Five years ago, hardly any heavy equipment was connected with telematics, says Paolo Fellin, vice president of construction and infrastructure industries at Caterpillar. Today, he says, the company has more than 300,000 connected machines worldwide.
“Two years ago, when I visited customers and talked about technology, sometimes they would get a glazed look in their eyes,” Fellin says. “Now when I visit customers, the first half-hour all they want to talk about is technology.”
We recently had the chance to talk one-on-one with Fellin and his colleague, John Carpenter, construction technology and solutions manager with Caterpillar, about their company’s strategy in this dynamic environment and how it will affect the industry and their customers.
The boom is here
The boom in heavy equipment technology is reshaping the industry, changing the role of partnerships and redefining competitors. For the contractors who have the desire and the means to deploy this technology it is creating double-digit gains in productivity, cost efficiency and fuel economy. And those who resist technology may find themselves marginalized as their tech-savvy competitors continue to drive down costs and boost productivity.
The industry has just emerged into the first stages of what will prove to be a decades-long revolution. And this fast pace of change has OEMs, suppliers and contractors scrambling to adjust to new realities, find the best value, and decide on the right technologies and the best path forward into an uncertain future. Uncertainty and questions abound for contractors, dealers and OEMs.
Wikipedia and Google eliminated the need to own an encyclopedia. iTunes eliminated the need to own compact discs or vinyl records. In these and thousands of other cases a small technology company with low capital requirements disrupted and eventually displaced larger, more established companies with huge legacies and capital investments.
Caterpillar has no intention of becoming the next victim of disruptive digital technology.
During our talks, Fellin showed us two slides. The first was the same heavy equipment manufacturers Caterpillar has always competed against: Deere, Case, Komatsu and others.
The second slide showed the companies Cat considers future threats. There’s not a single heavy equipment manufacturer on it. Instead, they are data, technology and service companies. Some are big, like Google, and some you’ve never heard of.
Caterpillar is not thinking that these technology companies will suddenly start making bulldozers. Rather, these non-traditional competitors, by virtue of their unique digital capabilities, can create a lot of value for contractors. They may even alter the fundamental dynamics of the industry, and Caterpillar has no intention of being left out of the process.
Partnerships and acquisitions
If you’re keeping up with the news you know Caterpillar has entered into several technology-related acquisitions and partnerships in just this year including:
- A partnership with Yard Club, a peer-to-peer equipment rental service.
- A minority investment and partnership in Uptake, an analytics firm that develops predictive diagnostic technology for equipment.
- Established an Analytics and Innovation division headed by an officer-level executive. This division will leverage the combined efforts of the different technology areas the company is working on while pushing for more innovation and change management.
- Formed a strategic alliance with Modustri, which makes ultrasonic equipment inspection and measurement hardware.
The new digital reality
It’s not just about the iron anymore, Fellin says. It’s telematics, connectivity, data analysis, software, financing, online rental and auction technology. Those all offer solutions and opportunities for contractors. Many of them are being provided by small companies that don’t manufacture much of anything other than sensors and small black boxes—the hallmark of many disruptive technologies.
The iron isn’t going away, but Caterpillar is betting that the OEM that gets the sale is going to be the one that helps its customers manage their equipment with the best available technology while serving as the customer counselor and advisor on that technology.
“People used to ask us about dig depth and lift capacity,” says Fellin. “Now it’s: ‘How can you help me set up the jobsite so it is more productive? How do I know if my machines are working at full capacity? How do I know if an operator is using my machine well?’ We’ve gone from a customer wanting a machine to a customer wanting a solution.”
Caterpillar and several other OEMs have been using telematics data for some time to improve equipment monitoring and diagnostics and even design. With the acquisition of Uptake, the company is pushing that process to the next level.
Uptake is allowing the company to develop more predictive and proscriptive information, says Carpenter. Rather than have a telematics system that simply tells a customer when his machine is overheating, predictive and proscriptive data can tell him (or his Cat dealer) weeks ahead of time that overheating might occur.
Armed with this foreknowledge you can tell the operator to change how he’s working the machine, or it can tell you order a new part and have it delivered and installed before the problem disrupts operations, says Carpenter.
And that’s just the low hanging fruit of data analysis.
“We are getting to the point where we can see regionally when things are picking up,” says Carpenter. “If we see our excavators operating more than normal in China for example, we know what parts wear earliest and we can have those parts in theater and anticipate what is needed to keep those customers up and running.”
