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I’m very happy to have Mike Hughes here with me, the zone president at Schneider Electric of the Nordics and Baltics region. Mike, thank you for joining. Pleasure. You have a very, very interesting career at Schneider Electric. I’ve seen you’ve been, now in the Nordic -Baltic region, before that you were in the UK and Ireland. So I assume in all these years, you’ve seen the role of digitalization changing.
And with your experience right now, why should companies talk about digitalization? Why should it be on top of the agenda today? Okay. Okay. Yeah. I mean, digitization has been coming for a long time. It’s something we’ve all been talking about as companies for many, many years. But why now? Why now? I think what’s happened in the last, let’s call it in the last 10 years is you’ve seen this
strong evolution in sensor technology, which makes it easier to capture data in the first place. And we’re specifically probably talking here more in a, let’s call it a semi -industrial manufacturing type of environment, not just an IT type of environment. Oh yeah. So you’ve had this parallel development from a technology point of view around computing power. We all see what’s happening with AI and Nvidia and all the rest of it right now, where this is really accelerating, okay? This capability of …
processing data and analyzing data and extracting insights from data that can really unlock huge productivity. And at the same time, you have this development in sensor technology where down in the physics where in an industrial environment, it’s much easier now and much cheaper to be able to capture thousands of points of data where in the past that maybe wasn’t financially viable or technically viable. And a lot of it, you know, you go back 30 years was
some guy with a clipboard writing down what’s the temperature and what’s this and that. So I think these two worlds have now met. I think at the same time as well, there’s a clear understanding, particularly in industry, that it’s bigger than IT, if I can put it that way. IT, we’ve seen huge progress in IT in terms of the cloud capability, et cetera, about office space type of applications for productivity. But…
As companies start to realize their biggest expenditure, their biggest potential value they can unlock is actually in their industrial processes. And so you get this nice coming together of digital sensor technology that’s able to capture it. And then I would throw on top of that the topic of regulation and sustainability, which of course is kind of accelerating the whole thing where companies now have to report on a large number of KPIs across the organization. You have to have that data.
Oh yeah. So it’s a fascinating environment. It’s been coming for a long time. You can really see it accelerating now, but it’s all driven by value. It’s all driven by that desire. Or I would say that understanding that says, look, if I can get the data and understand what’s happening in my process, I can actually drive a lot of valuable insights out of that and how should I optimize it? How should I change? Have you seen certain pivotal moments in the last years where … I would say …
start looking back and going like, okay, now we really need to change, now we really need to start adapting? I think yes, I would say it’s probably the last five years, something like that, that you really see this taking off. I’ve had the pleasure of working now in the industrial tech space since the mid -90s. Back in those days, it was very basic. You started to have some scatter systems.
I think the real wave has come in the last probably the last five, seven years where, as I say, the IT wave has kind of gone through. People understand it. People are deploying their IT systems, their ERP systems, their productivity systems around offices and how you manage that white space environment. And I think it’s, as I say, it’s that development of the sensor technology becoming much cheaper.
And the industrial tech companies, the industrial software companies starting to emerge and saying, there’s a whole industry here that is beyond the IT layer. You link it into the IT layer, of course. You need the processing power, but it’s about how do you capture that data? So I think the last… I wouldn’t like to really put a date on it, but if I had to reflect, it’s probably come on very strong in the last five years. You touched, I would say, the importance of IT coming together with OT. Yes.
the concept of IT and reconversions is not something new. We’ve been talking about that for, I don’t know, 10 years, maybe more. But I do see something happening now also in these last years where we talked about IT coming together with OT more from a, let’s say a practical point of view, because we had to share a network or a computer infrastructure or something like that. Now we’re starting to talk about the value.
why we just come together because everything is data driven now. Do you see those data driven evolutions, big data, AI, how do you see that coming from the IT world to us or is it more a bit of joint collaboration or? I think it’s joint. If we step back and we reflect on…
you know, how does change happen? I mean, I go back to the start of my career. I was in a very mechanical environment. I used to be involved in motion control systems, you know, which was very much around machinery, automation, et cetera. And, you know, that was kind of the phase where electronics was being married together with mechanical. And we had this beautiful word called mechatronics, right? And I remember the debates distinctly at that time where a mechanical engineer and electronic engineer would just not talk to each other. They were…
Completely different worlds, you know, this will never mix, et cetera. And sure enough, 10, 15 years later, mechatronics is just standard, right? You get the same, actually, it’s very interesting, you get the same happening now if you look in the home automation world, right? Yeah. Yeah, it’s not a world we talk a lot about, but if you look at the home automation world, you have this gray space emerging between the electrician and the plumber, right? You know, who puts in your heat pump? Is it an electrical thing or is it a plumbing thing?
