Welcome to the data-driven machine: Digital transformation in the construction industry
Building and operating the machines that make infrastructure and construction works such as roads, buildings and bridges possible is something that seldom gets mainstream attention. These machines may not seem as shiny and cool as cars for example, but in many ways they are not just more important, but more advanced as well.
It's not just that without them none of the material to build everything the industry builds would not be available, transportation would be a major issue, and everything we come to take for granted would be disrupted. Compared with cars, there are some interesting facts that stand out about these machines.
There are fewer of those machines around, they represent a greater investment to build, purchase and operate, they often need to work in collaborative formations of rainbow fleets and in challenging environments, and there are just a few players building them.
These have contributed to a perfect storm unfolding in the construction industry. ZDNet discussed with key people from industry leaders Caterpillar and Volvo CE on how going data-driven and using IoT is transforming their business.
Caterpillar, building data-driven machines since the 90s
Rumor has is that it took some coffee to spur culture change in Caterpillar. While that may have something to do with it, the story as articulated by Tom Bucklar, Caterpillar's Director of Innovation & Digital, is a bit more nuanced.
Caterpillar has been around for a long time, and Bucklar says it first started collecting telemetry data from its machines operating on sites around the world in the mid-90s. Think a handful of machines equipped with data-collecting equipment, with people mounting machines to access the equipment and using satellite comms to send the data for storage and processing.
Since the mid-00s getting telemetry data has become the norm for Caterpillar machines. Today data is collected in real time via sensors and sent over broadband mobile comms for storage in a data lake and further processing to power applications and analytics. Caterpillar boasts the largest fleet worldwide, with the vast majority of its 500K machines connected.
"A lot of that comes from engine electronics -- going from mechanical to electronics means there are sensors and capabilities to work remotely and understand the machine," says Bucklar. "We are also very active in going out and connecting existing machines and equipment," he adds.
Bucklar says that what started out as a telematics program is today a product line. Caterpillar stopped being all about selling machines a long time ago. Initially, the motivation was to get the data to build better products. But Caterpillar soon realized this could also bring benefits to its dealers and customers too, thus influencing its business model.
"We have always been a services company. One of the things that made us successful is our dealer network which we developed early on to provide services. That also evolves through technology," says Bucklar. This refers to CAT Connect, Caterpillar's suite of hardware, software and services for equipment management, productivity and safety. How does it work?
"As a client, you want to manage your capital assets, you want to maximize utilization, but you don't necessarily know how. So when you buy Caterpillar equipment, it comes out of the factory with a trial period of CAT Connect use," says Bucklar. After the trial period expires, clients need to purchase a subscription to keep using CAT Connect.
There are even machine-specific applications as part of CAT Connect, like grading for example. Caterpillar says that by using GPS and a 3D model of the site the CAT Grade application can move blades with centimeter accuracy and improve grading by up to 30 percent, resulting in better results and savings.
So it's not just about building better machines anymore. Caterpillar has another source of revenue, clients get added value, and dealers increase their operations too. Dealers are the interface with clients, and the ones that get requests to add more machines to CAT Connect.
Typically clients do not exclusively use Caterpillar equipment, which means that there has to be a way to make what is called rainbow fleets interoperate and work seamlessly. This is a topic in and by itself, but before we delve into the specifics of how it works, let's first get an idea of how others in the industry are following suit.
Volvo Construction Equipment, shifting business models and building ecosystems
Although Volvo is mostly well known for making cars, it has a construction equipment branch as well. While Volvo CE may not have been onto the data driven approach as long as Caterpillar has, it's not only catching up, but exploring ideas to differentiate around customer value proposition as well.
Christine Billaud, Director Business Technology - Connected Solutions at Volvo CE, referred to how old-school industries are morphing into new service industries in her talk at the Industry of Things world. The gist was how Volvo aims to deliver more than just equipment but real value-add services and solutions to customers via data.
Billaud was part of a small team that championed a pay per use model now used by Volvo CE. Inspired by Rolls Royce, Billaud explains that engines and construction machines have some common characteristics: they cost a lot and are a liability in the books for owners, they stay idle for long periods and are hard to utilize optimally.
