DX in Industries-2

We cover the digital transformation (DX) imperatives in connected buildings, electricity utilities and telecom sector.

Digital Transformation in Connected Buildings: Shaping the Future of Living and Working

Imagine the start of your day, with your alarm gently waking you up, and as you rise from your bed, a steaming cup of coffee is ready and waiting for you. The coffee machine is so intuitive that it knows precisely when to begin brewing, and the hot water tank has already preheated, having learned that your family typically showers at 7:15 a.m. on weekdays. Once your household is empty, a robotic vacuum cleaner discreetly begins its cleaning routine, ensuring it doesn't disrupt anyone. Simultaneously, the washing machine springs into action, taking advantage of lower electricity costs and the absence of anticipated hot water usage.

While you're at work, a mother takes a quick glance at her home's security through her computer and notices that the alarm system is armed, but a bathroom window is left open. With the help of a smartphone app, she accesses her home's control center and remotely closes the window using an electric motor. Is this scenario too good to be true? Surprisingly, it's not. Remarkable technological solutions like these are already a reality and are revolutionizing various types of buildings, ranging from residential homes to commercial spaces and public infrastructure.

Connected Buildings: Convenience, Security, Efficiency, and New Possibilities

The concept of connected buildings, powered by digital transformation, is revolutionizing the way we live and work. These smart buildings offer numerous benefits, including:

1. Convenience: Smart homes, offices, and other buildings make daily life more convenient. They anticipate our needs, from brewing coffee to managing household chores, thanks to self-learning systems that adapt to our routines.

2. Security: Enhanced security features, such as remote monitoring and access control, provide peace of mind for homeowners and building administrators. Real-time alerts and notifications help keep occupants safe.

3. Energy Efficiency: Connected buildings optimize energy consumption through intelligent climate control, lighting, and appliance management. This not only reduces energy bills but also benefits the environment.

4. New Usage Models: The integration of digital technology enables entirely new ways of using buildings, such as personalized climate control and remote management of appliances.

The Four Dimensions of the Connected Building Ecosystem

The connected building ecosystem can be described across four dimensions:

1. Customers: The ecosystem serves various customer groups, including consumers in smart homes, the public sector with smart buildings like universities and administrative offices, industrial facilities with smart factories, and the commercial sector with smart shops and warehouses.

2. Providers: Companies develop products and services that leverage the Internet of Things (IoT) to transform traditional buildings into smart ones. These providers offer solutions ranging from heating and cooling systems to locks and video monitoring.

3. Customer Needs: The offerings address a range of customer needs, including security, home automation, energy management, and more.

4. Technologies: The ecosystem relies on various technologies, including sensors, data platforms, IT security, and more, to deliver smart building solutions.

Commercial Spaces: Transforming the Modern Office

The traditional office building is evolving rapidly. It can now identify employees based on RFID sensors and open doors automatically. It calculates optimal routes for visitors to their meetings and controls elevators based on scheduled appointments. Smart offices also adapt climate control based on weather forecasts and share excess heat with neighboring buildings. Some office buildings even generate electricity through solar panels on their facades or roofs. Predictive maintenance, enabled by constant data transmission from technical equipment, keeps everything running smoothly. In buildings like "The Edge" in Amsterdam, technologies such as motion sensors, dynamic workplace allocation, automatic lighting and temperature control, and virtual facility managers ensure efficient operations.

Retail and Shopping Centers: Enhancing the Shopping Experience

Retail spaces are incorporating cameras, sensors, and control software to monitor customer behavior, optimize lighting, and track inventory. Smart systems guide shoppers, offer special deals, and manage store staff. Shopping centers use these systems to track visitor flows and provide real-time information to improve the shopping experience.

Consumers: Smart Homes for Comfort and Safety

Smart homes are becoming commonplace, with products that use machine learning to enhance daily life. For instance, refrigerators can automatically adjust settings based on usage, and washing machines offer remote control and alerts. Security systems recognize household members and integrate with digital service providers to manage access control.

The Rise of Voice Assistants and Artificial Intelligence (AI):

Voice-controlled assistants like Amazon's Alexa and Google Assistant are becoming central to smart homes. These assistants enable seamless control of various devices and services, enhancing the user experience.

Industrial Facilities: Robots as Collaborative Workmates

Industrial buildings are adopting smart technology, with robots playing a significant role in warehouses and factories. Goods marked with sensors free robots from fixed storage systems, allowing for more efficient and flexible operations. Industry 4.0 principles facilitate communication between smart machines, optimizing production and order processing.