Right? So you get these points where, let’s say, fairly traditional domains bump into each other and the value is unlocked by them working together. So it’s definitely not an IT or an OT topic. It’s about how do you combine these technologies? You know, IT is all about having the power of compute and the models and the AI and all the rest of it, right? The OT is all about getting the data from your…
process, but very important, and again, we’ve seen this trend over the last years, it’s not enough to have the data. You actually have to have the expertise to understand what you’re looking at. Oh yeah. It’s not just about saying, oh, well, there’s a spike or there’s a certain incident that happened. You have to have the deep process knowledge in your company to understand what exactly that means, what’s the impact to your process, what’s the financial implications or the safety implications of that.
So I think it’s fascinating to reflect on your point of why is it accelerating now. I think it’s kind of the same story as there are events that happen that accelerate things. They don’t change them, just accelerate what’s already there. I think COVID, where companies realized they didn’t have enough data on their supply chains.
which is a very OT type of environment. Absolutely. You know, how many pieces are in the factory? How many am I actually producing? And being able to see that as an enterprise, I think that really pushed the need to have connected factories. I think the whole topic around the energy crisis, again, where we’ve been talking about the cost of energy for years, but I think, of course, particularly the energy crisis in Europe really accelerated that.
understanding of I need more secure energy, I need to understand how much this is costing me. And then I think the last one that’s really accelerating is the topic of sustainability. All the regulations coming around sustainability where it’s all about traceability. Yeah. Yeah. And that’s all about data. And most of that data is coming from your supply chain, your scope one, your scope two, your scope three. Yeah. So you put all of this together, I think, with this sensor technology, with this IT.
evolving environment of AI and you get to where we are today. The interesting thing is, if you take a look at the dataization from a service provider point of view, there’s also now the possibility of introducing new business models for them where you have a background in mechatronics, where there might have used to be a time where you built something and you sell that piece of equipment to
Yeah, an end user, right? A company where now you might be able to sell that as a service or with predictive maintenance. Yes. Have you seen such things happening as well? Like all of these worlds where different domains of expertise come together, you unlock completely new value streams. You unlock completely new potential business models.
You’re right. You know, the whole, we, what we see a lot right now as well is not just the idea of saying, you know, you can rent the asset, et cetera, but a lot of financing companies coming in and saying, you know, we’ll finance the capex and, you know, we basically own the plant equipment. Absolutely. And pay us, you pay us for the next 35 years kind of thing. You know, it’s coming directly out of the infrastructure world where you build a motorway or you build a bridge and you take the toll for the next 25 years. Yeah.
So you definitely see that accelerating. As you said, then just from a technology point of view, remote maintenance, monitoring, preventative maintenance. But I think also what’s very interesting is the concept of benchmarking. Is that companies particularly, they benchmark their own plants against each other. And at Schneider, we have over 100 plants and we started a program of digitization. And you start to really understand, well, why is this one?
consuming 30 % more energy than that one. So that drives the whole thing as well. So yeah. Let’s take, because you’re talking about the Schneider plant, let’s take the Lexington plant as an example. It has been, I would say, recognized by the World Economic Forum as a advanced lighthouse. End -to -end digitization, yes. Lighthouse plant, yes. I’m actually myself also.
involved in that from an Agniva side, which is really interesting to see because we’re not only talking about, I would say, digitalization as such, but also about maturity, about, I would say, constantly raising the bar for the workers in the plants to, I would say, use those digital technologies better and better and et cetera, et cetera, right?
Now, if we take the Lexington plant as an example, what are the drivers for that plant to be really a front runner, to be ahead of the pack, so to say? Yes. I think it’s the same. It’s a good example of what’s happening in the industry in general.
You take a company like Schneider Electric that’s strongly committed to sustainability. A huge part of sustainability is the energy transition. Once you get into the energy transition, you say, well, where am I using energy? Oh, these plants are using a lot of energy. Why don’t I start the kind of thing, right? And then you literally just start to look at a plant. And that plant was over 60 years old. I mean, that plant has been manufacturing for more than 60 years. Wow. So, but.
