Process Control Industry: The Evolution of Technologies and Business Models

I had the pleasure of speaking at tech incubator TechSandBox this week on the state of the process control industry. Barb Finer, Executive Director of TSB and a long-time friend and colleague, grew up in the industry on a parallel path to mine. So I decided to focus on the evolution of two major disruptive innovation curves, both of which we experienced first hand as product managers at several of the leading innovators in programmable controllers and PC-based control systems. Let’s take a look at the evolution of the technologies and business models, and the wild consolidation that has occurred over the last 20 years.

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The process control industry. People outside the market think…what a boring industry with slow to change technology. Well, I’ve been knee deep in the controls market for 30 years and I can tell you, that is not the case.

Texaco_1959In March 1959 —following almost two and a half years of work—Texaco and the Thompson Ramo Wooldridge (TRW) Co. installed the first direct digital control computer in a refinery. This would become known as the computer-integrated manufacturing (CIM) era.

BusinessWeek wrote, “Shortly before 11 a.m. on March. 12, a veteran Texas Co. process operator named Marvin Voight flipped the switch … The action closed the loop in the first fully automatic, computer-controlled industrial process. Moments later, the most vital parts of the 1,800-bpd polymerization unit at Texaco’s Port Arthur (Texas) refinery were under the unblinking eye and almost instantaneous control of a Thompson Ramo Wooldridge Corp. RW-300, a desk-size digital computer designed for just such control jobs as this. Texaco hopes the computer will raise the plant’s efficiency by a healthy 6% to 10%.”

Since then, it’s been a wild ride of innovations based on developments in I/O, computing platforms, services, and network connectivity.

The introduction of the IBM PC and the rapid creation of a defacto bus standard, PCI bus, increased the pace of innovation.

In 1973, Fred Molinari, ex Analogic, started Data Translation to modularize analog I/O functions and put them on computer buses: Unibus, Q-bus, Multibus, and the IBM PC PCI bus. DTI and Tecmar were in a race to be the first to market. In 1976, National Instruments launched with a GPIB interface (first introduced as the HP-IB interface for instruments, then to become IEEE-488).

In 1981, Fred Putnam introduced LABTECH Notebook for the IBM PC, the first hardware-independent measurement and control software. At the same time, Steve Rubin founded Intellution and launched The Fix, which became the dominant PC-based HMI / control software. NI introduced LabVIEW for the Mac in 1986.

On the communications side, proprietary protocols like Modbus and AB’s Data Highway gave way to industry standards and open architecture systems.

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The 1980’s and 1990’s were heady days. As PC’s moved from operator interfaces to control systems, tempers flared. Fred Putnam and Ed Kompass, long time editor of Control Engineering magazine, even ended up in a very public shouting match at a trade show about whether or not PC’s should be used for control.

Then the innovators started to be acquired…

LABTECH was acquired by PC board vendor Measurement Computing, which also acquired Data Translation. Measurement Computing was acquired by National Instruments. National Instruments then combined LABTECH and Data Translation with other I/O businesses they had acquired: IOtech, Strawberry Tree, and Analogic’s board-level I/O business.

PC board vendor Computer Boards, founded by ex Keithley Instruments execs, changed it’s name to Metrabyte and was acquired by Keithley. Keithley was acquired by Tektronix. Tektronix was acquired by Danaher. Danaher is about to bring all it’s measurement and control businesses together into a new division, Fortive.

The behemoth control vendors were hungry for acquisitions, too. The original PLC was invented by Dick Morley and crew at Bedford Associates. Bedford became Modicon. Modicon was acquired by Gould Electronics, then by AEG. AEG was acquired by Schneider Electric. Schneider also acquired Foxboro (after they were acquired by Siebe) and Invensys.

Intellution was first acquired by Emerson Process. Originally a fans and motors company, Emerson also acquired Rosemount, Fisher Controls, and Micro Motion. Then Emerson sold Intellution to GE. I still think that was an odd move.

Confused yet? Lol.

Why such consolidation? Buyers are the primary force driving the industry. A small number of large manufacturers bought the bulk of the equipment. The fate of the process control vendors rose and fell with their customers. In the figure below, we see good news in aerospace products, electrical equipment, and basic chemicals. The low prices at the gas pump mean things aren’t so great for capital equipment purchases by oil and gas companies.

