Picking Up the Pace
‘Place to Pace’ — it’s not about where you are, but how fast you are progressing. Every advantage is fleeting. The clock speed of change is increasing. That was the initial theme that PTC CEO Jim Heppelmann emphasized at the start of his opening keynote address at PTC LiveWorx this year. He said PTC has embraced this new pace of change, touting the company’s move of their global headquarters from Needham to the Boston’s Seaport district, which is becoming an innovation hub for Boston.
Translating a Compelling Vision into Growth
For many years, PTC has had a strong and compelling vision. However, translating that differentiated vision into revenue growth has proved at times to be challenging. The company’s revenue has been essentially flat or shrinking for the past two decades; 1998 revenue was $1,018M ($1,490M adjusted for inflation) and 2017 revenue was $1,164M. While we have admired Heppelmann’s vision for years, the lack of revenue growth has left us and many others wondering if they could ever turn that into real growth. It seems that they may be on the verge of doing just that, though you might not know it just looking at their topline numbers.
Over the past few years, PTC has been transitioning from a perpetual license model to a subscription model. This transition results in a deferral of revenue from new deals, and, thereby, the revenue numbers hide the actual underlying growth. They are predicting 9% revenue growth in 2018, increasing to 15% revenue growth and 37% operating margins by 2023, at which point they would be well over $2B in revenue. Time will tell how this prediction goes, but the stock market and many analysts seem to be confident PTC is going to grow significantly (PTC’s stock price has surged about 70% over the past year). The subscription model also makes growth predictions more reliable, since recurring revenue becomes dependent on renewals, rather than net new deals.
Growth driven by IoT in Near Term and Potentially by AR Over the Longer Term
CAD, a mature market growing at about 6%-7% per year, is still PTC’s largest business, representing about 25% of new sales (but a larger portion of existing revenue). PTC’s next largest sector for new sales is PLM, followed closely by IoT. However, its IoT business is growing at around 40%/year, so it will surpass PLM new sales next year and CAD new sales in 2020. Thus, IoT is the engine that is driving PTC’s growth into the double digits. Augmented reality (AR) has even higher growth rates (about 100%), but from a much smaller base (about $20M/year). AR is going to be transformational, but it will take time. Over the longer term, AR could represent a large driver of growth for PTC.
Enabling Transformation
PTC recognizes that it needs to help its clients transform faster too. To this end, PTC provides an IoT Transformation Advisory Practice, which helps clients assess their current situation, prioritize opportunities and use cases, develop a roadmap, and measure value delivered. In addition, PTC is closely monitoring and documenting how IoT is being adopted by their clients — what challenges they encounter, how they overcome them, which use cases are tried, which ones are succeeding or failing and why, and what kind of results are being achieved towards specific outcomes. The presales engineers involved early on with a new customer or project are assigned to stay on with the client during implementation and rollout, to document the specific use cases and outcomes, and learn what works and doesn’t work. This allows PTC to accumulate knowledge, leveraging early adopters not just as examples of success, but as opportunities to learn, develop and continually refine best practices and implementation methodologies, and bring those into future sales conversations, pilots, and rollouts.
New Focus on the Factory Floor, Powered by Rockwell Automation Partnership
The factory floor is not a new area for PTC, but historically the company has had much more emphasis on engineering and design, field service, and smart connected products. The factory is now taking a much higher profile at PTC. While only about 25 of PTC’s 340 salespeople have been dedicated to the factory, the firm has entered into a strategic partnership with Rockwell Automation, which has more than 1,000 salespeople dedicated to industrial/factory automation. Rockwell is a large industrial automation firm, with over 35,000 customers and 22,000 employees in over 80 countries. Their businesses include process control, condition monitoring, distributed control systems, PLCs, drive systems, human machine interfaces, manufacturing execution systems, sensors, industrial networks, and motion control systems. Rockwell’s customers span discrete, hybrid, and process industries, including pharmaceuticals, CPG, oil and gas, chemicals, mining and materials, and industrial manufacturing. That could auger expansion into process manufacturing industries for PTC, who has historically focused primarily on discrete manufacturing.
