (auto braking, lane-change warnings, transmissions and fuel management), system engineers are evolving vehicular design in groundbreaking ways.  Today, a vehicle is essentially an I/O bus with wheels.

The fundamental shift in automotive technology means people with mechanical abilities can no longer work their way through various makes and models and simply “fix” all problems.  The common denominators of vehicular design are becoming a thing of the past.

Now, systems rule.  And, people who could once wrap their head around most automobiles are finding it beyond their abilities. Increasingly and rapidly, as new standards and technological advances arise, simply rolling up one’s sleeves and working in some elbow grease won’t cut it.  In fact, the notion of an automotive system is being redefined – the whole is no longer just the sum of its parts.

In today’s automotive industry, everything is designed, engineered, and integrated, and is specified to work as a system.  New demands call for interoperability.  From original equipment manufacturers (OEMs), and throughout each new vehicular system, customer expectations for innovation drive change.  And depending on how the industry responds, that has the possible outcome of either creating real value or unsatisfying imitations of value.

So where does new technology leave the industry moving forward?

Between the Internet of Things (IoT) and interconnected devices, there comes a deluge of data. There’s more data created every ten seconds than in the first hundred years of the Industrial Age.  And, there is great potential to make intelligence out of that data.

But what’s needed are ways to take it, understand it, and create simple suggestions or predictions that can be acted upon.  If we can’t do that, we fail.

A need for design that’s simple and intuitive, and that creates real business value, must go beyond the hard sell.  This is the conundrum of today: how to simplify in a world of complex systems and boil decisions down to yes or no answers.

Fuel management systems are good examples of trying to serve the underlying value.  They’re being designed in ways that can adjust to personal driving habits or particular conditions.  Vehicles learn and adjust to the driving patterns of individual operators. Did you know vehicles that travel into mountainous areas can adjust to altitude changes to save fuel?

Another example is Tesla’s ride-height suspension.  The vehicle adjusts chassis height, responding to speed and road conditions. And if there’s ever a problem with that system, it sends a universal software upgrade alert, adjusting the vehicle to fix that problem.

Other industry trends are demonstrated by the way a company functions.  BMW designs its models, but increasingly, it’s the suppliers who are actually building them.  In time, this could lead to a new business model where vehicles are more about a sum of intellectual properties than component parts.  Design and innovation are where the business opportunities are.

Simplifying for the future

Whatever advances come along, there will be fundamental questions to keep the automotive industry in check: Is the technology creating something that is relevant to the driver?  How much technology and simplification does one person desire versus how much the next is willing to consume?

Automotive manufacturers will also have to ask themselves: What business value does Big Data analysis provide to customers?  If a value proposition isn’t fully recognized, there will be a whole lot of ‘so what?’

In the new networked economy, with billions of data points and ubiquitous vehicular systems, the industry ultimately needs to create actionable, simplified intelligence. Platform solutions like SAP HANA can handle and manage the amount of information needed, while arriving at simple decisions.

Join us for the Best Practices for Automotive Conference, the Premier Industry Conference for Organizations using SAP, happening October 12-15, 2015 at the MGM Grand Detroit, MI.

This week in Chicago I was asked by my colleague Chet Harter on the Automotive team to provide my perspective in the growing trends around Automotive 4.0 to our mid-year industry breakout sessions.  Based on what we are seeing in the manufacturing and automotive industry we can point to three key areas which we presented recently at the SAP Manufacturing Industry Forum (#SAPMIF15):

1. Serving the Segment of One. Syncing process and data across make, build, service value chain components and across sectors.
2. Connected Value Chains. Move from batch to real-time to full platform integration.  MRP > ERP real-time data > ERP real-time process while leveraging device communications (internet of things, IoT).
3. Design Lifecycle Integration. Linking telemetry data with operational and service data. Complete visibility to lifecycle and usability costs.

