What do Grandma's roast and digital twins have to do with the durability of your business? It all comes down to how we look for and eliminate waste.
We are excited to discover, with you, the key commonalities and best practices that allow both public and private organizations from capital intensive industries to become stronger at managing their assets over time.
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https://lp.servicemax.com/Vanson-Bourne-Whitepaper-Unplanned-Downtime-LP.html
Ben Parker:
What do Grandma's Roast, digital twins and your business have in common? That's what we're going to talk about today on The Durability Podcast. Welcome to The Durability Podcast. This is for those that are passionate about helping their organizations plan and prepare for the inevitable future. My name is Ben Parker, management consultant, chemist, creator, entrepreneur, co-founder, and member of the Durable Capital Group. I'm excited for you to join me as we discover what successful organizations do to build longterm durability. We explore the tactics and strategies that allow great organizations to combine the financial wisdom of asset management, the practical street-smarts of the maintenance subculture with the real world paranoia of managing risk to ensure their organizations blast.
We uncover what great leaders are doing from all types of capital intensive industries to make decisions, build strong management teams and prepare to meet the future in whatever form it comes. This is The Durability Podcast. Hello, everyone. Welcome back to The Durability Podcast. I am excited to be with you. This is a lot of fun. And this week I am going to share a couple stories that are interesting to me. And the first one has to do with Grandma's Roast, and I'm reminded by that particular phenomenon and I'm going to call it the Grandma's Roast phenomenon, which many of you may have heard of before, but it is an analogy to something that I read from a service max of all people, not that that's a person, but an interesting study done by GE digital service max from GE and by a group called [inaudible 00:02:19] who's actually a subsidiary involved with them as well.
But there's some interesting white papers and I'll put the links down below that have to do with downtime that I just find fascinating. And it has to do with the same principle as Grandma's Roast's, which if you don't know the tale, it goes something like this. A daughter was cooking a roast for her family and her husband was, they were newly married, I think, the tail goes, and the husband was confused why she had this nice big [inaudible 00:03:07] roast. And the daughter cut the end off of the roast. And it turns out that the husband was confused. He was like, "Why are you wasting that part of the roast?" He was like, "I thought you were just supposed to cut it off." And he was like, "I don't know. I've never heard of that. We never did it with our roast." And it turns out that the daughter was just doing something she saw her mom do.
And so the son-in-law asked the mom, "Why do you cut off the roast, the end of the roast?" And she's like, "Oh, well, I just always thought that's how it was done because that's what my mom did." And so, he goes to the grandma and ask the grandma, "Grandma, why are you supposed to cut off the end of the roast?" And the son-in-law learns that, well, when grandma was cooking in the Great Depression era, she only had a pan that was so big and most roasts wouldn't fit in it. And so, she had to cut the end off so it would fit in the pan. So generations later, there's a perception and a tradition that gets carried on that creates a little bit of waste or a lot of waste depending on the practices that are employed.
And we find this in business all the time, especially working with capital-intensive industries and a wide variety of others that have inherent built-in traditions and perspectives of how they do things, that ultimately when the right questions are asked and the right perspectives are explored, we find out that there's actually more waste. So, in this conversation, there's a couple things that I think are significant and interesting. If you look at a couple of white papers put out by Events and [inaudible 00:05:07] which is a subsidiary of GE and related to ServiceMax, and they have found that downtime as it turns out is very costly. So if we take the average statistics on manufacturing companies that have output requirements, that have varying issues with software, hardware, and the production of products, that kind of stuff, we find that a lot of them when they have a major downtime event, they end up being very costly.
And this specific white paper and related articles and content shares how 82% of the 450 companies surveyed had multimillion dollar pains when it comes to downtime. In fact, on average that downtime lasted about four hours and costs around $2 million for those organizations. And at least 82% of those organizations had one major unplanned downtime outage over the last three years. And when it comes down to what causes that kind of downtime, what some of those issues are, 17% they attribute to human error and 46% are hardware failure or malfunctions, and then another 40% is on the software side and the malfunctions there. And so, there's this dynamic between hardware failure, pumps, equipment, and all that kind of stuff, and software which is more technology.
And as we move to a more machine driven manufacturing environment, not just in manufacturing, but across the spectrum of capital-intensive industries, we see similar problems popping up. Where there's this balance between what the risks are and what we can do, and what we need to be thinking about in the future to prevent them. And so, there's this concept of having a digital twin, where you basically are able to simulate what happens in reality, where you have data and information that is providing you insight into your operations. And this can be applied, not just to capital-intensive manufacturing industries but all types of businesses, where you actually are able to simulate and predict the things that are happening.
And so, you can see a huge push in all types of industries where we are using and relying more on machines to predict failures before they happen. And to be able to use the data that we have to be able to plan and prepare more effectively for those downtime events that have traditionally happened over and over again in all types of capital intensive industries. So, if you look at what companies are thinking about in terms of how to plan and prepare for those things, 65% say that this digital twin with predictive maintenance could really help these major failure events. And by the way, those failure events on average, that's like over $250 an hour, which has significantly spiked since the 2011 timeframe.
I think then there was another survey, which they quote in the Events and [inaudible 00:09:21] stuff done by Aberdeen that estimates the cost of unplanned downtime across all businesses to be 164,000 per hour. And then by 2016, that had skyrocket at least by 60% to over 260,000 per hour for a lot of those manufacturing based companies. And so, a lot of the focus is shifting toward planning, implementing, and having some type of predictive maintenance in place. And if you look at 54% of those organizations surveyed that they would have a digital twin by 2020. And I think the survey was done in 2016, I believe. And if you look at all the pieces that this information shows, actually it was 2017. My apologies. They were interviewed in 2017.
So this report you can find online and it just provides some fascinating insights into some of the issues that companies have. But the push to use technology to plan and prepare for major business events as contingency in terms of risk mitigation, but also in terms of market planning and forecast, is becoming more and more prevalent. And so, one of the challenges that many organizations have is taking that step from you relying on a reactionary maintenance mindset or reactionary processes within their management decision-making team to mitigate issues. And then the push to rely more on data, to plan and invest in major infrastructure that will help them to be more effective at mitigating some of these issues.
So, I think the biggest take-aways that I found from this report have to do with the market mindset shift, to using a digital twin, to help enhance and supplement the decisions that are made across the board, as well as predict failures and risk tolerances and a variety of things that happen in industries. So, a couple of key take-aways. One, look at Grandma's Roast, know why you're cutting which pieces off and know why you're losing certain amounts of value. If you're a manufacturing plan, if you are any capital intensive industry, you don't know your failure points and you don't know the pieces that are the most important to help you move forward, that is a fantastic way to start. There is low-hanging fruit there. And make sure that you're investing in those things that will allow you to gain some momentum in the future of predicting what can happen and having some fundamental tools in place to be able to ensure you can resolve those issues quickly and effectively without incurring some of those large dollar costs along the way.
And I got to see that firsthand in a variety of areas in the specialty chemical industry, as well as in the solar industry, where we would have a GSU transformer, a main transformer, and a substation go down and those thousands of dollars rack up pretty quickly when you don't have all the pieces in place. And so, it's a really fundamental principle, and I hope that you can take a look at your business wherever you're at, in whatever size or scale you're in, and think about how your team is looking at some of those issues, and what you can do to vet out those traditions and perspectives that may be contributing to some of the waste that you are seeing in your daily operations. Thank you so much for listening to this episode. And I look forward to talking with you again soon, have a great day.
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