I think it’s a great example of where you step back. This is the point, is you step back and you take a fresh look at something and you say, okay, well, that’s how we did it 60 years ago, right? You laid it out like that, things moved from here to there, there was a piece of paper that went with it, et cetera. What was fascinating on that one was when you put in all of the connectivity platforms, you capture all of the data, they eliminated 90 % of the paperwork.
Because you don’t need it now. You just capture the data. It could be a barcode. It could be an automatic scanning, whatever it is. It goes into your database, and you have it. So once you start to get into that, you just see productivity everywhere. Yeah. And you keep going. Yeah, keep going. And that’s one of our smartest plans. As you said, it was given the lighthouse status by World Economic Forum because …
It was a good example of what an end -to -end digitized plant could look like. It massively increased our productivity. And it made a better working environment because people, you know, they’re working with technology. They have the latest things, tools to work with, etc. It makes them very employable as well, you know. Employable, maybe also become more attractive as an employer. Correct. Correct. Correct.
Do you see that the generation thing coming up where I would say people who are, I would say starting to work right now, younger people, they want to work for a digital sustainable company or do you see that happening? Yeah, I think you’ve got two very different topics there. Sustainable, yes. You see that one very dramatically.
Certainly at Schneider, we get a lot of people who join us because they feel that we are very strongly engaged in that sustainability story. We’re not just talking about it. We’ve been doing it for more than 20 years now, actually, and that we’ve made serious commitments around net zero, scope one, scope two, scope three, et cetera. So they really engage with that. We see that. I think on the digital side is more…
visceral reaction that says, why the hell are we doing it like that? I mean, come on guys. This is 70 year old technology here, right? Surely. The first thing I have to do when I enter this plant is put my smartphone away because I’m not allowed to touch it. Yes. Yes. So I think that’s just your natural evolution of, let’s say, that generation coming in and just being so technology savvy in terms of that.
I think that’s just going to accelerate what we’re talking about, is this willingness to drive change. In your opinion, and so we’ve been talking about digitalization intensively. Yes, we see a bit of an uprise now coming, but in your opinion, what holds us back, what holds our customers, everybody in the manufacturing industry or in the infrastructure, et cetera, what holds us back to…
to really apply principles such as you’re doing in the Lexington plant and with other customers as well, but what holds us back to apply those at scale are there? Is it technology? Is it culture? Is it a combination of both? Yeah, I think the first thing we can probably agree on is not technology. This is not a technology issue anymore. And you see the way the world is accelerating from…
technology point of view in terms of being able to process data, capture data, predict data, build models around it. It’s just incredible the speed it’s moving at. No. For me, there’s a couple of things that are kind of holding it back. And I go back to my kind of mechatronic days. It’s, you know, how do you bring these communities of expertise together where, you know, we’ve seen many, many discussions where …
an IT organization looks at it through the lens of an IT, an OT organization looks at IT through the lens of OT, neither of them are right. There’s something in the middle, like the heat pump story between the electrician and the plumber, there’s something in the middle that both have to learn. So I think there’s a whole new space that has to come out of that that says you will always have your IT expertise, you will always have your deep …
process engineering expertise, but there is this IT, OT space connectivity in the middle. And I think that’s accelerating. I think each company is slowly discovering that. Yeah. Many of them making the same mistakes over and over again that everybody makes as they go through that. You start a project, you let it be driven by purely IT people. It doesn’t work. You let it driven by purely OT people. It doesn’t work. You have to get it into the middle.
So I think that’s one. So I think that’s just a learning topic of how do you unlock this value that’s there. I think the second one that’s holding us back is this classical design and construction model that the way the industry works today is where there’s this hard split between CapEx and Opex. And you know, CapEx is all about how do I build it as fast as I can, as cheap as I can. And by doing that, you…
you design in some very fundamental flaws that are going to cost you a lot of money in your 35 years of operation, right? And how do you bridge this gap? How do you start to design now in a digital world with this end -to -end concept that says, you know, I’m going to run this plan for, to take the lexical plan, 60 years, right? Most of the money that you as a company will invest will not be in the capex. It’ll be in the operation over the next 30 years.