Rockwell and PTC will create an integrated solution suite under one brand and bring it to market together through channels and partners. For Rockwell, this helps accelerate the convergence of IT and OT1 that they have talked about for years. For PTC, it accelerates their growth on the factory floor. Perhaps the biggest indicator of the depth of commitment is Rockwell’s $1B investment in PTC and their seat on PTC’s board of directors.
ANSYS + PTC — CAD-Integrated Continuous Simulation
One of the most impressive demos of the conference was based on PTC’s partnership with ANSYS. ANSYS has over 45,000 customers and provides comprehensive and accurate simulation capabilities. It is a natural fit, as PTC has CAD but very little simulation and ANSYS has simulation but very little CAD — and they both compete against Dassault and Siemens (both of whom have CAD and simulation). What really got PTC excited was one of ANSYS’s newer capabilities called Discovery Live, which runs simulations in just a few seconds.
Simulation has come a long way in helping design engineers get a lot of the kinks out before committing to physical prototypes, thereby greatly compressing the time from concept to manufacturing. However, there is still a back and forth process between the design software and simulation software: design for a while, then run a simulation, then back to the drawing board to make some design adjustments, then run another simulation to see whether that fixed the problem (without creating new problems), and so on. With Discovery Live integrated into CREO, PTC and ANSYS are creating a continuous simulation capability. Engineers can make a design change and they see the simulation change right in front of them in near-real-time. You can view a ~3-minute demo of this new capability here (from 35:08 to 38:35)2 where they show a fairly complex Finite Element Analysis (in this case one measuring deflection and another measuring stress) that only takes about three seconds or so to refresh.
This enables engineers to innovate faster and try out different things earlier in the process when they have more degrees of freedom. Designers will be able to find and eliminating more problems, earlier in the process. PTC plans to release this integrated capability to CREO customers this fall. They are even going to backport it into previous versions of CREO. PTC said they will have the only CAD system with embedded near-real-time simulation.
Augmented Reality Hitting its Stride
PTC’s AR (Augmented Reality) business still represents only about 2% of its total revenue, but has significant longer-term potential. A number of predictions have been made (from Inc. to Business Insider) about the end of the smartphone era, with AR glasses (combined with wireless earbuds) becoming the dominant UI. These predictions do not seem farfetched to me, and PTC has enumerated well the advantages of AR over traditional interfaces.3 In 2015, PTC acquired the AR firm Vuforia whose platform is used by over 500K developers, who have developed 50K apps which have been installed over 600M times.4 All PTC AR products now will be under the Vuforia brand and business unit. Among the customer examples presented was BAE Systems using AR on the factory floor to present step-by-step instructions to front line workers, based on CAD geometry (see video here). They said that training times were reduced by 30%-40%, cycle times for the actual work were cut in half, and BAE was able to deliver that solution at one tenth of the cost of the next best option.
AR Authoring using Waypoint
At the day one opening keynote, I happened to sit next to Umar Arshad (CEO of PTC’s recently acquired Waypoint Labs) and Alexa Rice, one of Waypoint/PTC’s engineers. It quickly became obvious that they were busy getting ready to demo their technology to author AR instructions (especially once Alexa donned a white lab coat to play the role of a lab technician). Their demo was part of the presentation by Andy Hay, the COO at Sysmex America, a leading maker of hematology analyzers (aka blood analyzers). You can see a ~five minute video of this AR authoring demo here — with a ~one-minute explanation by Jim Heppelmann (1:09:29 to 1:10:36), followed by a ~two-minute authoring demo (1:10:36 to 1:12:30), and a ~two+ minute desktop editor demo (1:12:30 to 1:15:15).
In the demo, Alexa played the part of a lab technician authoring instructions on how to run the daily startup procedure on a Sysmex XW-100 blood analyzer system. She did this authoring of the instructions while actually performing the work steps on the machine. She used a combination of gestures and voice commands to define/mark the beginning and end of each step, take snapshot pictures, and record video of her actually doing each step, using the camera built into the smart glasses, and record audio of herself explaining each step, just as if she was teaching someone in person. Since she is using the smart glasses, the video and pictures are taken from the perspective of the worker. Also, she is authoring the instructions while doing the work, rather than trying to write down instructions at her desk from memory. Thus, she is much more likely to get each step exactly right, and not forget anything. This follows the lean tenet of Gemba (go to ‘the actual place’ to see and solve a problem much more effectively and quickly).