Moreover, there were million dollar production lines and batches that couldn’t afford to be offline.  So Buyers were demanding more accountability, especially as they started shrinking their in-house engineering workforces.

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Distribution channels were a challenge. Everyone had to go direct to the end customer or through a specially trained systems integrator because of the complexity of the products and processes.

The fastest road to innovation was happening in the smaller companies who were new entrants to the industry.

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Two major business models dominate the market today:

  • Broad range of services, customers including hardware, software, system integration services
  • Focused product range. Over time, the focused product range companies are most likely to be acquired to expand large, integrated services

Let’s take a closer look at National Instruments, for example. Why did they not only survive but thrive?

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First, they are fiercely independent. For decades, they have refused to sell.

Second, they had a unique mix of hardware, easy to use software that turned the industry on its head, expertise-building marketing created by a strong team of product managers, and what grew to be a large channel of partners.

Marketing is not something to be taken lightly. Ralph Grabowski did research at the request of the MIT Enterprise Forum on which tech companies succeeded  an why. The bottom line clearly showed that the successful companies invested at least 2.5 as much in market research as they did in engineering. Yes, you read that right. AT LEAST 2.5x THE INVESTMENT IN MARKET RESEARCH. Then add other marketing activities and you end up with up to 10x the investment over engineering.

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According to Harbor Research, automation companies are evolving from simple equipment monitoring and maintenance to integrated automation, monitoring, and asset mgmt, energy systems, and managed security

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Some of the biggest opportunities for success are in plug-n-play KPI software  that transcends all layers of the factory, from real-time plant floor data to the executive suite. Think something like the LabVIEW of business KPI’s.

IoTThe other big opportunity is the push for smaller, smarter, cheaper as part of the Internet of Things. Gartner says 6.4 billion connective “things” will be in use in 2016, up 30% from 2015. What I don’t understand is why the measurement and control sensor manufacturers aren’t all over this opportunity. They should be driving this big, exciting opportunity. For now, we have to settle for Cisco and GE arguing about whether to call it “Internet of Things,” “Internet of Everything,” or “Industrial Internet of Things.”

You can download the presentation here: TSB_process_control_1601b.

TEDx VIDEO: Psychology, Neuroscience, & Behavioral Economics: Why Most People Don’t Get Marketing

Here is the TEDx video of my April 2014 talk at TEDxWPI. And here’s a link to the transcript and slides from the talk.

The talk covers widespread myths about marketing that make it a challenge to market marketing!

Myth 1. Marketing = Sales

Myth 2. Marketing = Advertising

Myth 3: If you build a better mousetrap, they will buy

Myth 4: Sex sells

Myth 5: Subliminal Messaging: Advertising can get people to buy things they don’t want

Comments and suggestions are always welcome.

How Many Advertisements Do We See Each Day?

I am appalled at the amount of marketing data being randomly asserted without any research backing it up. How many people has the Internet turned into babbling idiots looking for their 15 minutes of fame by citing arbitrarily inflated, shock-factor numbers?

This came to my attention again this weekend as I was reading a Tweet from a trusted marketing friend. He referenced a HubSpot blog post, “How to Use Storytelling to Cut Through the B2B Content Clutter.” (How’s that for a keyword-stuffed blog title? Lol) There’s a lot of interesting data in the infographic that goes with the article. But I became suspicious of all the data once I saw one data point that is way out of line. It said, “It’s estimated we see 5000 marketing messages per day.”

In putting together the data for my TEDx WPI talk, Psychology, Neuroscience, and Behavioral Economics: Why Most People Don’t Get Marketing, I did a lot of secondary research, including on that very data point. From all the information I read, that 5000 number is a gross exaggeration and there is no primary research to back it up. To see the wide range of numbers, see this Google Answers post from 2002. Guesses range as high as 20,000 marketing messages per day.

Screen shot 2014-04-15 at 1.23.33 PMLet’s look at this from the bottom up: If we assume we get about 8 hours of sleep each day, that leaves 57,600 awake seconds per day. To see 5,000 ads/branding messages per day, we would have to see one every 11.52 seconds.

