IoT Co-Creation for Digital Transformation Outcomes. Nick Chang Head of Global IoT and Analytics Practice

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1 IoT Co-Creation for Digital Transformation Outcomes Nick Chang Head of Global IoT and Analytics Practice

2 DIGITAL REVOLUTION Every industry, every business is under pressure

3 DIGITAL TRANSFORMATION Accelerate cost-efficiency and time to market by automating operations and processes Increase loyalty and grow revenue by improving customer experience Unlock new revenue streams by adopting new business models PROCESS AUTOMATION WORKFORCE MOBILITY SUPPLY-CHAIN EFFICIENCY MOBILE COMMERCE REAL-TIME INFORMATION PERSONALIZED ENGAGEMENT DATA-CENTRIC SERVICES GLOBAL EXPANSION DIGITAL COMMERCE

4 DATA STRATEGY FOR DIGITAL TRANSFORMATION DATA MANAGEMENT DATA GOVERNANCE DATA MOBILITY DATA ANALYTICS Abstract Access Any cloud Any app Automate Accelerate Anywhere Any use DATA Mobile SOURCES Structured data Unstructured data IoT data

5 The Physical (OT) and Digital (IT) Worlds Are Merging CLOUD CITY COMMUNICATIONS IoT IT OT INDUSTRIAL INSIGHT ARTIFICIAL INTELLIGENCE BUSINESS IT SYSTEMS CONSUMER BIG DATA ANALYTICS

6 The Skills and Resource Gap Data Analytics Cloud Computing Security Network Edge/Perimeter Software Development Virtualization Standards & Protocols Storage Management General Management Compliance/Licensing Distributed Computing Skills needed by new staff for IoT projects 54.8% 54.8% 45.2% 41.1% 38.4% 35.6% 28.8% 24.7% 20.5% 19.2% 69.9% Will your IT department add dedicated staff to support IoT-related initiatives in 2017? No 73.2% Yes 26.8% The case for collaboration: Most of the bright people don t work for you, no matter who you are. - Bill Joy Source: 451 Research, Voice of the Enterprise: Internet of Things, Budgets and Outlook 2016

7 Challenges With Product/Solution Approach Inflexibility one size does not fit all Ambiguity around the scope of the problem Complexity many sources of innovation outside of single business Firms today must contend with more complex projects, intertwined consumer markets, greater competition and the trend towards instant, and constant, customer feedback. Traditional approaches to business cannot adequately address these challenges. Longitude Research, Co-creating the Future 2017

8 Challenges of Doing It Yourselves In the digital world: Pace of change is relentless Problems span across multiple domains Blurring of industry domains and boundaries Finding the right partner with domain expertise in your business area is essential, as is that partner s ability to collaborate with key stakeholders to identify technologies, skill gaps and opportunities for organizational process improvements. 451 Research: Voice of the Enterprise 2016

9 Collaborative Creation (Co-Creation) Definition: The process of collaborating with customers and ecosystem players in order to innovate and create new value for business stakeholders, customers and society at large Co-creation - Innovation Turned Inside Out!

10 Co-Creation is Transforming Solution Creation How often has your organization worked with customers on co-creation? Co-creation transforming innovation Total Not for profit Energy Infrastructure/City Healthcare Financial Services Technology Automotive Transport Manufacturing 48.5% 73.4% 0% 20% 40% 60% 80% 100% Total Not for profit Energy Infra planning Healthcare Financial Services Technology Automotive Transport Manufacturing 49% 48% 57% 55% 61% 57% 61% 60% 61% 83% 0% 20% 40% 60% 80% 100% All of the time Often Occasionally Sometimes Never Agree Source: Longitude Research, Co-creating the Future 2017

11 Hitachi Co-Creation Approach THOMSON REUTERS: Top 100 Global Innovators HERITAGE OF INNOVATION 119,000 Patents AWARD- WINNING CULTURE

12 Hitachi Co-Creation Ecosystem Getting Various Elements Together Customer Note: need NewCo name in final version Challenges Hitachi NewCo name Lumada Co-Creation Innovation through collaboration Hitachi Business Units Industrial Water Healthcare Power and energy Urban Financial Government Partners Software vendors System integrators Hitachi R&D Global Center for Social Innovation (CSI) NEXPERIENCE

13 Different Levels of Co-Creation We SHOW you how We do it WITH you We do it FOR you Enablement Innovation Execution CUSTOMER RESOURCES HITACHI RESOURCES

14 Hitachi Co-Creation Methodology Hitachi collaborates with customers to co-create unique solutions to specific customer challenges and data. Customer HITACHI Engage Build model Create solution Validate scale List of use cases Analytical model Proof of concept Proof of value Iterate as needed

15 Life Cycle of Co-Created Solutions Customer Co-create solution Operationalize scale Operate and manage Engage Build model Create solution Validate HITACHI Business Integration Delivered Business Value Prioritized list of use cases Analytical model Proof of concept Proof of value HITACHI Customer Iterate as needed

16 Engage 1. Understand customer business and challenges 2. Understand data model 3. Conduct interviews, hold workshops, share vision 4. Define use cases Prioritized use cases 5. Garner Consensus and agree on IP ownership

17 Build Model 1. Define Use cases in detail 2. Explore Data by sifting through various sources Analytical Model 3. Prepare data model 4. Develop analytical model