These trends are being reinforced by concepts that SAP clients are discussing with us to create transformation and disruption in their companies and their markets.  As we prepare to move from Automotive 3.0 - generally referred to as the "globalization stage" of the industry - and moving to Automotive 4.0 - the convergence of automotive, tech and high value content to create a new, autonomous vehicles with shared community mobility - organizations need to modernize their processes, supporting infrastructure, and product definitions to transition into the new industry era.

The Segment of One is an interesting area.  While movement continues from Engineer to Order (ETO) companies are commoditizing to move to Make to Order (MTO) operating models, premier brand makers - including American icon Harley Davidson - are moving from customized "Order to Customer" models to specific MTO "Make to Customer" personalization options. Dedicated lines are created to then take the customized orders into a customized line.  The other aspect of the Segment of One is the increase in rates, options and service areas in the spare parts space where automotive suppliers and OEMs need to move to "high volume" (MMs parts x 000KKs orders x 00 locations daily).  This Build to Volume (BTV) space is needed to give customers the choice of what parts they need, where they need it and when they need it in the most economical and logical way.  Early high BTV environments suggest a need to move to both volume of data as well as process, a great model to consider S/4HANA as the base road map target to enable customer service personalization.

Connected Value Chains is most notable around the integration of telemetry and IoT areas, what most refer to as device communications or machine-to-machine (M2M) communications. Where IoT gets interesting from the perspective of automotive customers is the growing cases of what KPMG Consulting calls Internet of Behavior (IoB) or the additional step of consumer decision making based on M2M (so M2M2C).  Returning to the spare parts scenario, automotive companies are considering IoB aspects such as predictive notifications to automotive owners based on expected use versus real use and incentives to purchase official brand replacement parts at certified dealerships.  This alerts owners to consider a service event sooner, with a discount, using approved OEM spare parts (versus third party parts).  The rationale here is the need for greater supply planning transparency and integration to demand forecast.

Finally, Design Lifecycle Integration gets extremely interesting when we consider where the vehicle ownership model is heading based on trends in the industry.  The change in individual ownership of the passenger vehicle will shift into communities of use – like today’s car rentals, ZipCar, Uber – which will define the new design of the product and how it is used.  In this case the “fleet will become the market” in specific segments and how and when Millennials will adopt, own and use the car – in a very different way than what we see in today’s market.

For more information on how your organization can position in response to these trends and best practices, please feel free to contact me through SCN or email.

Hollywood has exploited our weakness for years; we love cars and they know it. So many famous films and TV shows are synonymous with their onscreen vehicles, you could probably put them bumper to bumper on the entire stretch of old route 66 and still not have room.

One thing that those cars have in common is that they speak to us in one way or another. Sometimes they just touch our hearts like the Mystery Machine, or the Ghostbusters’ Ecto-1, and sometimes they nonverbally communicate like in Herbie or Chitty Chitty Bang Bang, but sometimes they literally talk like Kitt in Lightning McQueen, or the ghastly in My Mother the Car.

Talking cars are not just Hollywood make-believe; cars do speak. I am referring to big data. Not only are the auto manufacturers communicating with every new vehicle, but employees, suppliers, and customers too albeit in different ways.

With data piling up, sorting through and making sense of the data can be the business equivalent of tearing down the autobahn or sitting in a Chicago traffic jam. All of that information is great to have, but the data is useless unless you can make sense of it. SAP HANNA’s real-time intelligence and enterprise mobility supports simple, intuitive decision-making, and new business processes with Big Data solutions for the automotive industry.

Automotive companies can simplify and speed up decisions with SAP’s real-time insights into manufacturing costs, asset use, customer experience, and operations. SAP also sets the foundation for seizing opportunities and creating new business models with risk and opportunity assessment capabilities.

My dream is that one day a manufacturer will analyze the data and discover a demand to mass produce Batmobiles and Jetson’s Space cars.

It’s an exciting time to work in this industry and I’m proud to work for SAP. The world’s most successful automotive companies rely on our solutions on premise, in the cloud, and on mobile devices. Here’s a link to some free resources to learn more about all the big possibilities with big data.