And today, the industry is kind of designed to not look at that. That’s somebody else’s budget. That’s another story. So, you know, I see a lot of things that have to happen there in changing that model. Now, that’s not easy because the whole industry builds like that. Yeah. But I’ve seen so many plants being built where instead of looking at it as a holistic digitization platform. Yeah.
It’s done in packages. It’s all broken up. And then when they try to put it together in the end to get the data out, the cat. It’s interesting on the blog, I refer to that as applying industry two dot zero thinking to industry four dot zero problems. Yeah. Yeah. Um, you have this in detail mindset that’s CapEx mindsets. Um, but also that’s risk averse mindset because what you.
Indeed, you want to build it as fast as possible, as soon as possible. But also with, I would say, the least amount of risk. You want to make sure that you kind of know where you’re heading towards. But with digital projects, you typically do not really know what the end game is going to be. You know what problem you like to solve, right? So you know the outcome, but typically not the path towards that outcome.
Yeah, I can get your point on the risk, but I think it’s more a habit of the industry. Not so much habit, that’s just the way the model works, right? I want to build something, I go to a design firm, they give me some designs, I go for three bids and a buy with the contractor. The contractor then makes their money by breaking it into packages, negotiating with everybody. I get my asset back and then in the end, then I realize that actually I can’t integrate all of this stuff and now I have to live for 40 years with this.
So I think that’s a matter of maturity. I think that’s coming. I think people start to see that. So yeah, it will be very interesting to see this change. Super cool. Hey, maybe a final question to wrap this up. It’s really interesting talk. Thank you very much. What do you think, in your opinion, the coming years will bring? What are the most important drivers, the most important …
things you see happening in the global … Yeah. I think, look, I think sustainability’s not going anywhere. I think it might politically come in and out of favor depending on who wants to get elected and what they say, but I don’t think that trend is going anywhere. You just talk to anybody in the younger generation, you know, this is not going away. Yeah. I think the acceleration around the ability for processing and analyzing data is just going exponentially.
We’re into a whole new world now in terms of large language models, AI, predictability. It’s just fascinating to see how fast that is expanding. I think that it’s kind of becoming the time of OT. I spent two years, and as you said, I’ve had a long career with Schneider. I spent two of those years working on how do we as a company try to…
digitize ourselves end to end from a customer experience point of view. Yeah, so that were easy to do business with. Yeah. And you know, I hired a lot of people in that space around coming into the B2B work. It was more around the, let’s say the commercial side. But what was fascinating for me was a number of them said, so why did you join Schneider? They said, well, because B2C is done. There’s nothing I can prove there anymore. That’s done. You know, that was the first wave of the internet was B2C, et cetera.
And for me, it was fascinating to listen to them to say, it’s all about B2B now. Yeah. Yeah. OK. And once you start to digitize B2B, you very quickly get into IoT because you’re kind of saying, well, what’s my production of a certain item in a plant that’s on the other side of the world? Yeah. Yeah. And the only way you’re going to get that is by having your data systems in place. So I think, I think.
The vast majority of the data that’s going to be processed is going to come from the industrial part. The processing will be done in the IT part. But when you look at the data going forward, we’ve had our holiday photos and all the rest of it, that’s still growing like crazy. But the piece that’s coming up very fast now is this quantity.
of industrial data. And when you look at all the forecasts about connected devices, the human connectivity is done. I’ve got two phones here. I’m sitting here. I’m not going to have three, right? But my plant 10 years ago might have had two connected devices. I’ll probably end up with 3 ,000. Mike, where do you see this going in the next couple of years? Yeah. So as I was saying, I think the big growth of data will be around the industrial space.
And this piece is growing very fast, et cetera, you know, more and more data points coming online that need analysis, et cetera. And I really look forward in the end to seeing this industry mature where, you know, IT has to meet OT. They have to learn to go back to my point about it’s about mechatronics. It’s about electrical and electronic engineers meeting mechanical engineers. And it’s about the heat pump story of my electricians talking to my plumbers and
getting this space in the middle because this is where the value is. This is where the new value is. So I look really forward to seeing how the IT world and the OT world come together, unlock that value in this, you know, what we would today call this industrial tech space. It’s going to be a fascinating world. Thank you very much, Mike. I like the analogy. Thanks for joining me for this interview. Yep, my pleasure. Talk to you soon. Thank you very much, David.