Home / Blog / The economics of the Digital Transformation – VII

The economics of the Digital Transformation – VII

The graphic shows the stage of evolution of Digital Twins. Today, by far industries adopting DT use them as stage 3, i.e. interacting with their physical twin. The economic value increases with the stage number. This value is the one associated to the Digital Twin, i.e. the revenues it can generate. In addition one sees an increasing value in the supporting infrastructure (platform, cloud, communication) and enablers (IoT, AI, DLT). These latter is predominant today but in the near future it can be expected that the reveue generated by using DT as independent entities will exceed by far the present one in support tools. Of course there is, additionally, the economic benefit derived from the adoption of digital twins, in the whole value chain in terms of efficiency and cost reduction.

Digital Twins as independent economic entities

Digital Twins are evolving rapidly. It started in the last decade with them being used as digital “mock-ups”, created by CAD systems. These mock-ups were refined till they could be used as digital specs for interaction with various groups in the company and with suppliers. The use of VR makes easier to visualise the Digital Twin of a future product.

Although that was not the case, one can find an economic value in these Digital Twins as “blueprints” that can be sold. This will be the case in this and the next decade as result of the market created by the Digital Transformation with companies buying and using these digital specs.

The second step was the use of the Digital Twins to create their physical counterpart, through CAM systems (Computer Aided Manufacturing). In this way a direct correspondence was established between a Digital Twin and its Physical Twin. Therefore one could use the Digital Twin as documentation of the Physical Object during operation and maintenance. The use of AR makes this correlation quite effective, since at the same time a technician will be able to look at the physical engine and get information from its Digital Twin that can be overlaid on the physical one through real time rendering.

This role in assisted operation and maintenance will become much more common as AR technology progresses. So far it is used in industrial environment but in the coming years it will become a common way of interacting with products and that will generate an additional economic benefit.

A further step was taken, and it is still being taken, enabling interaction between the digital twin and its physical twin. In this case we are dealing with digital twin instance and physical instance of a product/object. The interaction (shadowing) ensure the alignment between the Digital and Physical twins. At this point either the Digital Twin itself (in reality an extended digital twin) or applications interacting with the Digital Twin can deliver services, value, to the physical twin. There will be a progressive augmentation of a Digital Twin capabilities as it will not just interact with its physical counterpart but also with applications and services in the cyberspace. In this sense the Digital Twin becomes a gateway between the physical counterpart and the cyberspace, a tool to deliver value. This is clearly a significant, transformational, step for companies making it possible to deliver services on a product in a seamless way. We are already seeing some examples of this happening. Remember when downloading a new version of an Operating System required the reinstallation of applications and some personal data? Now this is no longer the case since our devices have a mirror image that is used when a new OS is installed. This mirror image is a sort of Digital Twin. A number of manufacturers, like GE, Mevea, Siemens, are now offering along with their products remote monitoring and proactive maintenance services based on the Digital Twin of their products. This changes the rules of the game since now the manufacturer has direct interaction with the end user (the flattening of the value chain that is one of the characteristics of Industry 4.0).

The next step will be the use of the Digital Twin to deliver additional functionality. In this case the operation of a product requires its digital twin since some of its features are made possible through its Digital Twin. In practice, there is a function splitting among the physical and the digital twin. This, per sé, is nothing new: already today we have some functions split between the device and the cyberspace (voice recognition is often the case), so that a service may be partially be delivered through real time interaction with a cloud.

This opens up the door to the “independent” exploitation of a digital twin by having it enabling functionalities to third parties (no longer, solely, to its physical twin). In other words, a Digital Twin may deliver services that in part are derived from its knowledge of its physical twin. An example would be a digital twin that has accumulated experience on the use of a car and can “sell” this experience to third parties interested in getting real feedback from the market. Another example might be the use of a Digital Twin as an avatar of a person. This will be addressed in the next post.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.