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If you have followed my blog over the past 10 years, I hope you realize that I am always trying to bring sense to the nonsense and still looking into the future where new opportunities are imagined. Perhaps due to my Dutch background (our motto: try to be normal – do not stand out) and the influence of working with Israeli’s (a country where almost everyone is a startup).

Given this background, I enjoy the current discussion with Oleg Shilovitsky related to potential PLM disruptions. We worked for many years together at SmarTeam, a PDM/PLM disruptor at that time, in the previous century. Oleg has continued his passion for introducing potential disruptive solutions  (Inforbix / OpenBOM) where I got more and more intrigued by human behavior related to PLM. For that reason, I have the human brain in my logo.

Recently we started our “The death of ….” Dialogue, with the following episodes:

Jan 14thHow to democratize PLM knowledge and disrupt traditional consulting experience

Jan 21stThe death of PLM Consultancy

Jan 22ndWhy PLM consultants are questioning new tools and asking about cloud exit strategy?

Here is episode 4  – PLM Consultants are still alive and have an exit strategy

Where we agree

We agreed on the fact that traditional consultancy practices related to PLM ranking and selection processes are out of time. The Forester Wave publication was the cause of our discussion. For two reasons:

  1. All major PLM systems cover for 80 percent the same functionalities. Therefore there is no need to build, send and evaluate lengthy requirements lists to all potential candidates and then recommend on the preferred vendor. Waste of time as the besides the requirements there is much more to evaluate than just performing tool selection.
  2. Many major consultancy firms have PLM practices, most of the time related to the major PLM providers. Selecting one of the major vendors is usually not a problem for your reputation, therefore the importance of these rankings. Consultancy firms will almost never recommend disruptive tool-sets.

PLM businesses transformation

At this point, we are communicating at a different wavelength. Oleg talks about PLM business transformation as follows:

Cloud is transforming PLM business. Large on-premise PLM projects require large capital budget. It is a very good foundation for existing PLM consulting business. SaaS subscription is a new business model and it can be disruptive for lucrative consulting deals. Usually, you can see a lot of resistance when somebody is disrupting your business models. We’ve seen it in many places and industries. It happened with advertising, telecom and transportation. The time is coming to change PLM, engineering and manufacturing software and business.

I consider new business models less relevant compared to the need for a PLM practice transformation. Tools like Dropbox, perhaps disruptive for PDM systems, are tools that implement previous century methodology (document-driven / file-based models). We are moving from item-centric towards a model-driven future.

The current level of PLM practices is related to an item-centric approach, the domain where also OpenBOM is bringing disruption.
The future, however, is about managing complex products, where products are actually systems, a combination of hardware and software. Hardware and software have a complete different lifecycle, and all major PLM vendors are discovering an overall solution concept to incorporate both hardware and software. If you cannot manage software in the context of hardware in the future, you are at risk.  Each PLM vendor has a different focus area due to their technology history. I will address this topic during the upcoming PLMx conference in Hamburg. For a model-driven enterprise, I do not see an existing working combination of disruptors yet.

Cloud security and Cloud exit strategy

Oleg does not really see the impact of the cloud as related to the potential death of PLM consulting as you can read here:

I agree, cloud might be still not for everyone. But the adoption of cloud is growing and it is becoming a viable business model and technology for many companies. I wonder how “cloud” problem is related to the discussion about the death of PLM consulting. And…  here is my take on this. It is all about business model transformation.

I am not convinced that in the PLM cloud is the only viable business model. Imagine an on-premise rigid PLM system. Part of the cloud-based implementation benefits come from low upfront costs and scalable IT. However, cloud also pushes companies to defend a no-customization strategy – configuration of the user interface only.  This is a “secret” benefit for cloud PLM vendors as they can say “NO” to the end users of course within given usability constraints. Saying “NO” to the customer is lesson one for every current PLM implementation as everyone knows the problem of costly upgrades later

Also, make a 5-10 years cost evaluation of your solution and take the risk of raising subscription fees into account. No vendor will drop the price unless forced by the outside world. The initial benefits will be paid back later because of the other business model.

Cloud exit strategy and standards

When you make a PLM assessment, and usually experienced PLM consultants do this, there is a need to consider an exit strategy. What happens if your current PLM cloud vendor(s) stops to exist or migrate to a new generation of technology and data-modeling? Every time when new technology was introduced, we thought it was going to be THE future. The future is unpredictable. However, I can predict that in 10 years from now we live with different PLM concepts.

There will be changes and migrations and cloud PLM vendors will never promote standardized exports methods (unless forced) to liberate the data in the system. Export tools could be a niche market for PLM partners, who understand data standards. Håkan Kårdén, no finders fee required, however, Eurostep has the experience in-house.

