The construction equipment industry has seen exponential advancements in technology over the past 10 years, and indications show more to come in the decade ahead. According to “A Study of the Impact of Autonomous Technology” conducted by CAVCOE on behalf of The AED Foundation, the trend toward automation and electrification of vehicles and heavy equipment will accelerate from “low levels to noticeable levels” over the next five years.
“There’s going to be a gradual but very definite deployment of autonomous technology,” said Barrie Kirk, executive director, CAVCOE, at a press conference held at the 2019 AED Summit in Orlando, Florida, to announce the study’s findings. “It will be gradual, incremental, and may take a number of years, but (it will be) very deliberate ...
The shift will start with functions that are easy to automate and will accelerate from there. “Five to 10 years out, most of the heavy equipment will be at least partially automated, and some of it will be fully automated,” said Kirk. And within the next 10 to 15 years, the study indicates, more than 80 percent of heavy equipment is expected to be powered by electric powertrains and have systems central to autonomous operation.
Brian P. McGuire, president and CEO of Associated Equipment Distributors, noted that, while the timing could be debated, “the key thing we found is that most OEMs are already fast at work at (autonomous equipment operation), and certainly in the mining industry it’s already there.”
The study indicates that heavy equipment manufacturers are already looking at providing services to their clients that go beyond the traditional equipment sales model. “If this transition from a sales- to a service-based business model gains momentum over the next five to 10 years,” it states, “then this could have major ramifications for the entire AED ecosystem.
“All AED members developing business strategies beyond the next 10 years,” it continues, “should consider the profound impacts that artificial intelligence in particular could have on their business and operational models.”
MONITOR CHANGES AND BE OPEN TO OPPORTUNITIES
An OEM panel held at the AED Summit seemed to echo many of the findings of the study, as well as its advice to AED members (see “Automation Study Recommendations”). Five representatives from leading construction OEMs addressed critical issues facing dealers both today and in the long term. When asked what their “best and brightest” dealers are most concerned about, emerging trends and technology topped many lists.
According to Michael Ballweber, senior vice president, commercial business, Doosan Bobcat Inc., questions these dealers tend to bring up include the following:
• What’s going to change in our industry as we go forward, and as manufacturers and dealers, what is our place in that value chain?
• What services are we going to provide?
• How is our business model going to look?
• And how are we going to take advantage of those things that are happening?
“I think the most interesting conversations are the ones where they’re not scared about what’s going to happen. They look at it as an opportunity,” said Ballweber. “I think the people that look at it as a threat and are really set on ‘I just want business to be the same the next 20 years as the last 20 years’ – that’s where we’re going to have the challenges.”
In discussing the autonomous technology study, Kirk warned that such advancements would be very disruptive. “There are going to be business opportunities and challenges,” he said. “I think the winners in the 2030s will be those companies who can stay ahead of the curve and look into the impact and plan for it.”
But there will be losers as well. “The losers ... will be those companies who just wait for the technology – by which time it will be too late,” said Kirk. “So stay ahead of the trail.”
Peter Mayr, president, Liebherr Construction Equipment, believes there will still be a role for those who lag behind. “Somebody has to repair the machine ... The dealer plays an important role there,” he commented. “But I think it’s important for them to be open-minded and look at the new things happening ...
“I also believe that in the future, they might not get paid for the sale of the machine,” he continued. Rather, they may be paid to do much more – including managing a customer’s entire job site.
BE FLEXIBLE AND THINK SERVICE
Future success for many dealers will be based on their ability to adapt. “Some of the best dealers are all about how they can better meet their customers’ needs,” said Philip Kelliher, vice president, Americas distribution services, Caterpillar Inc. “And obviously, in doing so, they keep changing; and hence the openness, flexibility and preparedness to evolve, basically to try to provide better solutions for their customers.”
This will be crucial for what may lie ahead. “The traditional model is sell, service, trade in. Now we’re more focused on fleet management and helping our customers manage their fleets better,” said Stephen Roy, president, sales region Americas, Volvo Construction Equipment. “The next is site management. That will be a dealer’s core competency one day.”
