1. The 7 th CIRP IPSS Conference 21-22 May 2015 Saint-Etienne, France by Matthias Herterich, Falk Uebernickel and Walter Brenner Presenting Author: Matthias Herterich Institute of Information Management University of St. Gallen St. Gallen, Switzerland Matthias.herterich@unisg.ch The Impact of Cyber-Physical Systems on Industrial Services in Manufacturing

2. Agenda 2 Methodology 3 Research Question and Related Work 2 Motivation and Introduction 1 Results and Implications 4 Practical and Theoretical Contribution, Limitations and Conclusion 5

3. 1. Motivation and Introduction 3 1. “Servitization in Manufacturing”  Importance of service business and industrial service offerings increases  (Industrial) Product Service Systems (IPSS) emerge  Technical Customer Service  Maintenance, Repair and Overhaul  Classical technical customer service is getting more and more competitive 2. “Digitalization and Digital Innovation“  Consumer and Industrial Products are getting physical (sensors, actuators and connectivity)  New capabilities cutting across traditional product boarders  Cyber-physical capabilities shape the way we use IPSS and products in general  A tight integration between industrial products and service delivery is necessary to realize digitally enabled (service) business models  Manufacturers strive for service innovation and increased service process efficiency

4. Emergence of cyber-physical industrial product service systems Servitization in manufacturing… Increasing importance of service business to monetize long lifecycles of industrial equipment TCS business is getting more and more important Increased competition in the service business drives for efficiency and stronger vendor lock-ins … implies the following challenges… When to service industrial equipment? What is the most efficient and effective to service industrial equipment? What data-driven services can be provided by industiral equipment manufacturers? … and calls for leveraging technology Emerging role of cyber-physical capabilities (sensors, connectivity and actuators) Manufacturers strive to leverage the emerging technological capabilities of industrial CPSs to Engineer better products Increase efficiency of their technical customer service processes Come up with new added- value services 4

5. Agenda 5 Methodology 3 Research Question and Related Work 2 Motivation and Introduction 1 Results and Implications 4 Practical and Theoretical Contribution, Limitations and Conclusion 5

6. 2. Research Question Research Question: What are the effects of cyber-physical systems on industrial field service and what are corresponding business models? Digitalization provides new opportunities for industrial equipment manufactures as sensor technology and ubiquitous connectivity become part of the industrial equipment We investigate service innovations driven by digitalization and CPSs and their impact on the service ecosystem and identify affordances that effectively exploit the new technological capabilities. 6

7. 2. Terms and Concepts Emerging Cyber-physical Systems (CPS) as real-world-phenomenon and subject of our investigation Systems with embedded software [...], which directly record physical data using sensors and affect physical processes using actuators evaluate and save recorded data, and actively or reactively interact both with the physical and digital world are connected […] via digital communication facilities use globally available data and services have a series of dedicated, multimodal human-machine interfaces’ (Acatech, 2011, p. 15). Service-Dominant (S-D) logic, Service Science and Product-Service Systems as theoretical foundation Following the Service-Dominant (S-D) logic, Service Science emerged as a new field of research (Vargo & Lusch, 2004, 2008) Based on the rather universal conceptualization of a service system (P. Maglio, Bailey, & Gruhl, 2007; P. P. Maglio & Spohrer, 2008), (industrial) product-service systems refer to combinations of products and services, realized in an extended value creation network (Aurich, Fuchs, & Wagenknecht, 2006) Integration of product and service offerings that delivers values in industrial applications (Meier et al. 2010) Due to permeation by pervasive digital technologies (Yoo et al., 2012; Meier et al. 2010), the term cyber-physical system is emerging (Mikusz, 2014). 7

8. 2. Lifecycle of Industrial Product-Service Systems (IPSS) Beginning of Life (BOL)  Conceptualization, definition and realization of product Mid of Life (MOL)  Use, service and maintenance End of Life (EOL)  Reuse of the product or individual components, refurbishing, disposal with or without incineration Beginning of Life (BOL)Mid of Life (MOL)End of Life (EOL) 8  Involved stakeholder groups  Equipment Manufacturer  Involved stakeholder groups  Equipment Manufacturer  Equipment Operator  Service Organization  Involved stakeholder groups  Equipment Operator  Service Organization  (Manufacturer)

9. Agenda 9 Methodology 3 Research Question and Related Work 2 Motivation and Introduction 1 Results and Implications 4 Practical and Theoretical Contribution, Limitations and Conclusion 5

10. 3. Methodology Interpretative case study approach Explorative qualitative research design following the multiple case study approach (Eisenhardt 1989) ‘Specified population’ was applied to obtain an increased external validity and comprehensive insights on different perspectives in the industry Following a multiple case study approach results in an enhanced validity of results Semi-structured interviews as primary method for data collection Additional material such as presentations or process documentations were analysed for triangulation purposes and increased reliability All interviews followed a structured interview protocol Class of organizationIndustries addressed in case studiesNumber of case organizations Equipment ManufacturersElevators, Industrial Materials Handling3 Equipment OperatorServices, Transportation5 Service OrganizationFacility Services, Airport Facility Management3 10

11. Agenda 11 Methodology 3 Research Question and Related Work 2 Motivation and Introduction 1 Results and Implications 4 Practical and Theoretical Contribution, Limitations and Conclusion 5