 

Free downloads – low barriers to start

A significant difference in opinion between Oleg and me is Oleg’s belief in bottom-up, DIY PLM as part of PLM democratization and my belief in top-down business transformation supported by PLM. When talking about Aras, Autodesk, and OpenBOM,  Oleg states:

All these tools have one thing in common. You can get the tool or cloud services for free and try it by yourself before buying. You can do it with Aras Innovator, which can be downloaded for free using enterprise open source. You can subscribe for Autodesk Fusion Lifecycle and OpenBOM for trial and free subscriptions. It is different from traditional on-premise PLM tools provided by big PLM players. These tools require months and sometimes even years of planning and implementation including business consulting and services.

My experience with SmarTeam might influence this discussion. SmarTeam was also a disruptive PDM solution thanks to its easy data-modeling and Microsoft-based customization capabilities like Aras. Customers and implementers could build what they want, you only needed to know Visual Basic. As I have supported the field mitigating installed SmarTeam implementations, often the problem was SmarTeam has been implemented as a system replicating/automating current practices.

Here Henry Ford’s statement as shown below applies:

Implementations became troublesome when SmarTeam provided new and similar business logic. Customers needed to decide to use OOTB features and de-customize or not benefits from new standard capabilities. SmarTeam had an excellent business model for service providers and IT-hobbyists/professionals in companies. Upgrade-able SmarTeam implementations where those that remained close to the core, but meanwhile we were 5 – 8 years further down the line.

I believe we still need consultants to help companies to tell and coach them towards new ways of working related to the current digitization. Twenty years old concepts won’t work anymore. Consultants need a digital mindset and think holistic. Fitting technology and tools will be there in the future.

Conclusion

The discussion is not over, and as I reached already more than 1000 words, I will stop. Too many words already for a modern pitch, not enough for a balanced debate. Oleg and I will continue in Hamburg, and we both hope others will chime in, providing balanced insights in this discussion.

To be continued …..?

 

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CoveyIt is interesting to read management books and articles and reflect the content in the context of PLM. In my previous post How the brain blocks PLM acceptance and in Stephen Porter´s (not yet finished) serial The PLM state: the 7 habits of highly effective PLM adoption, you can discover obvious points that we tend to forget in the scope of PLM as we are so focused on our discipline.

christensenThis summer holiday I was reading the Innovator´s Dilemma: When New Technologies Cause Great Firms to Fail by Clayton Christensen. Christensen is an associated professor at the Harvard Business School and he published this book already in 1997. Apparently not everyone has read the book and I recommend that if you are involved in the management of a PLM company to read it.

Sustaining technology

Christensen states there are two types of technologies. Leading companies are supporting their customers and try to serve them better and better by investing a lot in improving their current products. Christensen calls this sustaining technology as the aim is to improve existing products. Sustaining technologies lead to every time more and more effort to improve the current product performance and capabilities due to the chosen technology and solution concepts. These leading companies are all geared up around this delivery process and resources are optimized to sustain leadership, till ….

Disruptive technology

The other technology Christensen describes is disruptive technology, which initially is not considered as competition for existing technologies as it under performs in the same scope, so no way to serve the customer in the same way. The technology underperforms if you would apply to the same market, but it has unique capabilities that make it fit for another market. Next if the improvement path of disruptive technology can be faster than the improvement path for the sustaining technology, it is possible that their paths meet at a certain point. And although coming from a different set of capabilities, due to the faster improvement process the disruptive technology becomes the leading one and companies that introduced the disruptive technology became the new market leaders.

Why leading companies failed..

failChristensen used the disk drive industry as an example as there the change in technology was so fast that it was a perfect industry to follow it´s dynamics. Later he illustrates the concepts with examples from other industries where the leading firms failed and stopped to exist because disruptive technologies overtook them and they were not able to follow that path too.

Although the leading companies have enough resources and skills, he illustrates that it is a kind of logical path – big companies will always fail as it is in their nature to focus on sustaining technology. Disruptive technologies do not get any attention as they are targeting a different unclear market in the beginning and in addition it is not clear where the value from this disruptive technology comes from, so which manager wants to risk his or her career to focus on something uncertain in an existing company.

Christensen therefore advises these leading companies, if they expect certain technologies to become disruptive for their business, to start a separate company and take a major share position there. Leave this company focus on its disruptive technology and in case they are successful and cross the path of the sustaining technology embed them again in your organization. Any other approach is almost sure to fail, quote:

flyExpecting achievement-driven employees in a large organization to devote critical mass of resources, attention and energy to disruptive projects targeted at a small market is equivalent to flapping one´s arms in an effort to fly

As the book was written in 1997, it was not in the context of PLM. Now let´s start with some questions.

