Outline

• What companies must do to develop and maintain leadership in the new century
• 3 three important issues:
  • Technology innovation
  • Global competitors
  • Global markets
• Winning strategies for global markets

Proprietary advantages lost

• Many automation products are commodities
  • Available from several sources with marginally different features and benefits
  • Software easily copied – functional equivalents
  • Quality manufacture of commodity hardware
  • Low margins – stiff competition, drastic price reductions
  • Recession makes the competition more brutal

Technology Shift Needed

• Old technology - commodities
  • PLC, DCS, SCADA, Drives
  • Software – HMI, MES
  • Sensors, valves, equipment
• New technology – inflection points
  • Nanotech, MEMS
  • Sensors – tiny, low-cost, pervasive
  • Wireless everywhere
  • Pervasive Internet – M2M
  • Complex adaptive systems – Mesh networks

The Automation Mindset

• Result of short-term planning
  • Incremental budgeted growth
  • Same customers, same channels
  • Many variations – needing integration
• R&D budgets
  • Typical 1-3% (8-15% in Tech-biz)
  • Mostly extensions, no “NEW” products
  • More developments being outsourced

Strategic Misdirection

• Shift to solutions/integration
  • Low margins
  • Services intensive
  • Compete with SI customers
• Going offshore to reduce costs
  • Losing technology advantage
  • Losing people and process knowledge
• Consolidation – incestuous M&A
  • Pig + pig = more pigs
  • Compare with Tech-leaders

Productivity is the key

• Productivity is now a global race between regions and nations.
• Those who can make things cheaper, faster, better – win!
• US and Europe losing technology advantage
• Factories & process plants moving
  • Closer to customers
  • Closer to raw materials

Knowledge work - anywhere

• Internet makes physical location irrelevant
  • Availability of trained people
  • Know-how is spreading
• Knowledge is power
  • The “first world” is losing the advantage
  • Outsourcing moving up the food-chain
• New competition brewing
  • China, India, others

Offshore Outsourcing

• It’s NOT just “cheap labor”
  • Better, cheaper, faster
  • Local investment in automation & equipment
  • Availability of trained labor
• Steady shift of know-how
  • Marketing – product specifications
  • Development – already shifting
  • Global sales will be “outsourced”

China – Manufacturing

• Manufacturing prowess
  • Good, repetitive quality
  • Motivated, hungry
  • Big investment in automation
• Worldwide market-share
  • World leadership in several products
  • Wal-Mart – $ 18 billion from China

China Hitech growth

• 700,000 engineers a year
  • 37% of all college graduates
• University system growing
  • Size and quality
• Comparable engineers
  • Pay ranges - $4,000 to $8,000/yr.
• New high-tech competitors
  • Networking, Semicon, Biotech, Space

India in a new century

• World's most populous country (mid-century)
  • Advantage - English-speaking
  • Already the world's largest democracy
• US Software – $6-8 billion, 60% growth
  • Infosys - Revenue $1.5B, profit 30%, growth 50%, Nasdaq market-cap $18.6 billion
  • Wipro - Revenue $ 1.9B, profit 19%, growth 50%, NYSE market-cap $14B
• Strong growth intentions
  • Global growth targets

Global HiTech

• Other regions/countries are competing strongly
  • Central & Eastern Europe
  • Russia, Brazil, Mexico
• Traditional leaders steadily losing advantage in many key technologies
• Read Tom Friedman’s book “The world is flat”

World competition brews

• Third-world
  • Innovative
  • Competitive
  • Capitalist “bait” – big tax-holidays
• Fundamental drive
  • Hungry for upward mobility
  • You cannot simulate hunger

Outsourcing Solutions

• Use global resources
  • Focus on Technology
  • Utilize knowledge partners globally
  • Develop Solutions for Customers
  • Outsource “picks, shovels, rakes & hoes” - build the railroad

World structural changes

• The Achilles heel of Capitalism
  • Selling/losing knowledge advantage with short-term profit motive
• Old globalization was “cheap labor”
  • New globalization is “knowledge”
• Globalization and free trade
  • Massive disruptions in where and how world’s goods are produced

Keys for success

• Proprietary products
  • Customer productivity important
  • Continuous upgrade to maintain leadership.
  • Outsourcing is irrelevant – productivity is the key.
• High-value-added
  • Proprietary knowledge
  • Tailored to specific customer needs.
• Go global – think local
  • Special (custom) needs handled locally
  • Partnership and proximity

Futures prognostications

• The “good old days” will not return
  • The “good new days” are here
  • Look for inflection points
• Future is exciting
  • Not just a reflection of the Past
  • New leaders will emerge

Conclusion

• Use the technology advantage
  • Look for new products & markets
  • Lookout for new competitors
• Go global, think local
  • Global resources & partners
  • Lose the HQ mentality
• Be first, run fast
  • Agility, flexibility