He pointed out the electric site test that Volvo CE conducted last fall at one of Skanska’s Swedish quarries, in which autonomous haulers were put to the test in a real-world operation. In this environment, it’s not about the machines, said Roy, but how those machines work together.
He sees the dealer’s role as helping that equipment work effectively together on the job site of the future. “When you have autonomous and electric machines, you’re going to have to have a new way of thinking,” Roy said. “What we learn will, over time, transpose to the dealer network. So, as we learn to manage those sites, the dealers will [become] those operators ...
“It may not be a traditional sale model but a service model for the work that’s done,” he continued, “which happens to include the machines and may include the operator.”
Other types of services are likely to evolve as well. Consider the business model used by rental houses in Europe. “Typically, the rental house wants to send its own operator (with the machine) because they want to make sure he looks after the machine,” Mayr explained. The rental house not only gets better equipment longevity, it can also charge more for the services of a skilled operator.
Could such a business model be adopted in the U.S.? Jason Daly, global director, marketing and support, John Deere Construction & Forestry, believes it’s possible but could be difficult in the current low unemployment environment. He believes the bigger likelihood is for an Uber-type scenario to emerge – with the related negative implications.
“The fear that I’ve heard from some of our dealers and customers is that there are a number of idle assets,” he said. “You can look at rental yards, dealerships ... customer sites where machines are not operating at all times. So the opportunity for someone outside the industry to enter, like Uber, is not only possible but probable.”
While this represents a threat, remote-controlled operation could be a further service-based opportunity. “We have customers who want to remotely operate a machine – completely remotely, meaning 10 to 15 miles away,” said Mayr. “You can equip the machine with cameras, and with the monitor screens it feels like you’re sitting in the cab.”
Such technology is advancing rapidly. “It could be that you contract people to operate certain hours of the day,” said Mayr. “It could be that one day the machine is even operated from abroad in a safe environment.”
This may seem far-fetched, but consider that military drones are operated on the other side of the world by service personnel stationed on bases here in the U.S.
TEACH TECHNICIANS NEW SKILLS
With the changes ahead, there will be substantial shifts in the expertise and training required by service technicians. Electric drivetrains, artificial intelligence and autonomous technology will require a whole new set of skills.
“One of the main takeaways we got from the findings of (the automation study) is that the type of technician that’s going to be needed in the future is going to change rapidly, and more than we know,” said McGuire. “There’s really going to be a shift to an electronics technician as opposed to a diesel technician.”
Today’s technicians tend to focus their expertise on mechanical and hydraulic systems, Kirk noted. “In the future, you change that paradigm and you have electric drive systems and artificial intelligence and automation. That will be a whole different skill set, and you’re going to have to start training people now,” he advised.
Roy agreed, adding, “Disruption is coming, technology is coming, new business models are coming. Our discussions with dealers are really around the talent they are going to have to have.
“We probably have the same job profiles that we’ve had for 50 years – parts manager, service manager, sales manager,” he pointed out. “But there are studies that say 70 percent of the new job profiles have not even been created yet. That’s the issue we’re facing. I think you have to be open to what is coming, what your customers are demanding and how your organization is going to have to change.”
AUTOMATION STUDY RECOMMENDATIONS
“A Study of the Impact of Autonomous Technology” offers five recommendations to AED members as they prepare for what lies ahead:
Actively monitor technology developments both within your sector and outside, looking for potential disruptive trends that may well come from autonomous system technologies being developed by major tech companies.
Develop business model flexibility to accommodate changes in equipment automation and electrification.
Network with manufacturers, dealers, service operations and end clients to develop a greater understanding of needs and concerns as automation is introduced into the various business sectors.
Be aware of commercial pressures toward a more service-based (as opposed to sales-based) business model and prepare a business strategy for that.
Expand technician training to accommodate as much experience as possible relevant to automation and electrification.