With about four months as president and CEO under his belt, Rockwell Automation’s Blake Moret recently presided over the company’s 25th Automation Fair, along with Investor and Media Days, bringing together customers, partners, investors and the media in a celebration of all manufacturing things connected.
The message? The company is doubling-down and deepening its commitment to its “Connected Enterprise” vision. While that’s no surprise, presentations to the media and investors highlighted how Rockwell Automation’s strategy dovetails with global trends, as well as expanded on how its focus on technology innovation and domain expertise combines to drive the business and keep it ahead of the competition.
Bottom line, the company’s goal is to help companies move step-by-step into digitally connected manufacturing. Noting the various initiatives designed to promote the IoT and other digital connectivity throughout the world—China Manufacturing 2025, Make in India and Industrie 4.0—Moret asserts: “We have a vision of the connected enterprise that’s a practical way to make these concepts reality. They are a way to get started and a way to help companies along their journey."
Market conditions have not been ideal, the leadership admitted, but then tacked to explain where there’s room to grow. Though the company reported a 4% fourth quarter decline in sales, year-over-year, and 6.8% decline in sales for 2016, the leadership team stressed the positive.
CFO Ted Crandall, in a presentation to investors, noted that declines in mining, oil and gas accounted for more than the fourth quarter’s 4% decline, while “reasonably good growth” in consumer and automotive industries buoyed the bottom line. For 2017, he said, “what we’re expecting is another year of growth in consumer and auto, and while we don’t think oil and gas or mining necessarily get better, we don’t expect to have that same drag with had in fiscal year ’16.”
In an interview later, Moret expanded on the company’s thinking: “Around the world, the growth of the middle class is driving consumer [spending],” Moret said. For example, in the food and beverage industry--fundamental products, he points out--the growing middle class in emerging markets is looking for variety, more consistent taste, etc., which plays into Rockwell Automation’s strengths.
Such customer desire for variety applies as well to the auto industry, according to Moret. “The investment in our technology, in our people, is really more about model changes than it is about the raw units being sold,” he noted. “For the moment we’ve got good visibility on a healthy pipeline of projects.” He added that the company’s recent reentry into a growing powertrain market offers “a meaningful upside, as well.”
As for the heavy industry, “Our main play ... is around productivity, so it’s not raw cap ex; it’s capital of capacity expansion,” Moret explained. “Even existing operations need to be maintained, and we can help more efficiently maintain those operations.”
Finally, in the release announcing fourth quarter results, Moret called out “positive year-over-year organic growth in the Architecture & Software segment,” and that the company held segment margin above 20%.
Technology Innovation & Domain Expertise
In a presentation to investors and echoed in his presentation to the media, Moret credited the company’s success to “technology innovation, with domain expertise, and with what we think is the best partner network in the business.”
Referring to Rockwell Automation as an “intellectual-capital company focused exclusively on industrial productivity through automation and information,” Moret noted: “Software in some form or another is behind this. Over the last eight or nine years, our investment in R&D, primarily in software related disciplines, has grown at a CAGR of 6%, and that’s going to continue.”
During the media presentations, the company announced several new technology offerings, including FactoryTalk TeamONE, FactoryTalk Analytics for Machines and FactoryTalk Analytics for Devices applications.
What got most attendees buzzing was TeamONE, which Frank Kulaszewicz, Sr. VP of Architecture and Software, dubbed, “the first industrial app on the market to mix human and device data in such a frictionless and instant way.”
The company also demoed a mobility project, internally called Project Stanton, which is the company’s industrial version of Apple’s Siri.
Perhaps as interesting is the company’s changing approach to product development, as Rockwell Automation adopts strategies made popular in Silicon Valley. “One of the features of the IT and OT technology [convergence] is that the projects, because we’re early in the cycle, tend to be highly iterative,” Moret said. “The customer doesn’t know exactly what they want, so they get in the game, they get something that they can look at, and then they poke at what they would like to see better.”
In an investor presentation, Sujeet Chand, Sr VP and CTO, stressed that point: “We’ve shifted to building vertically integrated applications, much like Uber on our smartphones. So when Rockwell offers serialization as a package solution, it’s really fully integrated. You really don’t care what exists in the background in terms of the software.”
He added: “This is the shift towards more of the app economy, as opposed to creating those layers that existed before.”
Augmenting Rockwell Automation’s technology offerings is a focus on domain expertise. “This is all interesting stuff when we talk about the connectivity, but it doesn’t become real until you can begin to describe the benefits in the language of a customer-specific application,” Moret asserted. “Until you’re able to talk about increasing overall equipment efficiency for a food producer, or about serialization and track and trace… to help pharmaceutical companies comply with regulations, or about vehicle scheduling for a car manufacturer, or well head optimization for an oil & gas company, or increasing yield if you’re a miner…”
“This is where we think Rockwell has a real advantage, because the IT providers know how to sift through large amounts of data, but we know where to look.”
