Originally posted on Crain's Cleveland.
Uber owns no vehicles, Facebook owns no creative content, Airbnb owns no real estate. And someday, United Airlines may own no airplanes.
Sound far-fetched? Well, if Case Western Reserve University professor Youngjin Yoo is right, it could happen. Yoo, who is a professor of information systems in the department of design and innovation at the Weatherhead School of Management, is the driving force behind the upcoming Digital Futures Conference.
Yoo has been studying digital developments for years and said he believes a digital transformation is underway that will change the way many companies, in particular manufacturers, are organized and do business.
"Technology is fundamentally transforming the way value is created and captured in the economy," Yoo said. "Digital assets are the primary source of value creation."
That digital future will be explored in depth at the conference Oct. 14-16 at CWRU's Tinkham Veale University Center. The event is co-hosted by the university and the Innovation Research Interchange, formerly the Industrial Research Institute, whose members include people from large global corporations, small specialty companies, government laboratories and other research organizations.
Speakers will include chief information officers, research leaders and people with titles such as chief innovation officer and vice president of data science and analytics. Executives from Northeast Ohio companies including Eaton Corp., Goodyear Tire & Rubber Co., Lubrizol Corp. and Timken Co. will present at the three-day event. The university said it expects about 150 people to attend.
"At Case Western Reserve, we have great strengths in innovation and technology, and we are continually looking for ways to use those assets to help our businesses and improve our economy," said Ben Vinson III, provost and executive vice president, in an emailed statement. "Giving businesses the tools they need to compete in the digital age will help them stay relevant and competitive, and that's good for all of us."
Attendees will learn from leaders of industrial and other legacy companies that are undergoing digitalization about the tools available to coordinate digital innovation across their organizations.
"Digital transformation, in general, is of high interest to the people who are the members of IRI," said James Euchner, editor-in-chief of Research- Technology Management, the association's bimonthly journal of technology innovation. "It affects everything. It affects, obviously, the products; it affects business processes that affect customer-facing strategies; and it affects business models, which I think is becoming more and more important, primarily to the industrial companies that are part of IRI."
The changes are being driven by fast-developing digital processes — such as artificial intelligence, the Internet of Things and predictive analytics — which use data mining, statistics and machine learning to make predictions about product maintenance and safety.
The conference is designed to help companies make the transition from creating value by manufacturing goods to creating value through digital processes. Yoo said that Northeast Ohio, with its strong manufacturing base, can be fertile ground for digital innovation.
Brandon Cornuke, vice president of startup services at MAGNET, the Cleveland nonprofit that helps manufacturers grow and manage their operations, agrees. He will be on a panel at the conference talking about the value of the Internet of Things for small businesses. He said he understands innovation on the large scale, but also sees applications on the shop floor of small manufacturers.
"Talking about the future of manufacturing necessarily means talking about what tech can bring to the entire vertical and having a local conversation about it with some high-level thinking is super exciting," said Cornuke. "Manufacturing in Northeast Ohio is so important to the economy that connecting to the kind of thinking this will elicit will be helpful."
Yoo said the conference, which he has been spearheading, is organized around the idea that Silicon Valley did the easy part of the digital transformation: creating the devices and software. Yoo added that businesses will now go from being the sum of their contracts with suppliers and customers to being "the sum of their algorithms."
Yoo cited General Electric Co., whose GE Aviation subsidiary makes jet engines, as an example. Advanced sensors on those engines have allowed airlines to measure the condition of the engine and to know when it needs maintenance. Now, however, General Electric can digitally monitor those engine sensors from afar and software can allow it to anticipate when the engine will need to come offline for service and what parts need to be ordered to complete that work. It then can schedule the service call.
"They know the condition of the engine better than the users, so what they're really selling is the data, they're not actually (selling) the engine itself," Yoo said. "They're charging for the uptime and the service contract."
The company that makes the brake pads on the airplane can do the same thing, Yoo said, and could compete with a Chinese company that offers pads for half the price as the U.S. company. The pad maker wouldn't sell the airline the brake pads; it would instead sell a service: monitoring the pad's condition and providing whatever service or replacement is needed — charging per landing, perhaps.
"So this company doesn't have to convince its customers that its pads are twice as good as a Chinese competitor. Nobody is willing to pay twice the price, right?" Yoo said. "It only has to convince itself that its brake pads will last twice as long and, knowing that, it can offer the airline a price for pads and their service that will undercut the cost and maintenance expense of the competing pad."
The new technology may also offer small manufacturers more basic digital assistance, said Cornuke.
"There is a pretty high majority of manufacturers, small manufacturers in this area, who don't put the internet to use on their shop floor," he said. "One of my clients is developing tech that will very quickly measure vibrations and feed that into a machine-learning system that will help you optimize your shop floor. That is the tactical, ground-level stuff."