Even if those ads/brands are within eyesight, the reality is our brains see very few of them. Our senses are bombarded with over 11 million bits of data every SECOND. The average person’s working memory can handle 40-50 bits, max. That means we ignore 10,999,950 bits of data every second we are awake.

So let’s be reasonable. I’m still researching the answer, but my best guess is we see 300-700 marketing messages per day, including the ad overload we get from the Internet and video gaming.

Stay tuned. I’ll be back with more data!

Btw, two of my new favorite marketing books are: Decoded: The Science Behind Why We Buy by Phil Barden and Contagious: Why Things Catch On by Jonah Berger.

TEDxWPI — Psychology, Neuroscience, and Behavioral Economics: Why Most People Don’t Get Marketing

We were deeply honored (and tinkled pink) that our very own Shari Worthington was invited to speak at the inaugural TEDx event at WPI on April 6, 2014. We’ll post the link to the talk as soon as it’s available. In the meantime, here is the material from Shari’s talk on “Psychology, Neuroscience, and Behavioral Economics: Why Most People Don’t Get Marketing.”

TED Talks are designed to get people around the world thinking in new ways, talking, discussing, debating! We look forward to your comments.

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Let me take you back in time. You just got your first job and you excitedly tell your parents, “I’m a babysitter,” or “I’ve got a newspaper route,” or “I’m packing groceries at Acme.” Everyone’s happy and you’ve taken your first steps to personal and financial independence.

Fast forward a couple of years. You graduate and land the job that you are sure is going to be your “career.” You tell your family. In my case it went like this.

“Guess what? I found the perfect job. I’m so excited.”

“Great,” they say, “what is it?”

“Marketing,” “What?” “Marketing. You know, understanding customers and launching new products.” “Oh, you mean sales.” “No, marketing. You know, writing press releases and creating ads.” Oh, you mean that weird subliminal advertising stuff.”

Sigh. I realized early on in my marketing career that marketing has a marketing problem.

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So I decided to do some research on an all-inclusive response to “what is marketing?” Here is a typical example of what I found…

A little wordy, maybe? How many of you did I lose half-way through? Lol

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So I decided to try something more visual. I love infographics. A way to tell a story with text and data and graphics.

I found An Illustrated History of Marketing: from cavemen carving on walls to human sacrifice of the Aztecs (yikes!) to the printing press…

Then I found The Road to Modern Marketing: from the Fuller brush salesman to David Ogilvy, the print ad pro, to television to direct mail to online marketing…

Then I found this really cool infographic, Communication Through the Ages: smoke signals, morse code, typewriters, telephones, radio, TV, word processors…

You get the drift. But still not the “elevator pitch” we marketers need.

On a side note: my pet peeve is data floating around the Internet without a source. Sadly, this happens a lot, especially with infographics. But the world doesn’t need yet more random data asserted as research. So let’s work with facts today.

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Here’s a nice, concise summary. Something that everyone can grasp because, quite frankly, EVERYONE NEEDS TO BE MARKETING.

Daniel Pink, in his book To Sell is Human, put forward a darn good case for EVERYONE IS SELLING…whether impressing the boss at work or convincing your spouse to go on that cruise.

But before you can be selling, you need to be marketing. You need to understand who you’re trying to influence, what they care about and, therefore, are willing to invest in (whether it’s time or money), how much they’re willing to invest, and how to best deliver your convincing message.

For instance, where do you want to make your next career move? Which industries offer the best possibilities? Which can benefit from your skills?

The new local pizza joint needs to decide if they are better off selling to the college students a block away OR to the elders in the housing unit on the other side of the street.

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So let’s dispel a few marketing myths as we help marketing do marketing.

First, marketing is NOT sales.

Marketing is about understanding groups of customers with common characteristics. We factor in industry trends to determine which products are right for these customers we’re targeting.

Sales is all about interacting with individual customers and closing the deal.

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Marketing and selling are both built on trust. Who do our customers trust? In the latest Gallup survey, we business people have a credibility problem. We may be experts in particular technologies and processes, but we are facing big trust issues.