18 Create Solution 1. Deploy IoT analytics platform 2. Build solution-model code and algorithms Proof of outcome 3. Build UX wireframes/ui design model 4. Perform functionality testing with sample data

19 Validate 1. Integrate with customer IT and OT ecosystems 2. Update data and analytical pipeline Proof of value 3. Test robustness 4. Validate business outcomes and KPIs

20 Case #1: Predictive Quality at Daicel Corporation

21 Case study: Predictive Quality at Daicel Corp. Daicel is a global manufacturer of chemical and pyrotechnical products. HQ: Osaka, Japan FY2016 Revenues 440 B ($4 B) Employees:11,556 Automotive airbag inflator is one of Daicel s core business. Issues: Globally improving product quality, increasing productivity and improving worker s field of operation in automotive airbag inflator production processes

22 Engage to define specific use cases Activities Interview stakeholders and research to identify, evaluate and prioritize IoT/Analytics opportunities Explore the possibility of co-creation bringing IoT/Analytics expertise and image analysis technologies to the table Outcomes Defined scope of project: Enhance Manufacturing Execution System (MES) by incorporating IoT technologies; first at Harima plant and then scale to other plants Specific use cases: Improve quality and increase productivity by accurate traceability, detecting signs of operational failures and deviations in worker activities on the front lines

23 Build an analytical model with data Activities Collect the manufacturing performance data captured from the perspective of 3M - Man, Machine & Material Capture human joint position information in 3D via cameras and distance image sensors Identify and list all possible deviations by questioning workers at great length and identify all work processes Analysis targets and sensing methods Category Analysis Targets Sensing methods Man Worker activities Depth cameras Machine Position of supervisor & parts suppliers Location of work abnormalities, welding defects Omni-directional camera Fixed Camera, High speed camera Material Parts supply PTZ camera* * PTZ (Pan, tilt, zoom): captures subjects in high resolution & pin-point accuracy Use algorithms & pattern recognition to detect worker irregular movement compared to standard movement. Outcome Feature value Pre-processing extraction Head movement Joint Smoothing Waist position movement information Normalization Arm movement Model selection Judgement Both hand work judgment One hand work judgment Whole body work judgment Judgment result - abnormal type - Degree of abnormality Analytical model Standard movement models High level system view of irregular movement detection algorithm

24 Analytics solution ready for pilot Create Solution to generate outcomes Activities Introduce cameras as new sensing data sources combined with advanced analytics Blend 3D image analysis with data from MES, IT systems & IoT feeds Build data pipeline and analytical workflow Continuous data monitoring and refinement of man, machine & materials assets Outcomes Initial results of identification & removal of defective parts improves the overall non-defective product ratio

25 Validate the delivered value Activities Joint verification in Pilot tests at Daicel's Harima Plant (Tatsuno City, Hyogo Prefecture) Detect signs of operational failures in production line facilities & deviations in worker activities Outcomes Reduced the time to discovery of man, machine & materials defects Reduced number of product recalls and quick elimination of defect root causes Ready for multi-site deployment The role of supervisor shifted from After the fact to Prevention of failure

26 Case #2: City of Innovation Campus Strategy

27 Smart Campus: Curtin University, Perth, Australia Goal: Transform into a major innovation area in APAC Formed Innovation Central Perth, an industry and research collaboration center to accelerate innovation around big data Expected outcomes: Better student experience, increased efficiency and safety Insights about the life cycle of a student, day-to-day reality of students and staff members and prevention of testing fraud Environmental health and utilization of the campus and classrooms Evolving from a learning center to a living laboratory" 60,000 students 4,000 staff

28 3 Use Cases # 1 Student registration mgmt. # Objective: 2 Room environment optimization Understand student activities # Objective: 3 Exam fraud monitoring Outcomes Optimal achieved: utilization of space Tracked registered-student Outcomes Objective: classroom achieved: activity Optimal Monitor Identified utilization exam fraud presence of of room Outcomes Minimize unregistered achieved: energy students costs and enhanced Exam attendees student matched comfort by How: How: face against the schedule Evaluated performance of How: Hitachi video and video video analytics analytics (live Real-time face Took matching, RFID and scan historical people of student room ID data counting, then (temp., attempted and humidity Hitachi live face and lighting) Visualization matchingand visual Suite) correlation with room occupancy

29 On the Horizon: A Marketplace to Exchange IoT Solutions Connecting Customers, Partners and Developers for Innovation One place to: Exchange services, know-how and technologies Foster collaboration and accelerate co-creation Assemble solutions and find new business opportunities Stay tuned for more news (Spring 2018) Technology Know-How Customer Customer Partner Developer Cu Developer Service Technolo Partner Co-creation Service Customer Know-How Customer Partner Developer Cu Know-How Customer Technolo Partner Developer Technology

30 Co-Creation Innovating Innovation! Co-creation leverages the expertise and perspectives of an enterprise, its technology partners, and its end users. Together they are better able to envision, develop, deploy and operate the best possible solutions. 52% said cocreation has reduced the cost of developing products and services 61% used co-creation to produce successful new products, services and commercial opportunities 57% said co-creation has transformed their organization s approach to innovation 51% said that cocreation has improved financial performance Source: Longitude Research

31 Thank You