To its own technology innovation and domain expertise, Rockwell Automation adds the technology and domain expertise of a growing cadre of partners, systems integrators and solution providers—what’s become known as the digital ecosystem. Together the goal is to meet customers where they are in the connected enterprise journey.
The bias to work with partners arises in part from one aspect of the company’s culture—that of seeking out the best-in-class, according to Moret. “[We’re] willing to look at the very best in business, whether it’s directly in our industry or elsewhere,” he said. “Because with that IT and OT convergence comes the influx of ideas from people we haven’t considered either competitors or peers in the past. So it’s looking out and saying, ‘o.k. here’s how we do it, here’s how our customers do it. But what’s happening elsewhere, what’s happening in the IT world, what’s happening in retail,’ because it’s not just technology; it’s business models as well.”
The partnerships also serve a practical purpose. “Each customer has different desires and different incumbents, and they’re at different stages of maturity in that process,” Moret explained, noting that the majority of customers are seeking to expand capacity of existing plants. “They may be capacity expansions within those plants, or might be upgrades of equipment that was installed many years ago,” he said. “So you have to be able to catch a customer at their particular spot in their journey. You can’t apply a one-size-fits-all that might be applicable to a brand new installation, but isn’t pragmatic when you’re talking about an existing process that may be running 24/7 that needs to be upgraded.”
Having partners enables Rockwell Automation to meet those various needs, as the partners bring in their own technology, domain expertise and market access.
“We’re not dead set on doing everything whether we’re the right choice or not, so we need partners commercially as well as technically,” Moret said. “I’m going to give [customers] every reason to try to work with us, to work with us across a broad portfolio of what we have to offer. But if there’s a piece of technology that they’re wed to that doesn’t happen to be ours, we’re not going to tell them that they are silly for not using everything from us.”
He added: “Many of our distributor’s sales people are indistinguishable to a customer from a Rockwell employee; it just looks like the same thing. That’s a huge multiplier of our efforts and the ability to support those installations… it allows us to spin up to be much larger than our six billion dollars of our own revenue.”
Walking the Walk
This combination of internal and partner technology innovation and domain expertise, Moret said, is essential for meeting customer needs, but it also “informs our technology roadmaps.”
He stressed that the journey the company is helping others make is one that Rockwell Automation also is making. “We’re walking the walk. We started some years ago, looking at how we could apply these concepts to our own production facilities,” Moret said.
The comparison to their customers is not direct, he admitted, as Rockwell Automation’s plants, with significant engineer-to-order business, are "not particularly automation intensive.” However, after going through the process, the Rockwell plants were able to reduce inventory and WIP, and to error-proof processes to reduce the need for rework.
The company is now venturing in what it calls Phase II of the journey, which involves “bringing in more data streams from our quality processes, a little bit more information from our supply chain, using the cloud for some of the large information management challenges to complement the on-premise use of our software in these new processes to change the work,” Moret described.
“We’re confident that we can continue to drive productivity in our own plants, which helps inform us as we talk to customers about their own journey.”
Skilled Worker Shortage
In Rockwell Automation's narrative, two other global trends, that are creating cross-currents in the company's business involve the skilled worker shortage and the trend to lower cost of connectivity. Addressing investors, Moret pointed out: “Raising the overall competency of the workforce is something we can help with in one or more of three key areas.” These include traditional training and support of STEM skills, as well as using technology to augment the skills of the workers and change the workflows, so the workers accomplish more with less.
To support STEM skills in the developing workforce, Rockwell Automation, long a supporter of First, formally announced at the Fair, a four year, $12 million donation to the organization. First (the acronym stands for “For Inspiration and Recognition of Science and Technology”) “designs programs to build self-confidence, knowledge, and life skills while motivating young people to pursue opportunities in science, technology, and engineering.”
“It’s the biggest gift they’ve ever received; it’s the biggest gift we’ve ever made.” Moret declared.
Of course, the lower cost of connectivity offers solutions to the latter two ways of addressing the skilled worker shortage. “You can’t have somebody who is an expert on all the technologies locally all the time, you just can’t afford to have that many people onsite,” Moret explained. “So being able to have remote support in a broad spectrum of available options--from basic self-help to 24/7 monitoring--helps augment the skills of workers.”
Moret and the leadership team’s confidence seems to stem from an approach and culture that’s been a time-tested, steady evolution of the company’s connected enterprise vision. Its beginnings date back to at least 2007, when the company committed to the goal of a global ERP system, then embarked on driving enterprise-wide connectivity at and between each of their facilities.
Going further back in history, Moret, a 31-year Rockwell Automation veteran himself, reminisced about attending his first Automation Fair 25 years earlier. “In 1993, I was a young salesman when we had the company’s 2nd Automation Fair, and I was interested in showing my big customers at the time what Rockwell could do, including Coca Cola, Southwire, & Factory Automation Systems. And almost 25 years later, they’re still big customers of ours…"
“It’s not a one-and-done discrete event,” Moret said. “Each customer starts, as did we in our individual plants, at a unique point and there’s an opportunity to add value along the way.”