In the survey, nurses ranked at the top of the trust hierarchy with 82%. These were followed by pharmacists, teachers, medical doctors, and military officers at 69-70%.

We have to move way down the scale to find Business Executives at 22%, Advertising Professionals at 14%, and Car Salespeople at 9%. Based on all the lawyer jokes, you’d think they’d be at the bottom, but no…they’re above advertisers at 20%.

Hoo boy…marketing really has a branding problem!

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Marketing is NOT all advertising.

 

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Marketing helps the sales team sell the right product to the right customer at the right price through channels that are convenient to the customer.

That’s the 4 P’s: Product, Price, Place, Promotion.

Advertising is a small portion of what marketers do. In fact, it’s an increasingly smaller portion thanks to the Internet and new behaviors like “banner blindness.”

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Our sophisticated mental apparatus has allowed us to improve life. But we have created an environment so complex, fast-paced, and info-laden that we increasingly need short-cuts to deal with it.

Let’s start with this data…how much time do we spend interacting with advertisements…

Most marketers rely on an outdated model of buyer decision-making: EMOTIONAL vs RATIONAL. How much logic or emotion can you get out of a 1.5 second interaction with anything?

Let’s look at the NEUROSCIENCE. Our senses are bombarded with 11 MILLION BITS of INFO EVERY SECOND. 11 million!!! But the upper limit of our working memory is 5-9 chunks of info, which translates to 40-50 bits. That leaves 10,999,950 bits of info that need to be processed. So we need short-cuts that will help us save time, energy, and mental capacity.

Enter the Nobel Prize-winning work of Daniel Kahneman. He studied decision-making behavior and introduced the AUTO-PILOT / PILOT framework.

Our AUTO-PILOT integrates perception and intuition. It’s always running. It’s made for fast, automatic, intuitive actions without thinking.

The PILOT uses reflective thinking to make decisions, which requires energy. So, in a way, our brain is not made for thinking, not when we have such massive amounts of information to deal with.

COGNITIVE PSYCHOLOGY: When we learn something new for the first time, the PILOT is engaged. We stop and think and learn. With repetition and experience, we develop intuition and the processes become automated and more efficient. Malcolm Gladwell, author of The Tipping Point, says it takes 10,000 hours of practice to make an action automatic.

Once we have sufficient experience under our belts and have developed our intuition, the PILOT system only comes into play when we face new problems.

A strong BRAND activates the AUTO-PILOT and circumvents PILOT processing. Weak brands, by contrast, active the PILOT, making buyers stop and think about the purchase decision. Now you are likely to lose them.

Between the AUTO-PILOT and the overwhelming info flow across the Internet, we now have to deal with situations like this: 40-70% of all purchase decisions are made at the Point of Sale with little to no pre-planning. From a communications perspective, the messaging has to be sufficiently new for learning to occur.

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I’ve spent most of my career in technology marketing. That’s an engineering driven world that firmly believes the better product will win. That may have worked decades ago when the pace of tech advances was much slower. Today, Forbes says we’re seeing at least 250,000 products launched per year globally, with an average failure rate of 85-95%.

And being first in a product category often doesn’t help. Was Amazon the first online bookseller? Nope…books.com. Was Apple’s iPod the first MP3 player? Nope. The first was launched in 1997 by Saehan Information Systems in Asia. The first player widely available in the US was from Diamond Multimedia in 1998. Was iTunes the first digital music? Nope. That goes to Napster in 1999, which was sued by the music industry and closed in 2001.

So what leads to success?

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It takes a good product and a great business model. No marketer worth their salt works without a business model that focuses on a unique combination of target customer segments, value propositions (what’s in it for the customer), and key resources and partnerships.

In fact, what made the iPod / iTunes combination a success was the PARTNERS portion of its business model. This was a result of the deal-making of the one and only Steve Jobs. In 2001, the music industry had just taken Napster down and they thought they were infallible. Jobs walked in and showed them the demand was there for digital music. They had to find a way to embrace the technology…and he had the answer they needed. Who else but Jobs could sway them. And sway them he did.

Since iTunes launched, $33 billion has been paid to content owners, $9 billion in 2012 alone. What started as a music system is now music, apps, software, books, and videos.

