Bold Forecast of the Future of the Instrument Industry
2016/9/21 张鹏工作室

     My article "Being an Instrument Insider, Lucky or Unlucky” published earlier this month and caused extensive discussions in the industry. The main idea of the article is: due to the barriers of dual protection, technological barriers and hardware barriers, the industry is less impacted by changing times. Within the high and solid walls, the industry can still go about business as usual. Although due to malignant competition within the industry, there have been ups and downs; in general it is still a field that progresses with only gradual improvement rather than revolution.

     But the seemingly solid walls are being heavily attacked by two great forces: artificial intelligence and big data.

     Of course, these walls can't be destroyed overnight. The attack may be a gradual breakthrough. Can the arms and ammunition of the industry guards resist the attacker's fire? Let's have a weapon analysis for each guard. The so-called weapon analysis is actually the value analysis; this is to understand whether your existing value will be replaced by the new value.

     1、Product Sales

     Looking at sales in the instrument industry, what are your main values? I think they are formed by three parts: product knowledge (you know your product features and that of your competitors), market information (you know the location of potential customers) and customer relationship (you can attract customers to purchase).

     First of all, your product knowledge is likely to be replaced by big data. Through big data in the future, the buyer will be able to get all the information for products, including the performance, price, evaluation, market share, product stability, much like researching commodity information on Taobao or Ebay. Most importantly, this data is more objective because it does not represent the interests of any one vendor, so customers can make decisions with more confidence after a comparative analysis.

     Apart from this fact, your knowledge of the market, even after years of research, will be dwarfed by big data. Where are your potential customers? Unlike a salesman’s customer information, big data will be able to store tens of thousands of customer’s details.

     Then you still have the last barrier of customer relationships. When choosing a product, will customers who know the big data of products rely on relations with you or the better option which big data offers?

     Of course, some special customers will value personal relationships with you. It is not because they cherish the personal connection, instead they use it for personal interests. But they are also facing a huge threat from big data. It can cause long term complications for the customers, as big data platforms do not erase data, and this may act as a time bomb, as it can reveal your insider trading: "why the instruments you have purchased are 20% more expensive than the same product at other companies?”

     2、Product Service

     If you are in the pre-sales and after-sales service sector of the instrument industry, including installation, maintenance and application engineering, you have two core values: your product knowledge (installation, maintenance and application knowledge, including the ability to diagnose product problems) and door-to-door service (you can provide on-the-spot service to solve problems after instrument installation, maintenance and application).

     Clearly, with the introduction of artificial intelligence and big data, product design in the future will have four main changes: modular structure, user-friendly operations, automatic diagnosis and self-maintenance. That is to say, the vast majority of operational problems can be solved by the users themselves, including self-training and self-maintenance. Instrument manufacturers will greatly reduce the number of service engineers they employ, because their knowledge of the products will be challenged by big data and artificial intelligence.

     Of course, there will still have to be some door to door service by staff. But as a result of working with big data, supported by artificial intelligence, technology requirements for service personnel will be reduced. Therefore, the work will tend to be performed by technicians, rather than professionally trained engineers. Similarly, because of technology simplification, the staff are likely to come from a professional services firm local to the customers, rather than the instrument company, or distributors. With a professional services firm, there are two advantages: firstly, they provide services in the local area, saving air fare and time costs. Secondly, they provide services for competing products, which further improves efficiency. That is to say, this trend will challenge the value of the door-to-door service engineers under the present system.

     3、Marketing

     In marketing there are two main principles: advertise the brand to the customer and then find the customer.

     The key value of marketing personnel also depends on whether they can use the least amount of money to achieve these two goals. These are all part of the "information game", based on information asymmetry. In the past we played the marketing game with traditional methods such as advertising, sales promotion, etc. But now the rules may be changing drastically, because of big data.

     PC internet has solved the information symmetry and mobile internet has solved efficiency. The future of big data has allowed data to be shared freely and enabled value to be distributed according to needs. The essence of internet + is to build a platform, allowing everyone to quickly find the target, whether it is looking for a customer or a product.

     Will marketing still exist? Maybe, but it will transform into a different style. It is quite possible that in the future instrument companies won't have marketing departments, but entrust the marketing to a more professional marketing company with more data, a "Data Company".

     4、Product Research and Development

     Product research and development is most instrument companies’ main bottleneck problem at present, because companies need to employ long-term software engineers, hardware engineers, application developers and industrial designers which are a huge burden on cost and management overheads. It is also the main cause for the slow launch of new products. After all, each kind of instrument is very sophisticated, but sales volume is quite low. Different manufacturers producing the same kind of equipment need to keep the same group of research and developmental labor, leading to the common problem of labor shortages.

