A digital and transformed future | "An amazing digital playing field"

Fast, powerful connectivity is enabling new ways of doing business. In a series of Insights (adapted from an article written for the 2019 Bristol Technology Showcase) we will be exploring some of the most transformative technologies and trends, and the challenges and opportunities they are bringing for businesses. The series opens with a look at next-generation connectivity and the profound transformation underway for business models.

The first 5G networks are starting to be switched on in cities around the UK. "Network slicing" technology is being developed so that 5G networks will not be "one size fits all" but can be sub-divided. Different slices of spectrum will be optimised for particular use-case groups to maximise the efficient use of available spectrum.

5G is just one aspect of the next generation of connectivity. Satellite communications have become more affordable for remote locations. Full-fibre communications networks are being built, replacing the old copper loop connections. Meanwhile, older and slower networks – even 2G – will be retained to offer cost-effective connections for systems which do not need speed. Overall, connectivity options will be more varied and with a greater measure of optimisation for the particular needs of the customer.

The transformative boost from 5G won't necessarily be in our smart phones, but in the connected environment in which we operate, driving advanced Internet of Things applications. Smart buildings, smart cities, connected and autonomous vehicles and digitised commerce and industry are all set to benefit from enhanced connectivity, data flows and increasing tech-driven autonomy. As a comms industry speaker recently commented, this will be "an amazing digital playing field".

Advanced Internet of Things and "digital twins"

Digital manufacturing is evolving, with connectivity, sensors and actuators added to processes and production lines. Manufacturing facilities are being reproduced in virtual form as "digital twins". A digital model is built of hardware and other physical kit, integrated with operating software, and receiving real-time data about how the actual kit is functioning. The digital twin becomes a mirror of the physical factory or processing plant. Digital twins can be incredibly sophisticated, integrating information about the technical properties of the various parts of the machinery, such as the friction on a conveyor belt or the response of a particular material as it is heated.

The data collected from the connected equipment and the insights from the digital twin can be used to fine-tune performance and output. This might mean optimising production schedules, or understanding wear and tear patterns on machinery to predict when best to undertake parts replacement and maintenance, which in turn should reduce down-time from unexpected breakdowns. The ability to plan maintenance schedules also enables more efficient deployment of technicians.

Digital prototyping

Digital twins can also be the starting point, rather than retrofitted to new or legacy physical assets. Machinery can be prototyped digitally before it is actually built. Again, the properties of the various materials which form part of the process can be built into the model. Testing and refining the prototype can be undertaken in the virtual environment.

Normally, there is significant risk in investing in building a prototype. If the prototype has too many faults and problems, the project may become unviable and be abandoned. A well-constructed digital twin, by contrast, can ensure that the first physical prototype is very close to production quality, as the faults and problems will have been identified and resolved in the digital model. Clearly, investment is required to build a digital twin, but partnerships and technical support may be available from relevant centres of excellence.

From asset sales to "as a Service" supply

Connectivity and digital twins – whether developed at the product design stage or retrofitted to existing facilities – offer the potential to transform not just the way that things operate but entire business models.

If a manufacturer has a connected digital twin of each asset which it produces, the option opens up to retain the digital connection with the asset even when it is in use by a customer. Real-time data about the operation of the asset can assist with repair and maintenance, and can help the manufacturer understand how the asset is used in practice.

Increasingly, however, manufacturers are not only retaining a digital connection but are retaining legal ownership of the asset. The customer no longer buys the equipment. Instead, it is installed by the supplier and paid for by the customer on the basis of how much it has used the functionality offered by the equipment. This might be on the basis of the time in operation or the number of operations completed.

This shift is game-changing in terms of the relationship between supplier and customer. The supplier switches from offering goods to offering a service, with significant changes to the contractual relationship with the customer (including ongoing performance expectations and service level commitments).

The customer is no longer investing capital in purchasing or leasing an asset which then depreciates on the balance sheet. The cost of the equipment becomes an incremental operating cost. For smaller customers, the "as a Service" model offers much less risk because of the reduction in sunk costs. This can be a transformative change in the business model for both supplier and customer.

The extension of the "as a Service" model from the world of software and intangibles into the provision of assets is just one example of the possibilities opened up by next generation connectivity, and how digital transformation is driving new ways of doing business. Along with the commercial and technical challenges, businesses need to ensure that they are also addressing the legal considerations that follow from these changes, including the implications of the shift in business model on for the contractual frameworks that govern them, as well as in relation to data security, IP rights, etc.

This feature is the first in our series, "a digital and transformed future". For an overview of the series, click here.