For 91 years Caterpillar pursued a strategy of making equipment for heavy industry: machines, engines, vehicles. It was hugely successful. Today, nearly everyone recognizes Caterpillar’s familiar bright yellow machines. The company that started in 1925 reported sales of $47 billion in 2015 alone.
Then, in 2016, Caterpillar changed direction. In short, the focus switched from mining, to data mining.
It declared the ‘Age of Smart Iron’ – an era in which the ‘dumb’ machinery of the past would be updated to be intelligent and connected.
It confirmed that it would accelerate its own efforts to address this new age and become a digital-first business.
Here’s how Doug Oberhelman, CEO of Caterpillar, described the move: “Our vision is that by enhancing our Cat Connect Technology and Services offerings, entire fleets and job sites – every machine, engine, truck, tablet, light tower, smart device, and drone – will eventually share data on one common technology platform and speak the same language.”
In fact, Caterpillar first began building software into its machines in the 1990s. It can claim to be an innovator in this space. But these early efforts were ‘merely’ telematics designed to make machines more efficient.
Today, the opportunity is different and much much bigger. The industrial IoT promises to bring unheard of improvements to productivity, safety, and sustainability.
Tom Bucklar, Director of IoT at Caterpillar, says: “Today we’ve got the largest industrial fleet in the market. But when we started to connect our machines and bring data back into the company, it wasn’t called the IoT.
“We were building more reliable products… but the biggest opportunity now is taking all the information that gives you insights not just into the machines, but also at the site level, and providing solutions for our customers.”
An example of this came last year when it was reported that Caterpillar helped a maritime company make huge savings by connecting its machines and analyzing the data.
Caterpillar fitted sensors inside the ships and correlated power consumption needed for refrigerated containers with fuel meter readings. Data mining revealed it would be more efficient to run many generators at lower power than maxing out a smaller number.
The resulting annual savings were more than $650,000.
The platform that makes sense of Caterpillar’s connected fleet is Cat® Connect, which the company first announced in 2014.
Cat® Connect gathers data from technology-equipped machines and returns insights into equipment and performance that customers can use to improve their operations.
As the data gets richer and deeper, these insights will become more transformational.
Bucklar says: “In mining and energy and transportation, when we have large machines bringing in streaming data, we can go from being reactive to being predictive in repair and maintenance cycles.
“In those industries our equipment becomes their outdoor factory.”
And Bucklar stresses that Caterpillar’s digital framework is available for companies of all sizes. In many cases, it requires only the addition of software or easily installed sensors. And users can review the results in a web-based user interface.
But of course, it is hard work making things this easy. Bucklar says: “We’re driving into analytics and machine learning. You need to build a platform to bring all that data back into one place. Once you have that data, you have to build up the software so you can mine the data to build solutions around it.
“We’ve had to bring in data scientists and technical architects and user experience architects. The user experience is so important when it comes to the digital and the physical aspects.”
Ultimately, the move towards digital services will change the kind of business Caterpillar is.
The company itself says it is now more oriented around customer outcomes than selling equipment. It says the question has changed from “How many trucks do you need?” to “How much dirt do you need moving?”
Gathering data from the sensors attached to 500,000 of its machines in use worldwide is how it finds the best answers to these questions.
And this strategy has already seen a step-change in the way Caterpillar charges for its services. The company now offers subscription services for access to data – just one of the many innovative new revenue models the business will be embracing in its digital future.