Hence the thinking is to offer customers a lease based on utilization with additional services on top, rather than just the option to buy and own a machine. This is in part also inspired by the "sharing economy" paradigm, according to which you don't necessarily need to own assets, as long as you can have access to them when needed.
The way it works is by Volvo CE examining the customer's site and needs and proposing a fleet and level of utilization. This sounds, and is as Billaud acknowledges, more like consulting work than building machines. Why Volvo CE then, and not just any consultancy? "You have to know the industry, and the risk is on the one providing the machines," says Billaud.
"How much does it cost to maintain a machine with specific features at a specific site and level of utilization -- this is not something anyone can answer. Dealerships also try to position themselves there, in the same way we did: someone comes to them with a question, they try to answer as best they can."
This was initiated by one use case, built on the expertise of people with experience in calibrating machines in Volvo CE, and had the objective to look broader than the current business. Billaud says this is meant to complement, not replace the traditional business model, but although it's still early and there are challenges such as finding the right pricing, Volvo CE has to learn to live with that, because it's the future.
Although Billaud acknowledges the lead that Caterpillar has in using data to drive business and operations, she also adds that it has been an inspiration and a wake up call to get upper management support. Furthermore, Volvo CE is looking into ways to differentiate itself, such as its award-winning co-pilot initiative.
The co-pilot can be thought of as a tablet plus app store for construction machines -- the Google Play of machines, as Billaud puts it. The co-pilot is based on Android too, and the idea is to offer something that can host apps that work in the cockpit. There are apps developed by Volvo CE, such as Dig Assist and Pave Assist, as well as third party apps.
Internet of Things
Volvo CE apps help operators by getting, processing, utilizing and displaying real-time time data to partly automate certain tasks, similar to what CAT Connect offers for example. The difference according to Billaud is that Volvo CE wants to turn this into an open ecosystem, inviting third party providers such as Trimble to deploy their apps on co-pilot.
"It does not make sense to develop everything ourselves, but we want to give customers more than just a screen. It makes life easier for everyone -- before that, customers had to order a machine, wait for delivery, then go to Trimble and ask them to come install hardware and software before they could start working. Now it comes out of the factory integrated," says Billaud.
The Future
As you may have noticed, there was little to no reference to data and techniques so far. Both Caterpillar and Volvo CE concur that these are enablers, the key is in customer value proposition.
Billaud says machines are getting commoditized anyway, and in the end it won't make that much of a difference whether it's Volvo or Caterpillar or whatever, but how the vendor can help you get the job done.
While not everyone may agree with that, there is some analogy there. The data collection, pipelines, processing and application building parts are to some extent at least standardized, the point is what you do with those.
Of course it helps that there are some industry-specific standards as well. Both Billaud and Bucklar point towards a couple of organizations that carry out the task of definining evolving standards and APIs. As Billaud puts it, "We all face the same issues, so we'd rather talk."
This is in stark contrast with the car industry, in which the landscape is fragmented. Billaud says that a couple of years back she joined a connected car conference hoping to learn from them, only to find out that there is no interoperability there and each manufacturer has its own way of working with data.
In construction, there are fewer players, rainbow fleets are the norm, and customers need those fleets to work together to run their businesses. All of those contribute to the different landscape.
Autonomous vehicles are already a reality in construction, as this is a more constrained domain with characteristics that seem to make it a better fit for early adoption than autonomous driving
Billaud says that major vendors agree on common standards to share openly machine data like GPS position and machine hours. However how and to what extent this works in practice for each vendor is not entirely clear.
Evolution is also reflected in the kind of people and skills involved in manufacturer operations. For both Caterpillar and Volvo CE, the emphasis is shifting from mechanical to software engineers, from industrial design to human-computer interaction and user experience, and from traditional, monolithic KPIs such as sales to a more holistic data-driven culture.
Naturally as data accumulates, automation and machine learning comes into play as well. Another manifestation of evolution is that from rule-based approaches to machine learning. The end goal is to automate the operation of such machines to the fullest possible extent, with a multitude of goals including safety.
There are already steps in that direction, and the car industry may have something to gain by observing the construction machines industry. It seems Caterpillar and Volvo CE would rather disrupt themselves than wait to be disrupted, and standards and interoperability are gaining adoption and driving the process.
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