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Executives tasked with planning for Industry 4.0 / Maintenance 4.0 often rely on industry analysts for guidance.  When faced with rapidly evolving technologies, analysts and consultants provide objective and third-party information that is vendor neutral.  At least, this is the theory.

This blog article addresses a topic that does not get sufficient attention – should you trust analyst coverage on Industry 4.0 and Maintenance 4.0?

Full disclosure:  Presenso is a Gartner Cool Vendor in Artificial Intelligence Across the Supply Chain and we have a positive relationship with quite a few analyst firms.  At the same time, I have been observing trends within industrial analytics and Maintenance 4.0 for the last few years and have written extensively on a range of topics in multiple trade publications.

Analyst Objectivity or Pay-for-Play?

 Every business depends on its revenues, and analyst organizations are no different. However, the murky business model of some analyst are not necessarily recognized in the marketplace.

Tier 1 analysts such as Gartner have rigorous methodologies for granting awards and do not accept payment.

Unfortunately, this professionalism and objectivity does not apply to all analyst organizations. In at least one instance, I know of a play-for-pay model that is used by analysts who generate a significant portion of their income by selling prestigious awards to solution providers and then honoring these vendors at an award banquet. My understanding is that analysts are financially incented based on the number of awards sold a year and that sales reps upsell the recipient company on consulting services as part of the award outreach.

Why is this important?  There is nothing inherently wrong for analysts to charge for a service.  The problem arises when the decision maker with the industrial entity (the end customer) does not understand the financial relationship between the analyst and the vendor.

Trade Publication Recognition Cost Money

In the last two years, Presenso has been solicited multiple times by trade publications offering the opportunity to receive a recognition award.  The titles vary, but typically include the terms “top,” “leading” or “excellence.”

I’d like to share a (moderately modified) email that I recently received:

Greetings from The XX Magazine!

I am XX from editorial department of XX magazine; is a business and technology magazine for all business decision makers and enterprise IT. It is the most trusted source of news and information for business leaders and professionals. 

I am glad to inform you that your company has been shortlisted for “30 XX Companies of the Year 2019“. It will be 2 full-page in-depth feature about your company’s differentiators, products, services, challenges, road-map and how the CEO is driving the company with a title 30 XX Companies of the Year 2019 with an interesting tagline.

This is a great opportunity to showcase your company and product/services in front of hundreds of thousand decision makers who could be your potential customers. This is undoubtedly going to optimize your visibility as it will reach to 70,000 senior leaders and decision-makers of all the businesses apart from the subscribers of XX Magazine.

Our Circulations:
Our Readers/Subscribers: CEOs, CIOs, CTOs, CMOs, VCs and other C level executives. Also, Fortune 5000 companies and this will help you to reach your probable clients.

Medium to reach your target audiences: Print circulations, Online circulations, Digital media, Email campaign, Newsletters, Events and Conferences, Social networking sites like Facebook, LinkedIn, Google, Twitter, Bing etc.

The total number of print circulation/Offline: 70,000.

Digital/Online visibility: 200 thousand+ (unique visitors to our website per month)

Benefits:
1) Title as a “30 XX Companies of the Year 2019” with an interesting photograph of the CEO/Founder.
2) Two full-page in-depth feature about your company’s differentiators, products/services, challenges, road-map, strength, unique proposition to the customers worldwide and how the CEO is driving the company with very interesting picture and chart-graphs.
3) One full-page complimentary ad/press release/article/product release anytime that can be used by you.
4) One whole month visibility on the homepage of our website and one complimentary hard copy of the issue.
5) Full reprint rights, Certificate of Honor and high-resolution PDF of the profile which you can use for your media circulation and the same you can put on your website also.

Registration Fee: $2900

Next Step: Please send me a mail confirmation for your participation and we will go ahead with further procedures like paperwork, editorials, designing etc.

I hope you will agree that this is a very good branding exercise for your company. Looking forward to a positive response from your end.

Why is this a concern?  The stamp of approval that trade publications provide to technology vendors may be mistaken as an objective validation. The assumption is that the publication performed due diligence and researched the company as part of the selection process.  This could not be further from the truth.  The research relates to the vendor’s ability to allocate marketing budget to a campaign, and not the strength of the vendors solution.  Whereas Gartner speaks to a vendor’s customers during its evaluation process, these trade publications are sending out purchasing contact information and executing email marketing campaigns.

Lies, Damn Lies and Statistics

Even though I am an avid reader of analyst reports on Industry 4.0, IoT and Maintenance 4.0, it is never clear how specific projections of market growth are derived.   Will Industry 4.0 reduce operating expenses by 3% or 30%?   What is the growth rate of the Machine Learning for Predictive Maintenance market?

Since I have no first-hand knowledge of analysts’ forecasting methodologies, I am going to hypothesize these two scenarios:

  • A team of freshly minted MBA’s collect both historic data and develop complex assumptions for growth based on surveys and macro-economic trends. The assumptions are vetted by senior analysts and the model is tested and re-calibrated.
  • The black box. Back-of-the-envelope guesstimates are made based on arbitrary assumptions. To be safe, the time horizon is 5, 10 or 20 years in the future.

I will not speculate which methodology is used more prevalently and there is no guarantee that the more complicated formula is more accurate than the intuitive one.   However, these are some examples of forecasts that should be carefully examined:

  • IIoT could add over $14.2 Trillion to the world economy by 2030 – Accenture, 2013
  • Smart factories can generate up to $1.5 Trillion to the world economy within 5 years – Capgemini, 2017
  • The industrial sectors will spend $900 Billion per annum over the next five years on Industry 4.0 – PwC, 2016

What is the danger in overestimating growth and investments?  When forecasts become widely published, they gain credibility and are can be used to set benchmarks for internal investments.   The most significant risk is when planners assume the accuracy of external data.  A business case built on unrealistic growth expectations could lead to overinvestment in solutions that lack economic justification.

Conclusion

My advice to those tasks with planning for Industry 4.0 and Maintenance 4.0 is develop bottoms-up, data driven business cases based on testing / piloting solutions.  If you are intend to rely on a third party, then understand how they are compensated and whether there is potential for bias.

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Eitan Vesely

Eitan Vesely

Formerly a hardware specialist and a support engineer for Applied Materials. Specializing in software-hardware-mechanics interfaces and system overview. Experienced in the field of industrial automation and motion control. Holds a BSc. Mechanical engineering