In a report from 2015, McKinsey & Co., a consultancy, estimated that the IoT’s potential value to manufacturing, from operations and equipment optimization alone, lies between US$1.2 and $3.7 trillion. Such estimates are probably already obsolete, as even more powerful technology is developed and deployed. However, they do point to a starting point in illustrating the order of magnitude of upcoming change as the digitization phenomenon unfolds. The changes already underway in service — including industrial, technical, after-sales and field service — parallel those in manufacturing.
In the not too distant future, we can expect several advancements:
- Smart connected products will self-diagnose problems.
- Maintenance will become almost exclusively, predictive.
- Spare parts will be 3D printed.
- Needed interventions and optimizations at any level will be carried out according to AI-generated recommendations.
- Humans will interact at a deeper level with machines through augmented Reality (AR), whether the machine is in the same room or on the other side of the planet.
The nature of the service business will shift from technical labor and logistics to knowledge management and exchange. Service delivery will change drastically as will the nature of competition and business models. Servitization, in the sense of product-as-a-service (PaaS), enabled by digitization and based on platforms will become ubiquitous. The implications for jobs, companies, productivity, growth and profits will be vast, though at present they are still the subject of ongoing debate and are quite unknown.
But if an “end-state” medium term can be discerned quite clearly, getting there poses significant challenges. So, at a Si2 Partners we developed a series of survey-based management reports, to shine a spotlight into service businesses’ efforts to grasp the opportunities of digitization while dealing with the challenges. We then drew conclusions from the results and provided recommendations for the best ways forward. Our first report on augmented reality in service is available now, and the next report, on predictive maintenance, is due by the end of the year.
The origins of Augmented Reality (AR) as a technology, go back at least 50 years.
But the first public demonstration was in 1998 during ESPN’s coverage of a football game — the display of the yellow first down line. The line stayed fixed within the coordinates of the playing field. It was not physically present on the field and was visible only to the television audience. But from that simple application, only 15 years later, Gartner was predicting that companies would be increasing their profits by more than $1 billion annually by 2017 through the application of AR in their field service business. Things of course are not so simple. Reducing costs does not directly translate into increasing profits. That depends on prices, and we know that digitization tends to make them drop, sometimes to zero. But even if we only consider costs, AR is clearly an important, in many ways transformational, technology with a potentially very powerful impact.
Recognizing this, over the past few years, several AR startup vendors have emerged, targeting the field service market specifically, offering affordable, semi-standardized solutions that complement and compete with the more general offerings of bigger players such as Microsoft or PTC.
So, are companies adopting AR for industrial and field service? Our survey showed that they are. Most expect significant cost savings and productivity improvements through AR, mainly in engineering time and travel cost and, interestingly, smaller companies are at least as much engaged with the technology as larger ones. Upfront investment can be low, and it can be implemented quickly and stand-alone (at least initially). Importantly, it may help reduce pressure on scarce, highly qualified, and expensive engineering resources, while simultaneously improving the cost-effective support of remote customers (smaller companies are less likely to have extensive service networks). Overall, we found that while less than one-third of respondents already used AR, and, of those, the majority had introduced it over the past 12 months, another third planned to introduce it over the coming 12 months. This indicates an accelerating trend.
But for users, it has not been all smooth sailing. Challenges are numerous. For example, it turns out that connectivity at customer sites is a significant issue, which hampers the use of the technology. But technical problems are normal at this stage of introduction and they will be solved. Far more important are managerial challenges. For example, as always, one size does not fit all. The most common reported use case is field technicians receiving AR-based support by experienced engineers from a remote central hub. This may help companies with large field service workforces (possibly with high turn-over rates or less qualifications) supporting standardized equipment. It is not much help to vendors of highly complex equipment whose field engineers are already highly experienced and qualified.
So, are companies adopting AR for industrial and field service? Our survey showed that they are. Most expect significant cost savings and productivity improvements through AR, mainly in engineering time and travel cost and, interestingly, smaller companies are at least as much engaged with the technology as larger ones.
In fact, it may be even counter-productive, slowing adoption and reducing acceptance. Better applications for such cases may be pooling AR-based support, providing technical information through “knowledge-libraries,” particularly on rarely encountered problems or legacy equipment, or integrating AR with the IoT, so that operational data can provide real-time context to engineers and support for diagnostics. However, such applications require investment in digital content, something that many AR users have often not considered, as well as a process of experimentation and development. Another finding is that following implementation of AR, many managements don’t take the necessary action to lock-in the AR benefits by pushing through change in the support and field service processes. For example, few companies eliminate technical manuals and drawings from a field engineer’s toolbox, delaying the necessary adjustments. And, while many companies market their AR capability to customers, few have developed revenue generating AR-based offerings. Yet our survey shows that customers would welcome AR-based support if it would help to reduce costs and improve performance, notwithstanding issues of confidentiality or privacy.
The process to integrate AR into a company’s mode of operations and to maximize its benefits will, as for any new technology, be arduous and bumpy. But the impact on costs and productivity is becoming clear. Though most don’t yet formally track it, 72 percent of our respondents say that AR is on par with or has exceeded expectations.
The survey and report provide many more interesting results and recommendations. AR is a watershed technology, not least because it frees people from two-dimensional screens and pages and enhances the ability to be informed, understand context and learn. It allows remote sharing and interaction in unprecedented ways. In the end, it is probably more about augmenting humans than “reality.” And, due to its nature, service is an excellent area of application for the technology. But it should also be noted, that AR is an “infrastructural” technology and as such, while it may be of great value, does not confer competitive advantage on its own. How it is used is what is important. Acknowledging the realistic assumption that it will rapidly become a standard way of supporting customers and equipment, not using AR today is a serious disadvantage.
You can download the flyer with a comprehensive summary of results and analysis or purchase the full report “Augmented Reality in Service: Ready for Prime Time?” at the Service in Industry Hub Shop.