Transforming forces: Interview with Jim Heppelmann, CEO of PTC

Manufacturing business worldwide is undergoing a transformation in product, in process and in the very definition of manufacturing. Those that don't keep up are likely to find themselves outpaced. Jim Heppelmann, president and CEO of the systems and software group PTC, counts seven different but related "forces" that he says are coming together to create what he calls "a history-defining moment". Hype? Well, Heppelmann has influential backers such as The Economist who believe that on its own digitisation of product and process represents a new industrial revolution. But digitisation is just one of Heppelmann's seven interrelated game-changing forces: "Each of them taken singly would be a big deal," he says. "The sum of them is completely transformational." Digitisation is in fact the starting point for Heppelmann, and for manufactured products it started with the capture of geometry in computer-aided design (CAD), which reduced errors intrinsic in drawings and sketches. Digital product data, he says, has become the "DNA" of manufacturing. "But there's plenty more benefit to come from digitisation," Heppelmann says. Technologies such as 3D printing point towards a redefinition of the whole manufacturing process, and the digital product information is now used as the basis for service operations such as installation and maintenance. But digitisation has done more than just produce its own direct effects: it has also fostered other business changes that are among Heppelmann's seven transformational forces. Globalisation, for example, has some of its roots in universal air travel and the development of the internet, but digitisation is a trend that has, he says, "torn down geographical and economic boundaries". In the past, companies could decide whether to operate locally or nationally "but in many sectors that's not viable – businesses need to think globally," he says. Globalisation changes the whole process of innovation from the lone inventor to a collaborative approach based on worldwide information sharing: "The best companies design anywhere, build anywhere and sell and service everywhere," he says. But if many products are now global, then the regulatory regimes that control the sale of goods are still far from uniform. Regulation, the third of Heppelmann's transforming forces, is a "strong headwind" buffeting the trend towards globalised products, he says. Governments, agencies and industry bodies impose rules that modify the free flow of goods; pressures such as environmental impact and employment conditions add new layers of compliance for manufacturers to meet. Differing regulations mean that the idea of a single uniform product in every market is viable for only very few commodity items: product variation, customisation and now personalisation are the fourth of Heppelmann's trends. Regional variations stem from many factors as well as regulations: customs, preferences, geography, history and climate. Heppelmann says that the trend towards mass customisation of products has until now required a balance between customer demand for an individual product and the benefits of mass production. In some industries, such as automotive, it's been possible to meet these apparently conflicting drivers through a "platform" strategy in which the basics remain constant but the details are customisable through options and variants, though costs are usually passed on to the customer. This is now changing. "Software inside products starts to break the rules," Heppelmann says. Smart phones are an example of products where "the last mile" of personalisation is done by the individual customer – and this will apply increasingly to other products, he says. This is because of the fifth mega-trend that Heppelmann identifies: the incorporation of software into products that were previously mechanical. Embedded programmable software means that product performance can be modified to take account of changed circumstances: it redefines the conventional idea of a "product" that has a fixed purpose and a fixed method of delivering it. Heppelmann's sixth transforming force is very much related to the software change: it's the degree to which products are now connected and can communicate their status and receive communications. What this means, he says, is that there is "a digital umbilical cord" between manufacturers and their products that extends right through the lifecycle. "It gives remote control and visibility: we can gather information on their usage and their performance and we can update them," he says. In terms of business, this breaks down the long-standing division between manufacturing and service. Putting all the data into one unified system fuels the last of Heppelmann's seven forces: it's called "servitization", and it is the trend for manufacturers to take responsibility not just for the supply of a product but also for its operation, maintenance and availability afterwards. There are business drivers for this trend anyway: service represents a revenue stream that manufacturers have in the past not been tapping into – and in tough economic times, it's a missed opportunity. But Heppelmann believes that the trend also fundamentally changes the nature of what a customer buys. In aerospace, for example, servitization of aero-engines means that airline customers no longer buy an engine as such; instead, they are buying engine availability as the manufacturers take on responsibility for service.