Data collection, in part, is the backbone of Cat’s recently announced fuel challenge. In that program, Cat has said if you burn more fuel than the benchmarks it has established for a particular machine worldwide, the company will pay you $1 per gallon for every gallon you consume over the benchmark.
And if the data says you’re wasting time or fuel with operational inefficiencies? Fellin and Carpenter both said they have talked customers out of buying a new machine when the data and the benchmarking pointed out inefficiencies.
“Instead we’ve said, ‘lets take a look at your setup or your operator practices. Perhaps your idle time is too high, so before you buy another machine let’s take a look at that first,'” Fellin says.
Talking a customer out of buying a new machine might seem counterintuitive in the short term, but long term Cat believes that this kind of coaching and counseling, backed with analytics and data, is the best route to loyal customers who will ultimately be more successful. “If a customer buys a machine and at the end of the day he doesn’t use the machine, we’re going to lose,” Fellin says.
Informed sales force
“Even before technology came along, most Cat dealers and salesmen knew they couldn’t just flog iron,” Carpenter says. “There’s was a time when you didn’t have to worry about financing, and now there isn’t a salesperson worth their salt who can’t qualify a customer on financing. The same holds true for salespeople and technology today. It is new and represents a change to their selling approach, but it will quickly become an integral part of their everyday sale.” Carpenter says.
“A salesman who isn’t doing that isn’t going to survive,” Carpenter says. “If you don’t know what’s weighing on the customers mind, if you can’t go in and understand the processes that are keeping that customer in business or up at night, he may never give you the business. You have to become a confidante to that contractor.”
Every contractor faces different challenges, Carpenter says. “We need to be able to scale to what the customer needs. They may not need all the tools in our arsenal, or they may want to go to a complete digital ecosystem for their product or enterprise.”
Coming soon to a jobsite near you
In addition to big data and telematics, Caterpillar is looking further down the road for the next big thing. And as it turns out there are a lot of next big things, including:
- Autonomous machines. “We’re going to leverage what we’ve learned on the mining side and bring autonomy to the jobsite,” says Carpenter. “We have semi-autonomous dozers operating today and autonomous mining trucks.” Cat’s thinking on autonomy is to automate simple, repetitive processes as much as possible. Part of that can be as routine as autodig capabilities on excavators.
Autonomous technology may not trickle down to small machines like skid steers, but Carpenter sees things like a push-pull scraper setup to be likely candidates. Another possibility is one operator controlling four compactors on a single site.
Does that mean workers are going to lose their jobs? It doesn’t have to.
The goal is not to reduce headcount but to make more efficient use of the employees you already have, “redeploy, not unemploy,” Carpenter says. There are also big benefits to safety when you keep people out of trenches or send in unmanned equipment to work in landslide areas, fire hazards or toxic waste environments, he says.
- Augmented reality. In the service environment, augmented reality might mean that a technician approaches a machine with his tablet computer. The tablet recognizes the machine and reads a telematics feed that tells it what the problem is. It could give him a virtual reality image of a schematic showing where the problem is, show him how to take care of the problem and enable him to order the part all on one screen, Carpenter says.
Similar systems could provide benefits to operators in the cab with heads-up displays that show progress against plan. “You could visualize what it should look like and simulate the movement of piece of equipment on the jobsite,” Carpenter says. The simulation could give you an early warning that you’re lagging behind on timetables, or if changes are made to the plan, they could be updated instantly to the virtual reality system for everybody to see.
- Drone technology. “We’re looking at drone technology or any collection of 3D data, cameras included,” Carpenter says. “There are companies today that can do a 10 minute fly-over a quarry analyze the data in a simple way for the customer to see and have the detail available to analyze. The ability to process camera data is so good they can tell aggregate stockpile types, when haul roads are becoming to narrow for safe passage or how much material has been removed to where since the last fly over. We can combine this data with our machine data in real time and analyze performance,” he says.
In describing the history of heavy equipment, Fellin says the 1960s and 70s were all about mechanical innovation. The late 70s and 80s saw big improvements in hydraulics. And the 90s to early 2000s reaped benefits from electro-hydraulics.
“Now we are going into the era of analytics, data and connectivity,” Fellin says. “But we can’t only do it by ourselves, like Cat has done before. We have to collaborate with other companies that are quicker in this space than Caterpillar. That’s why we welcome these partnerships. We have to learn how to do it and we’re not discounting anybody.”