Is ERP in the stage of sustaining technology?

erp_txtHere I would say Yes. ERP vendors are extending their functional reach to cover more than the core functionality for two reasons: they need continuous growth in revenue and their customers ask for more functionality around the core. For sustaining technologies Christensen identifies four stages. Customers select a product for functionality, when other vendors have the same functionality reliability becomes the main differentiation. And after reliability the next phase is convenience and finally price.
From my personal observations, not through research, I would assume ERP for the major vendors is in the phase between convenience and price. If we follow Christensen´s analysis for SAP and Oracle it means they should not try to develop disruptive technologies inside their organization, neither should they try to downscale their product for the mid-market or add a different business model. Quote:

What goes up – does not go down. Moving to a high-end market is possible (and usually the target) – they will not go to small, poor defined low-end markets

How long SAP and Oracle will remain market leaders will depend on disruptive technologies that will meet the path of ERP vendors and generate a new wave. I am not aware of any trends in that area as I am not following the world of ERP closely

Is PLM in the stage of sustaining technology?

plm_txtHere I would say No because I am not sure what to consider as a clear definition of PLM. Different vendors have a different opinion of what a PLM system should provide as core technologies. This makes it hard to measure it along the lifecycle of sustaining technology with the phases: functionality, reliability, convenience and price.

Where the three dominant PLM providers (DS/PTC/Siemens) battle in the areas of functionality, reliability and convenience others are focusing on convenience and price.

Some generalized thoughts passed my mind:

  • DS and PTC somehow provoke their customers by launching new directions where they believe the customer will benefit from. This somehow makes it hard to call it sustaining technology.
  • · Siemens claiming they develop their products based on what customers are asking for. According to Christensen they are at risk in the long term as customers keep you captive and do not lead you to disruptive technologies.
  • · All three focus on the high-end and should not aim for smaller markets with the same technology. This justifies within DS the existence of CATIA and SolidWorks and in Siemens the existence of NX and SolidEdge. Unifying them would mean the end of their mid-market revenue and open it for others.

 

Disruptive technologies for PLM

Although PLM is not a sustained technology to my opinion, there are some disruptive technologies that might come into the picture of mainstream PLM.

open_sourceFirst of all there is the Open Source software model, introduced by Aras, which initially is not considered as a serious threat for the classical PLM players – “big customers will never rely on open source”. However the Open Source model allows product improvements to move faster than main stream, reaching at a certain point the same level of functionality, reliability and convenience. The risk for Open Source PLM is that it is customer driven, which according Christensen is the major inhibitor for disruptive steps in the future

cloudNext there is the cloud. Autodesk PLM and Kenesto are the two most visible companies in this domain related to PLM. Autodesk is operating from a comfort zone – it labels its product PLM, it does not try to match what the major PLM vendors try to do and they come from the small and medium mid-size market. Not too many barriers to come into the PLM mid-market in a disruptive manner. But does the mid-market need PLM? Is PLM a bad annotation for its cloud based product? Time will tell.

The management from Kenesto obviously has read the book. Although the initially concept came from PLM++ (bad marketing name), they do not to compete with mainstream PLM and aim their product at a different audience – business process automation. Then if their product picks up in the engineering / product domain, it might enter the PLM domain in a disruptive manner (all according to the book – they will become market leaders)

searchFinally Search Based Applications which are also a disruptive technology for the PLM domain. Many companies struggle with the structured data approach a classical PLM system requires and especially for mid-market companies this overhead is a burden. They are used to work in a cognitive manner, the validation and formalization is often done in the brain of experienced employees. Why cannot search based technology not be used to create structured data and replace or support the experienced brain?

If I open my Facebook page, I see new content related to where I am, what I have been saying or surfing for. Imagine an employee´s desktop that works similar, where your data is immediately visible and related information is shown. Some of the data might come from the structured system in the background, other might be displayed based on logical search criteria; the way our brain works. Some startups are working in this direction and Inforbix (congratulations Oleg & team) has already been acquired by Autodesk or Exalead by DS.

For both companies if they believe in the above concept, they should remain as long as possible independent from the big parent company as according to Christensen they will not get the right focus and priorities if they are part of the sustainable mainstream technology

Conclusion
This blog post was written during a relaxing holiday in Greece. The country here is in a crisis, they need disruptive politicians. They did it 3500 years ago and I noticed the environment is perfect for thinking as you can see below.

Meanwhile I am looking forward to your thoughts on PLM, in which state we are what the disruptive technologies are.

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