     In the future, this kind of phenomenon will be replaced by another trend, namely: research and development by outsourcing, whereby all the product research and development will be outsourced to R&D companies. The R&D companies will have a wide range of skilled personnel. They will be more professional and more efficient. Last year I visited a professional R&D company for medical equipment in Suzhou, where they provide product development services for different vendors and are very successful.

     Without R&D, where is the brand value of an instrument company? I think their brand value is their intellectual property, including patents. They may be bought by a university, institute, company or individual patent, and then entrust to another R&D company for product development. The competition do not have this patent, therefore, the patent difference creates value.

     5、Product Manufacturing

     Similar to product R&D, product manufacturing in the instrument industry will be mainly completed by outsourcing in the future, including purchasing, assembling and testing. Professional production companies will maximize efficiency with their specialized large-scale production. A production enterprise can manufacture similar products to those competing companies at the same time. Much like Foxconn manufactures similar mobile phones to two competing phone companies.

     Due to the introduction of big data, cloud computing and artificial intelligence, professional manufacturing companies will have a higher production ability, including scale effect, which instrument companies will not have. Their flexible production lines can be customized according to the customer's requirements, and this can be done at a low cost and at high speed.

     6、The Structure of Organizations

     The instrument industry is still in a M&A boom. Some of the Big Macs are becoming Super Big Macs. One of the main reasons for this rise is the needs of the stock market. The shareholders need to see growth and need the stimulation of good news, and mergers and acquisitions can fast achieve this.

     But do M&A create value? Can it really reduce waste and improve the overall efficiency of an enterprise operation? Does it really produce scale and synergy? If it does, the evidence is not clear.

     Evidently, a company spends heavily on M&A, the consolidation process will cost significant fees. In the end, after expanding the company, middle management will increase accordingly. This is like a pyramid, the higher you build means the base will have a higher burden. And only the initial base layer can create value directly. Management employees do not produce value directly. The more management employees there are, the higher the cost of the whole system and the less flexible operation will be.

     I think management is a source of waste, the less management, the better.

     Big data and artificial intelligence combined with cloud computing and the internet will completely change the above phenomenon. It will lead to social organization turning from the "company + employees" to "platform + individual". There will be a large rise in freelance work.

     The company's management, especially the middle management will shrink or even disappear.

     Support departments will also be reduced or disappear, and be replaced by outsourcing services.

     Human resources departments will be reduced in size. Because companies will have less fixed staff, but in outsourcing and project organization of the staff will increase. Labor relations will become very simple.

     In future, ideally, instrument companies will only have a two-layer structure, namely the top and the bottom level, with the former deciding strategic direction and the latter doing their work by signing contracts with outsourcing companies.

     So, in future it will be less of an employment relationship, instead, it will become a project scheme of temporary contractual relationships.

     In the future, people will no longer pursue the old traditional methods previously held by companies. Instead they will transform into a company quickly and according to customers’ needs. As the customers’ needs change, they will rapidly disperse to accommodate the trend.

     7、Business Model

     At present, the instrument industry business model is: producers - sellers – consumers.

     But the pattern may be replaced by the business model of the future, that is: consumers - designers - producers.

     That is to say, when consumers have certain demands, then the instrument companies will design and produce products. The biggest benefit of doing this method is to reduce waste, and remove inventory stockpiles.

     The future career path will no longer be an employment relationship, but instead be a mutual investment relationship. Enterprise and employee will invest in each other with the same common mission and goals.

     Therefore, the traditional dealers will disappear, and this new breed of designers who can transfer consumers’ ideas into products that will flourish.

     Instrument industry will transform from an era of heavy assets to an asset light era.

     At present, many business models of the instrument industry depend on information asymmetry. The "supply" and "demand" in society has been misplaced all along. This requires that businessmen adapt their business practices to match them. Thus, many agencies can profit from them. Information databases built on future big data platforms will be more ideal, producers and users will have better connection at any time. All the existing intermediate links will be difficult to maintain and intermediary business will disappear. It is not logical to benefit from these price differences.

     The most important concept for the instrument industry in the future will be the "cross-industry interconnection”, and the medium will be "big data company". In the future, these big data companies will be important partners in the instrument industry.

     Self-enclosed companies, who do not release their own information to the big data platform will be eliminated, because they will lose contact with society. No customer will buy their products.