Public Sector: Smart Public Buildings and Infrastructure

The public sector, which includes schools, universities, government buildings, and transit hubs, is also benefiting from smart facility management. Innovations in personalized climate control aim to reduce energy costs in public buildings. Smart lighting solutions in cities, such as Philips' CityTouch, improve energy efficiency and enhance environmental monitoring.

The Challenge of Standards and Ecosystems:

In the rapidly evolving smart building market, several tech giants and startups are vying to establish standards and ecosystems. Companies like Apple, Google, Amazon, and Samsung are developing platforms and voice-controlled assistants to control smart devices. The industry is still in search of interoperability and seamless integration, making it essential for players to collaborate and establish compatibility standards.

Conclusion: The Future of Connected Buildings

Connected buildings are reshaping the way we live and work, offering unprecedented convenience, security, and energy efficiency. As technology advances and ecosystems mature, the smart building market holds immense potential for innovation and growth. Collaboration among stakeholders and the establishment of standards will be key to unlocking the full potential of connected buildings in the future. The smart building revolution is well underway, promising a more connected and intelligent way of living and working.

Electricity Utilities

In the past century and a half, the operation of electric utilities was relatively straightforward. Customers had no choice but to rely on their regional monopoly, electricity demand was predictable and steadily increasing, and power generation primarily occurred in a handful of large power plants, initially powered by coal and later transitioning to oil, gas, hydro, or nuclear sources. Pricing was structured to ensure profitability after covering costs. Energy utilities operated much like public sector entities, with the distinction that some of them generated profits for shareholders in a stable and low-risk manner.

However, these times are now history, as many energy utilities find themselves in a battle for survival. Beyond grappling with the challenges posed by the phaseout of nuclear energy and the rise of renewable sources, they face a revolution in their customer relationships and the overall technological landscape of the industry.

The liberalization of energy markets and the end of regional monopolies have given rise to a dynamic group of energy providers, such as Yello, that focus exclusively on trading purchased electricity volumes, rather than owning power plants. Online portals like Choose Energy and Verivox facilitate price comparisons among all providers and enable customers to switch to their preferred provider while canceling their previous service. Meanwhile, tech giants like Google, Amazon, and Apple are establishing themselves as intermediaries between established energy companies and customers by expanding their existing ecosystems or creating new ones. With customers already controlling their heating and security systems through smartphones, it's a natural progression to manage energy consumption through these platforms as well, potentially undermining energy utilities' dominant position in customer interactions and relegating them to mere commodity suppliers.

Digitalization has permeated every aspect of the energy industry, complicating life for utility companies. Smart meters, which are gradually being rolled out, eliminate the need for manual meter readings by constantly transmitting consumption data over the internet, often to third-party data centers instead of the utility companies themselves. This shift could deprive traditional energy companies of exclusive access to sensitive customer data. In regions with competitive retail providers, competitors can analyze individual customers' consumption patterns and offer tailored, potentially cheaper deals.

On the production side, the energy landscape has transformed as well. Instead of a few large power plants, thousands of decentralized producers now feed electricity into the grid, mainly from renewable sources like solar and wind. Predicting the timing and volume of feed-ins from these sources is complex, but smart grids, equipped with sensors at feed-in points, collect real-time data and transmit it to central computers for analysis. Initiatives like Reforming the Energy Vision (REV) in New York envision not only enabling distributed generation but also creating an economic marketplace for various microservices, including distributed generation.

This shift creates complexity for grid operators, who are increasingly separate from retail and generation companies. The central role they traditionally played, paying electricity generators and selling energy through markets or directly to consumers, is threatened. Blockchain technology, which allows secure, direct transactions between energy producers and consumers, could disrupt the trading part of the value chain that traditionally linked producers and consumers.

Energy companies are recognizing the importance of digitization and exploring opportunities to digitize their processes. This transformation can lead to substantial resource savings, especially when applied across the entire value chain. Predictive maintenance, made possible by sensors transmitting performance data from critical points, can reduce personnel costs and minimize downtimes. Digitizing customer interactions can increase satisfaction, as customers prefer self-service options and expect consistent service across all channels. Digital assistants, like chatbots, staff call centers and respond to customer queries based on AI and machine learning. Energy companies are also using apps to provide customers with information on energy consumption and costs, fostering customer loyalty.