PTC also provides a desktop editor that shows what was captured and allows the editor to add or update explanatory text, reorder the steps, extract new images, and modify it as needed. Once finished, the instructions are published. They can be published in a Word document as a series of images and text. But of course, the preferred way is to publish them as AR instructions. They showed this in the demo as well, with the images and videos floating above the machines, so you can start and stop the instructions for each step.
This demo showed a way for frontline workers to quickly author instructions by showing others what they do, enabling rapid AR instructional content development by the people most familiar with the content. Furthermore, it is not constrained by or dependent on the availability of CAD models for each of the machines involved in the interaction.
Programming using AR
The next demo was kind of mind boggling; a ‘Reality Editor’ originally developed at MIT Media Lab. You can see that demo here (1:17:48 to 1:23:25) explained by Valentin Heun, who started up and led development of the Reality Editor technology for over five years at the Media Lab and is now VP of Technology at PTC. The demo involved a hopper filled with some materials, feeding a bin, with physical on and off buttons. The on button opens the hopper and starts up the conveyor belt to fill the bin, the off button closes the hopper and stops the conveyor. Using AR, a logical representation of the internal circuitry was overlaid on the physical image of the machine. This is the actual logic that drives the system. I was impressed by how the Spatial AR Programming paradigm allows this logic to be displayed so simply and intuitively, visually tied to the underlying equipment.
As Valentin used the physical buttons to start and stop the machine, it changed the state of the virtual on-off buttons – i.e. the physical buttons and the virtual logic were connected over the network (a smart connected device). Then he showed a completely independent machine – a ‘smart table’ with a scale on it. First, he showed the logic representation overlaid on the smart table (Figure 3 below).
But then he switched modes and showed some controls overlaid on the same table.
The AR view of the smart table (Figure 4) had a virtual on-off button on the right and a threshold ‘limiter’ on the left. Valentin set the limiter to a specific weight. When the scale goes above that weight, a virtual ‘tag’ (signal) changes from on to off. The virtual on-off button and limiter are connected via an AND5 logic statement that requires the button and the limiter’s virtual tag to be on at the same time. Then came the magic, even though the two machines were completely independent physically, not connected by any wires or mechanics, he was able to connect this AND logic with the feeder machine, by drawing a virtual connecting line. Now, the virtual on/off button of the smart table controlled the feeder system. Valentin put the smart table/scale with a bin on it under the end of the conveyor, so that now the conveyor was filling up the bin. As the bin got heavier, it eventually reached the threshold limit he had set on the smart table, and the virtual logic shut off the conveyor-feeder system. The logic connecting these two machines was created using drag and drop gestures in the air. The two systems were thereby connected via a decentralized real-time edge system. No internet connection is required, as long as all the devices are on the same local network.
They also had a tablet computer (Microsoft Surface) sitting above the smart table, that was acting as a HMI (human-machine interface) for the system. Using the AR interface, Valentin first ‘grabbed’ a graph of sensor data being displayed on the tablet and dragged it off the tablet and onto his virtual AR interface, tied to a specific spot on one of the machines. Then he dragged and dropped the on/off button from his AR interface onto the tablet. Thus, a series of machines and their physical HMI were connected and programmed onsite, using simple drag & drop visual AR logic controls. It is still early days for this stuff, but it really was eye-opening.
Remote Assistance Using AR – Vuforia Chalk
We also saw the use of Vuforia Chalk, which allows an expert to see through the eyes of someone who is wearing smart glasses at a remote site. The expert was able to not just talk the onsite person through a maintenance or repair process or procedure, but was able to mark up the physical environment, such as circling specific elements on the machine being worked on. This could be very useful for virtually any kind of remote assistance that involves physical reality. The Vuforia Chalk app has been available for download for about six months.
Customer Panel
Jeff Miller, VP of Customer Success for PTC Advisory Services, led a customer panel discussion on day two of the conference. There were six panelists: Haroon Abbu, VP Data Analytics and Sales Operations for Bell and Howell; Victor Glukhov, Sr. Manager MES/Automation Group, at Carlsberg Group; Augustus Pan, CIO, CIMC; Ryan Cahalane, VP Digital Growth, Colfax Corp.; Justin Hester, Manager, IT Lab, Hirotec; and Shane O’Callaghan, Division Manager, Insight, TSM.
