By : Jim Pinto,
By : Jim Pinto,
During a decline, good companies should be looking for revenue growth through significant new technologies that can change the rules of the game. New products that provide an order of magnitude improvement in performance or cost-effectiveness generate an inflection point.
Automation.com, August 2003
The history of technology-based business is marked by transformations generated by inflection points:
The computer age is overThe technology futurist George Gilder’s insists that the computer age is over. The PC revolution, and the silicon technology that triggered it, drove significant growth in the past decade – but these technologies have now become commodities. Gilder suggests that Intel and Microsoft are simply becoming icons of a bygone age – they no longer shape the future.
Intel cannot continue to leverage its power through producing giant chips in multi-billion-dollar factories, because in the future computer intelligence will be disseminated in tiny intelligent chips with wireless connections. The bloated code of Microsoft will not be brought down by another software giant, but will be circumvented by software that is part of every product and appliance. People will not use software – it will simply be part of the things they use.
Of course, the microchip and the computer will still retain their tremendous importance, in ways similar to steel mills and power plants. They have past their peak and now simply become part of the platform that is giving birth to new technologies that are transforming human economies and cultures, faster and more drastically than ever before.
Abundance and ScarcityIn the industrial age, power (steam, coal, oil and electricity) was available in abundance. In the past century, the cost of a kilowatt-hour equivalent dropped from hundreds of dollars to about 5 cents and it continues to decline at about 2 percent per year. De-regulation changes it from being a “scarce commodity” (a paradox of words) that only the power company monopoly could provide and gives it the status of a true commodity. While there may be temporary price surges, de-regulation will inevitably cause eventual pricing to decline to a commodity level.
A typical PC uses about a thousand kW hours per year. The billion computers which are expected to be connected to the Internet over the next five years, together with peripherals and hundreds of billions of embedded chips, will consume as much electricity as the entire US economy does today. So, power, once an "abundance", will become a "scarcity".
During the past 30 years, the cost of a transistor dropped from about $10 to a few millionths of a cent, and continues to decline (Moore’s Law) at about 66% a year. Processing MIPS (millions of instructions per second) that cost several millions of dollars sell for less than a buck today. And we utilize that abundance not only in computers and workstations, but also in video games and music synthesizers.
In short, the defining abundances of the past few decades have been silicon and power. People used those abundances to relieve the scarcities. In what Gilder defines as the “macrocosm”, they use power to replace horses and slaves, while in the "microcosm" they use silicon intelligence to replace human intelligence.
Defining abundances and scarcities mark every new era. And there is a natural overlap - the successes of one era spur and enable the successes of the next. The plentitude of the agricultural age loosed resources for the industrial revolution, while that in turn served as a platform for the computer revolution. The sons of the industrialists went off to study technology and came back to start new computer or software companies, which now in turn are giving birth to the new era of information connectivity.
The Inflection pointOver the years, people always have felt that scarcity will ultimately prevail over abundance. However, Necessity (the mother of invention) turns scarcity into abundance. Abundances and scarcities play out in a spiral of reciprocity, with each producing its opposite in the cycles of economic advance.
A scarcity finds meaning and value in the future abundance that it causes – and that is the inflection point. This is the where significant growth and wealth is generated for leaders who utilizes knowledge and creativity to manipulate the future abundance while it is still a scarcity.
Industrial automation is becoming a commodityA few decades ago, industrial automation involved a lot of proprietary knowledge, which generated significant value for the purveyors of that knowledge. Industrial automation products were an essential and proprietary ingredient in factories and process plants. At the turn of the century, a lot of the proprietary content has melted away through rapid and widespread dissemination of the information in the global arena.
Automation knowledge that produces quality goods at low cost has now become a commodity – everyone knows how to do it. In many cases, the western world chased cheap labor in the Far East and educated the locals with their knowledge as part of the project, shortsightedly frittering away the value.
The features and functions of conventional instrumentation and automation products are easily copied and the cost reduces to quality manufacture of commodity products with the lowest overhead. Software is also quickly and easily copied – if not directly, then at least through availability of functional equivalents that can be developed quickly and cheaply in countries like India, which have rapidly become centers of the software universe.
Stop being incremental – look for changeDCS, PLCs, PC-based SCADA and controls drove growth in the past, but they no longer shape the future Now we need new technologies to replace them, products and systems which will provide the same functions – cheaper, faster, better. The old products will simply become part of the platforms that give birth to new technologies that transform the business landscape.
What we ARE good at in the US is new technology. New growth and success will result only for leaders who work with technology that is revolutionary enough to cause significant change. Look for inflection points – the technologies that bring 10X improvements.
Industrial automation inflection pointsFor industrial automation, several new inflection points will arrive in the next few years. This is where the growth and success will occur, from which new instrumentation and automation leaders will emerge.
Let me suggest my favorite possibilities:
Stop being incremental – look for 10X change!
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