It is always encouraging to meet with customers and partners to explore new dimensions of possibilities in engineering and technology… Doing so with global customers across industry segments makes it more interesting and challenging at the same time. More and more, we often reach the cross-roads of industries and technologies which provide great opportunities for innovation and new thinking. In an earlier blog, I captured some themes on convergence largely related to products we use as consumers, and now I see this increasing more rapidly universally across industries. The leverage of technology is pervasive, be it at the consumer or industrial level. The positive rate of change in adopting embedded technologies, M2M, cloud, substantially improved user interface, etc. by industrial companies is simply amazing.
These companies seek to create significant business impact through new products in the global market with increased acceleration enabled by new and upcoming technologies. Even if established in a defined market with a set of mature and proven products for decades, they are embracing change with the advent of omnipresent connectivity and new technologies. Embedded and platform engineering have become one of the most invested areas in industrial companies products and associated road-maps. In many of these companies, embedded, platform and software engineering now account for almost 40-50% of the R&D investment, which is a massive jump from just a few years ago. In the recently concluded Embedded Technologies event in Yokohama, Japan, more than 40% of the participants were industrial companies – a shift from the earlier dominance of consumer-oriented companies as early adopters. Higher growth in emerging markets compared to mature markets in the medium to long term is the opportunity no-one wants to miss, and this certainly calls for innovative and competitive products across all industries, be it auto, medical, consumer, industrial, etc. Acceleration in product development and engineering is equally critical in mature markets such as the US, which must seek new ways of market competitiveness, i.e. digital manufacturing, robotics, energy efficient systems, M2M, etc.
In 2011, Global R&D spend by commercial organizations and governments was ~$1300 billion. While R&D investment has increased in absolute terms over the past 3 years, it has lagged as a percentage of the revenue increase for the top 1000 R&D companies in the world. This trend is also reflected in a recent report from Booz & Co. Although overall R&D is expected to be ~$1700 billion by 2020, Global R&D at a macro-level is expected to decline from 2.2% of Global GDP at the beginning of this decade to 1.9% by 2020. This implies that companies must become more effective in managing their engineering and R&D spend to maximize returns. They will need to deliver much higher business impact through better value creation by shifting focus and investment into high yield products and cutting investment in low cash generation products with low market shares. With several hundred billion dollars at stake, higher engineering efficiencies are needed to drive this portfolio optimization to fund newer areas of growth, and operations maturity need to be extremely high and proven with virtually no risk of failure.
Our world enabled by the adoption of new technologies and products, such as self-driving cars, vehicle-to-vehicle communication, sensor-based products, internet of things, smart devices, 3D printers, cloud, everything mobile, natural user interface, etc., is rapidly changing all around us. In a fascinating and recently published report, GE talks about the industrial internet and how the combination of intelligent machines, advance analytics and people at work has the potential to impact the global GDP by $10 – 15 trillion over the next 20 years. This is ~15-23% of the current global GDP and has the potential for huge impact.
Successful product and technology companies will drive higher engineering experiences which create significant business impact through accelerated product launches, and drive value through innovation and improved engineering efficiencies, all by leveraging and adopting new and disruptive technologies.