Data collected from customer interactions becomes a valuable differentiator in the competition for future energy customers. Energy utilities that retain data from smart meters and grids can create tailored offerings. For example, they can manage climate control systems in buildings, potentially offering significant savings. Energy companies may even collaborate with property developers and systems manufacturers to provide energy management services for entire residential areas, industrial facilities, or office buildings. Expanding into smart, connected buildings and offering remote-control systems for electric appliances could open up new revenue sources.

In conclusion, energy giants face a multifaceted challenge, including digitization that disrupts the traditional order, emerging economic ecosystems, and changes in power generation and consumption. To survive, they must develop their business architecture by digitizing processes, communicating with customers across new channels, and expanding their product offerings. Reinforcing their foundations with strategies like a two-speed IT architecture and advanced data analytics is essential. The digital transformation of energy utilities is a major endeavor, but it offers opportunities for increased productivity, revenue, reliability, new business areas, and enhanced customer satisfaction. It also presents a rare chance for these companies to reinvent their strategies, structures, and processes after 150 years, and those that do not adapt may be pushed out by new competitors, while those that embrace digitalization can seize future market opportunities.

The most important action areas in the digital transformation are:

• New ecosystems (New fields like smart grids, smart living and connected building etc.)
• Customer experience (digital front-end process, multi-channel trading, seamless customer journey across all interfaces)
• Product and value proposition (Smart products and components)
• Value add (end to end digitization, automated back-end processes)
• The foundation will be technology lead that has many elements featuring connectivity, data security, advanced analytics, digital talent and agility.

Telecom

Telecom giants find themselves under significant pressure, as a battle for dominance ensues among hardware manufacturers, content providers, and telecom companies. At the heart of this transformation is a tiny innovation, the eSIM, measuring just 6 by 5 millimeters and 1 millimeter thick. The real revolution lies not in its minuscule size, but in the "e" which stands for "embedded."

Traditionally, subscriber identity module (SIM) cards were sent by wireless providers and manually inserted by customers. The eSIM, however, is programmable and integrated into various devices, including smartphones, tablets, fitness trackers, smartwatches, game consoles, smart glasses, cameras, and even medical equipment, enabling them to stay connected to the internet and cellular networks. The eSIM also allows users to make calls directly from their wearable devices, disrupting traditional mobile communication models.

This innovation excites consumers but concerns telecom companies that once held a dominant position when communication capacities were limited. Telecoms provided SIM cards and enjoyed significant customer loyalty due to the costs associated with switching providers. However, the reassignable nature of eSIMs threatens to redistribute profits and revenues among telecom groups, hardware manufacturers, internet providers, and content providers.

The battle for dominance in the emerging ecosystems of this digital transformation is intensifying. Hardware giants like Apple and Samsung may gain the upper hand with eSIM technology by determining wireless providers for their devices and allowing users to switch providers with ease. They could even consider purchasing transmission capacities and infrastructure themselves, potentially sidelining wireless providers.

Content providers, on the other hand, exemplified by Netflix and Amazon, are thriving by emphasizing the importance of content. Streaming services like Netflix rely on self-produced TV series and movies to attract millions of customers. Facebook has also entered the arena with its Oculus virtual reality (VR) headset, signaling the growth potential of VR and augmented reality. These new markets could generate substantial revenue, with predictions of growth ranging from $80 billion to $100 billion by 2025 based on a McKinsey Report. Telecom giants are experiencing declining revenues. To counter this trend, telecom companies are investing in content and program producers to stay relevant. For example, AT&T made an $85 billion bid for Time Warner, emphasizing the importance of content and distribution integration.

However, acquisitions alone may not secure the profitability of telecom companies. To remain competitive, they must focus on three key areas: streamlining their core business processes through digitization, identifying and capitalizing on growth markets, and managing regulations.

Streamlining core business processes involves scrutinizing every aspect of the customer journey, from acquisition and registration to billing and customer support, to identify opportunities for cost reduction and enhanced customer satisfaction through digital assistants and automation.

Identifying growth markets is crucial. Telecom providers have a strong position in markets related to wearables, smart homes, connected cars, the Internet of Things, digital health, and cloud computing due to their existing network infrastructure. Decisions regarding their role in these markets—whether to supply transmission technology or play a central role in emerging ecosystems—will significantly impact their future relevance.

In the battle of business models, telecom companies primarily monetize communications but also sell hardware. Manufacturers of home equipment seek to capitalize on add-on services, while media giants from Silicon Valley rely heavily on data. The battle lines are drawn, and the distribution war is underway, with the key players vying for supremacy in the evolving digital landscape of the telecom sector.