12. 4. Overview of findings - CPSs affordances for the industrial service business Service AffordanceDescriptionBenefiting stakeholder Engineer better equipment by leveraging operational performance data Data from the industrial equipment of the current installed base can be used for engineering future version of the equipment. Equipment manufacturer Optimization of equipment operationsOperation of the equipment can be optimized based on historic operational data. Breakdowns can be prevented. Based on historic usage patterns, operations can be optimized. Equipment operator Control and manage equipment remotelyHaving the ability that CPS can receive control information, dedicated functionality of the equipment can be controlled manually via remote service centers. A reset of CPSs can be conducted to eliminate faults remotely. Equipment operator, Service organization Predict and trigger service activitiesContinuous data collection based on CPSsmight be used to trigger and predict service activities. For example, routine maintenance activities can take place based on usage or wear and tear of the equipment. Efficiency increases can be realized by scheduling service incidents in an efficient yet effective way. Service organization 1 2 3 4 12

13. 4. Overview of findings - CPSs affordances for the industrial service business Service AffordanceDescriptionBenefiting stakeholder Remote diagnostics and replace field service activities In many cases, maintenance or even repair can be accomplished remotely. Comprehensive service centres are set up and experienced staff diagnoses or solves problems remotely. Experienced service agents can be utilized more effectively, as travel is no longer necessary. Initial diagnosis is accomplished remotely. Service organization, Equipment operator Empower and optimize field service Industrial CPSs can be used to optimize and enhance efficiency of existing service processes and particularly field service activities. Based on CPS, field service activities can be performed faster and service quality could be increased. Field service technicians can be supported by remote experts to solve problems faster and more effectively. Service organization, Equipment operator Information and data- driven services Data as well as insights obtained from cyber-physical industrial equipment to realize unexpected information and data-driven service opportunities. For instance, in case that the manufacturer is the owner of the data, data can be sold to other stakeholders via standardized interfaces. This data can be leveraged for the service business. Service organization, Equipment operator, Equipment manufacturer 5 6 7 13 Besides service affordances, the emerging digital capabilities have impact on equipment manufacturers, equipment operators and service organizations as key stakeholder groups in the industrial service ecosystem.

14. 4. Impact on industrial equipment manufacturers Impact of Cyber-physical industrial equipment on Business Model 1.Activities no longer focus on BOL lifecycle phase 2.Manufacturers aim at collecting data from already sold equipment to offer product- related services and monetize MOL 3.Manufacturers operational data to engineer better equipment in the future 14 Depending on ecosystem circumstances manufacturer need to decide between an open and closed system approach for their IT architecture System ApproachAssembling and Control of SolutionPossibilities for organisation Open System Approach Control and optimize the design of all (physical and non-physical) parts of the system Organisation keeps control over technology and data and future developments Closed System Approach Assemble and customize dedicated parts of the solution. Develop system interfaces and application to optimize the operation and service of equipment more efficiently

15. 4. Impact on industrial equipment operators Impact of Connectivity and Data Sensors on Business Model 1.Digitalization and CPSs are opportunities for minimizing equipment downtime and drive operational efficiency 2.With an open system approach, operators might be able to integrate the equipment or machinery in their existing system landscape 15 Example Airport operator is interested in connecting equipment such as air-conditioning and passenger transportation to a centralized facility management system. The operator could control the equipment dynamically based on flight schedules. Product Operators can benefit from the Connectivity and Data Sensors to approach their vision of flawless product operations one step further

16. 4. Impact on service organizations Impact of Connectivity and Data Sensors on Business Model 1.New technological capabilities to provide advanced service offerings 2.Gain of competitive advantage due to the expertise of the service organisation and its access to the to the operational product data 3.Shift to outcome-based business models 16 Example Performance Contracting would be an example where the service organisation is responsible for the availability and smooth operation of an industrial machine. Service Organisations can use industrial CPSs as a tool to increase service efficiency and drive innovation and hence the use of CPS becomes a key competitive factor in the service business

17. Agenda 17 Methodology 3 Research Question and Related Work 2 Motivation and Introduction 1 Results and Implications 4 Practical and Theoretical Contribution, Limitations and Conclusion 5

18. Practical & theoretical contributions, limitations Limitations  Limited generalizability due to case study approach  Limitation could be by overcome by investigating more cases in different industries Theoretical contribution  Important step for understanding the impact of cyber-physical industrial equipment on the industrial service business Practical contribution  Valuable insights on the potential business value of CPS for the service business  Best practices for technology exploiration Future Work  Understand the link between service business models and technical capabilities that are necessary for implementation  Taxonomy of smart service scenarios  Identify scenario archtetypes and derive business models 18

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22. 4. Impacts of CPSs on the service ecosystem StakeholderImpact of CPS on StakeholderImplication for Stakeholder Industrial Equipment Manufacturers Collection of data and manufacture better equipment in the future Increase Quality of Equipment and increase innovation capability Industrial Equipment Operators Flawless product operationMinimize downtime and drive operational efficiency Service Organisations Increase service efficiencies and drive service innovation Data becomes increasingly important for realizing operational efficiencies in the service business. 22

23. The allocated time for each paper is shown in the overall conference program. This includes 5 minutes for discussion Number of slides should be planned accordingly. 23 AFFILIATION LOGO