Sustaining Advantage With Transitory Technologies

Relentless technology change can feel like a rollercoaster — simultaneously exhilarating and exhausting. Just as we reorient from one twist, we’re thrust into the next one.

For managers, one difficulty with new technology is that it typically must integrate with the old. Managers working with data generated by technology rarely have the luxury of a single version of data. Instead, the analysis must incorporate multiple generations that — by definition — differ from each other.

The rise of embedded devices for data collection makes this situation far, far worse. Consider the industrial equipment market: The long life of this hardware combined with the rapid evolution of sensors is difficult to manage.

Siemens AG provides an excellent example both of this difficulty and the opportunity it presents. Gerhard Kress, director of mobility data services, describes the data challenge the situation creates:

“Industrial equipment has time spans that are so much longer than IT time spans. That is a huge issue because, for example, you cannot just shut down the control center of a power plant to upgrade. Or given that the average life span of a rolling stock vehicle is about 30 to 40 years, you have a large, installed base that simply does not have all the modern functionalities in it yet.”

Instead, his group must be ready to handle the latest technology (for new products) as well as quite old technology (for their installed products). Siemens, for instance, still services a water turbine that was installed 105 years ago. Lifetimes for heavy equipment “easily last 20 to 40 years.” While it’s a challenge, Siemens is able to create advantage from this difficulty in several ways.

Turning Legacy Into Advantage

Using its data platform, Siemens differentiates through compatibility. Kress notes that: “One of Siemen’s advantages, and a barrier to entry for the other [nonrail] players … is that [we] understand very old rail data formats. Siemens can read data formats from 30 years ago; we have to read them.” While someone else could develop systems to read these, it would take significant time to build. Kress notes that documentation is rarely a priority and that “a lot of the documentation was only through people, and [gathering information] required talking to the experts who designed it.” Reverse engineering takes considerable time and effort for others, but organizations that already understand these legacy formats have an advantage.