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The idea of commercial advertising is pretty simple:  people see, listen to, or read an advertisement.  They recall the brand, its tag line, and the product.  They later recognize the products in stores or on the web, and buy it.  They trust products more that have been advertised. The problem is how do we get the ad noticed and remembered in the first place?

Ad agencies use drama, humor, sex, and violence to make the ads more attention grabbing, interesting, and memorable.  They try to elicit emotions that enhance memory.

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These ads are from the late 1800′s and early 1900′s. They were considered scandalous at the time, given the amount of skin that was shown. But do ads that focus on a sexual theme actually sell products?

Research by Bushman and Furnham looked at recall when ads were placed with violent or sex TV programs. The studies showed that those watching the neutral program remembered the most.  Irrespective of their sex or age or how much they liked the program, the sex and violent programs seemed to impair memory for the advertised products.

But sexing up an ad and putting it in a non-sexy program might just work. You can get a strong ISOLATION EFFECT, which means the ad stands out like a sore thumb. Unfortunately, that effect is consistently reduced every time the ad is shown. It’s a paradox: the more you see a sexy ad, the less of an effect it has.

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Professor Tom Reichert has spent a long time researching the history of sexual images. His studies show that sex is primarily used to sell low-risk products purchased on impulse – alcohol, entertainment, and beauty products.

Sex is not as effective when selling high-risk, informational products such as banking services, appliances, and automation equipment.

Let’s take a look at the Old Spice campaign that launched in 2010 — centered around the theme “The Man Your Man Could Smell Like.” It captured the imagination of the public. The original ad has garnered more than 48 million views to date on YouTube.

In 2011, they kicked it up a notch with the Old Spice “Responses” campaign, during which a team of marketers pumped out more than 180 personalized videos featuring “The Old Spice Guy” responding to questions posed by fans. This campaign increased sales, generated over 24 million views on Youtube, and took home a Creative Emmy Award for Best Commercial of the Year.

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The first person to coin the term was James Vicary, a market researcher. In 1957, He stated that he inserted messages into a movie in New Jersey. The messages, which flashed for 1/3000th of a second, told moviegoers to drink Coca-Cola and eat popcorn.

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According to Vicary, Coke sales in the theater increased by more than 18% and popcorn sales by more than 57%.

Turns out, he actually lied about the results of his study. He also appeared to have lied about whether the study took place. The owner of the movie theatre said it never happened.

What came out of Vicary’s exercise is that subliminal messages could affect people’s conscious thoughts and actions. This spread like wildfire. In 1958, the National Association of Broadcasters banned subliminal ads.  And federal legislation was proposed several times, but never went anywhere.

Here we are over 50 years later and articles are still being written about the evils of subliminal advertising. Law web sites, Salon magazine, New York Times columns….

The reality is that people cannot be manipulated at will. If something is not compatible with our conscious or subconscious goals – at that moment and in that context – then we won’t do it. In fact, we won’t even perceive it.

Let’s look at BEHAVIORAL ECONOMICS. When it comes to decision-making, our brain calculates a NET VALUE between reward and pain. If reward exceeds pain, buyer will purchase. Prices, by the way, activate the PAIN area in the brain. What do you think sex activates? J

The AUTO-PILOT’s decision-making process is based on VALUE and COSTS. This system is also sensitive to peripheral signals, expectations, habits, heuristics (auto decision rules), and the context in which the decision is made.

We have rules:

•  The higher the quality, the higher the price

•  The more often we use something, the more we value it

•  Flowery titles activate value expectations, e.g. tender, Kobe beef vs steak

•  Hyperbolic discounting: the further away something is in time, the less value we assign it

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In doing research on subliminal advertising, this ad came up as an example. BK’s Super Seven Incher. Sexy red lipstick on the open mouth of the model. Surprised look. “It’ll blow your mind away.”

Is there anything subliminal here? Nope. This goes right back to the SEX SELLS portion of our discussion.

The bottom line is we all need to market throughout our life and career. To do this effectively, we need to understand the data and behavior involved in:

•  Business strategy

•  Psychology

•  Neuroscience

•  Behavioral Economics

HAVE FUN!  Thank you.

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