Bell and Howell Helping Walmart Improve Customer Service for Instore Order Pickup
Bell and Howell launched a 16’ tall vending machine by Cleveron (bright orange, you can’t miss it) for Walmart customers to use when they pick up online orders at the store. Traditionally customers would have to wait in line for about 15 minutes to pick up their order. With the machine, customers simply scan a 2D QR code for their order and get their package in under 9 seconds on average. They already have about 300 of these installed in Walmart stores and will be installing many more. Haroon Abbu said it only took about 12 weeks to get their first mashup running using ThingWorx.
They are also providing augmented reality for training associates on how to load packages into the vending robot, such as putting in liquid dishwashing detergent so it doesn’t fall over and leak. As well, Bell and Howell is using AR to show retailers how the machine will look, in situ at the store.
Bell and Howell is selling, more broadly, smart lockers and automated store and retrieve systems, which can be used beyond a retail store, such as in university mail rooms so students can retrieve mail 24X7 safely and securely, while the school saves on labor. These can be used almost anywhere where people are waiting in line to pick up something, like picking up an iPhone at Apple, or picking up some equipment that has been repaired at a service center.
In addition, Bell and Howell has about 30,000 legacy assets already in the field, which they are starting to bring onto the ThingWorx platform as well, to provide some of these same remote monitoring capabilities. This is helping them shift from being a product-centric company to an information and technology-enabled field service company providing actionable intelligence to their own technicians and to their customers. The majority of their click and collect service calls are now handled remotely. B&H has been able to charge for these remote monitoring services. They also have additional capabilities in beta testing: bring together information from parcel companies about what has been delivered to the store, with scan data about what has been loaded into each vending machine, and outbound scans when each item was picked up by the customer.
Colfax Developing IoT Applications and Services Beyond Their Own Equipment
Colfax makes ESAB welding and cutting equipment and Howden air and gas handling equipment. They are partnering with Microsoft and PTC to develop IoT applications on their own and other people’s equipment. They just started these efforts in March of this year and have already launched two commercial products. They have connected welders, compressors, ventilation, and mining applications.
TSM Monitoring and Improving Performance on the Factory Floor
Ireland-based TSM is a smaller firm that manufactures highly specialized gravimetric blending and control systems for industrial automation and control in plastics manufacturing plants. They started adding IoT capabilities about three years ago. They created a new division, called Insight, around monitoring and improving performance management on the factory floor. This new division works not just with TSM equipment, but with competitors’ devices as well. They act as a bridge between OT and IT world and have been able to monetize these new performance management capabilities, independent of selling hardware. This has enabled them to also sell their product as-a-service, and help their customers manage and reduce energy and materials usage and waste. That is quite an accomplish for a company of their size.
A common thread between these three examples has been the ability of traditionally hardware-centric businesses to move into information and service-centric business models with higher margins, stickier/more embedded customer relationships, and greater differentiation.
Doing Well by Doing Good
The lunch time speakers for the analyst and media session on day two talked about PTC supporting the use of AR technology to help treat autism. For example, they are using AR to teach autistic people how to speak and communicate better. One thing that touched me was when PTC asked for volunteers to work on this project, on their own time; within one hour over 60 PTC employees responded and volunteered. With that kind of culture, and the amazing technology vision they have, it is hard not to root for PTC to succeed with their well-articulated vision and ambitious growth goals.
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1 IT = Information Technology, OT = Operational Technology.IT-OT convergence has become an increasingly important topic as IoT is being adopted in manufacturing plants. — Return to article text above
2 This clip is from the video of the opening keynote session at LiveWorx. — Return to article text above
3 Jim Heppelmann showed the future of delivering directions for someone driving a car by overlaying the turns on the actual road ahead via smart glasses. It’s like having a big personalized marking on the road that shows clearly where to go. Once we start seeing more and more applications like that available — along with smart glasses that look good, work well, and are reasonably priced — it is easy to see the AR market really taking off. — Return to article text above
4 These figures were provided by PTC. — Return to article text above
5 An AND statement (just like a hardware AND gate) is true only if both its inputs are true. — Return to article text above
To view other articles from this issue of the brief, click here.