insights1 DIGITAL TWINS: DRIVING BUSINESS MODEL INNOVATION

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DIGITAL TWINS: DRIVING BUSINESS MODEL INNOVATION Featured

27 November 2022

Digital replicas of physical assets, processes and systems, Digital Twins are increasingly acknowledged as a gateway to better decision-making securing greater efficiencies. Likely benefits include improved performance, faster processes, the capacity to predict and pre-empt maintenance issues, plus better quality-control and reduced costs.

For many engineering and manufacturing firms, digital transformation remains elusive. They struggle to emulate the success of platform-based consumer businesses such as Uber, AirBnB and Facebook. While new technologies are undoubtedly delivering efficiency gains, complete digital revolution is yet to be achieved in the B2B (business to business) world. There are many reasons why success is still to emerge for B2B platforms, including existing market monopolisation, high entry cost, shortage of capital, and lower churn rate in comparison to B2C.


Researchers at the Cambridge Service Alliance (CSA), in the Institute for Manufacturing, University of Cambridge, set out to investigate the role of Digital Twins (DTs) as enablers of B2B business model innovation. Could Digital Twins create a conduit for customer insight and operations data, and in turn create new services in the after sales market? Players in the B2B field are often traditional companies in a heavily-regulated market. Familiar with the physical and social dimensions of operations, they struggle to transition into digital dimensions of business models. How could established firms (incumbents) respond to this necessary change? What types of business model assist DT adoption in the manufacturing and construction sectors?

Big picture


Digital replicas of physical assets, processes and systems, Digital Twins are increasingly acknowledged as a gateway to better decision-making securing greater efficiencies. Likely benefits include improved performance, faster processes, the capacity to predict and pre-empt maintenance issues, plus better quality-control and reduced costs. Cost savings alone are forecast to be impressive: Gartner forecast $1 trillion a year savings in asset maintenance as early as 2022, courtesy of digital twins, with both consumers and businesses benefitting; the global research and advisory firm predicted widespread adoption, with half of major enterprises expected to be using digital twins by 2023 (Gartner, 2019). This forecast was updated in light of COVID-19, with one-third of mid-to-large-size companies expected to have implemented at least one digital twin (associated with a COVID-19-motivated use case) by 2023 (Gartner, 2020). In the long run, for many engineering firms, digital twins must also offer new business model opportunities such as increased revenue streams and profitability beyond increased efficiencies and safety.

The case for change


Manufacturing and engineering companies are yet to fully realise the potential of digital twins to transform business in the after-sale market. A number of obstacles remain. These include the immense amount of computational power required to operate digital twins, the demand for people with the right skills to develop them, and the high cost to implement digital twins.

The project


Researchers set out to establish a framework for B2B firms, helping them understand both the opportunities digital twins can offer, and how well placed they are as an organisation to capitalise on those opportunities through a digital twin business model taxonomy.

To help businesses think about how DTs can enable business model innovation, researchers identified DT-based pathways to change, and key forces driving change within business models, as a precursor to developing a framework that B2B firms could use. The resulting value-based framework supports organisations in assessing their digital twin capabilities and determining where their business model innovation opportunities lie. The Framework was designed by a literature review and validated and modified through industry interviews.

This article was originally posted by: UNIVERSITY OF CAMBRIDGE

 

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