     8、The Cultural Concept

     Now the concept of company culture, regardless of being Western, Japanese and Chinese, will become one uniform style, which will be the future of company culture.

     In future companies, interpersonal relationships will be very simple. The relationship between the superior and the subordinate will hardly exist, this only leaves contracted relationships with the project scheme. This reflects the core feature of the future company: only connections, no relationships.

     Because building and maintenance of relationships are costly, there is no appreciation to the value chain. Companies won't even have to build relationships with the outside world, because all information is in big data, and you can always find value through the data, rather than through the relationships.

     Also, the company’s internal communications will also be reduced, because communication is also a source of waste.

     Similar to other industries, the instrument industry in the future will be attached to many kinds of trading platforms in society, including talent trading and technology trading platforms. Everyone can use their specific talent and obtain what they desire.

     The value of the company will be based on patents and brands, rather than talent, because talented labor can be found in these trading platforms and can flow between different companies.

     In other words, corporate culture will no longer be important, because the importance of the company itself will reduce.

     9、Individual Values

     Under the impact of big data and the mobile internet, the display of individual values of instrument insiders in the future will be significantly different from patterns at present, which will be reflected in the following three aspects:

     Will not rely on relationships: Individual values (including the salary and position), will no longer be determined by the relationship within the organization. On the contrary, everyone has countless connections with the outside world. Depending on these connections, the value of each person will be fully displayed in the big data. Your experience, achievements, failures and evaluation from partners, namely, your character will be completely revealed, because everything about you is a part of big data.

     Will not rely on position: The class of people is determined by their individual value rather than their position. The general manager's salary, for instance, may be less than a short-term contracted software engineer, because the latter can bring great value for the company in a short time. However, once the value transaction is completed, he will be terminated with the company.

     Will rely on creation: by that time, the biggest individual value lies on whether you have the ability for continuous innovation, rather than the ability to repeat previous work. Therefore, the highest income comes to those who boast continuous innovation, rather than the task implementers. People's income will have much bigger polarization in the future.

     Furthermore there is no need for the company to carry out training for employees, because all the learning and development will be the responsibility of each person themselves. This is the investment in yourself, which will not be borne by the company.

     No matter how the change goes, the future of instrument industry needs to depend on a group of people with "originality", namely, those who can create real value for customers, such as product designers, programmers, and data analysts and so on. They may not be an employee of an instrument company, but they will bring value to the development of instruments.

     Then will we, current insiders of instruments, be unemployed? I’m afraid to say that it is in all probability likelihood. But, as long as you have value, and can continuously create new value, then you will find a place in the new value chain. You may still be an independent product designer, programmer, data analyst or trainer, but the existing corporate structure will be reshuffled.

     Everyone will be an independent economic entity in the future, that is to say everyone can complete a task independently and can carry out systematic project depending on coordination and organization. Therefore, society will not lack of performers who deal with details or organizations and the teams which are able to handle big projects.

     Company managers will all be temporary workers and they will be dispersed and combined continually in order to complete new tasks.

     Nowadays, almost all employees in the instrument industry are working for others, but the nature of working for others is selling your labor at a certain price without bearing results. With the end of employment times, you must take the initiative to think and to solve problems, as well as trying to use your special skills so as to create values for the society and others, otherwise you have no value of existence. Our work mode is upgrading from “means of life” to “creation”.

     Everyone will break the bondage of tradition and gain the opportunity of rebirth, with the key lying in whether you can inspire your potential energy. This is a true liberation movement and it will come to the instrument industry sooner or later.

     Conclusion

     After reading the above nine analysis (referred to as "Nine Forecasts by Peng"), do you think it is too farfetched and too ridiculous? Is it even possible?

     But now we all can have video calls with faraway relatives, which was not predictable 30 years ago?

     So are you scared?

     Don't worry, it won't happen overnight. It may take 10 years, 20 years, or even longer. Until then, you may have been in the new ecological chain, happily enjoying higher values and a better life.

     Of course, some job roles will be eliminated. This is the inevitable result of every technology revolution we human society experience.

     About the Author:

     Zhang Peng, China General Manager of the Oxford Instruments.

     LinkedIn Account:

     https://cn.linkedin.com/in/zhang-peng-(张鹏)-250445

     Acknowledgement:

     I would like to thank Ms. Ryann Peng, Mr. Gustav Winkler and Dr.Conor McCarthy for their excellent help in the translation of this English version.

    http://weixin.100md.com
返回 张鹏工作室 返回首页 返回百拇医药