MICHAEL PORTER: Today, at this moment,

there is a major inflection point just starting

to get underway, which is going to affect

not only competition and productivity in the economy,

but it's also going to affect humans and our role, and how

we work in society.

Where we've come from, really, has

to go back to a world in which products and machines were

physical.

They were mechanical.

Information was collected manually

and stored in paper files.

But then, starting in the early '60s, what

we like to call Wave 1, was the advent

of computers in the early '60s, which

allowed us to start automating various processes

across the value chain.

And those computers not only allowed

us to do the process more efficiently,

but also to collect and gather and analyze data in quantities

that we'd never ever had opportunities to do so before.

But then we started moving into Wave 2,

and that was driven by the advent of the internet.

We were able to start linking the parts of the value chain,

connecting the dots.

But the really big wave, the one that's

going to be the most significant in the long run,

is Wave 3, which is the advent of what we

call smart, connected products.

And that's created a lot of improvements

in productivity and capability of products and the value

that products can create.

But it's created, now, the next big problem.

The amount of data available is just overwhelmingly greater

than ever before.

How do humans actually access and utilize all this data?

We get data on 2D screens, flat screens.

And then we got to figure out how to translate it

into the real world.

Bridging the gap between digital and physical is taxing.

A great example of this problem is illustrated here.

We have a GPS screen in our car, and then

we have to look up at the real world through the windshield

and try to figure out how to take what we see on the screen

and actually make it real, in terms of, should we turn here

or should we turn 100 feet up the road.

And of course, as we're looking down at the screen

and looking back and trying to figure out what to do,

we make mistakes.

We're distracted.

Hopefully, we won't have an accident.

Well, to solve that problem, we have

to take advantage of the senses that we humans have.

The powerhouse of our senses for gathering information is sight.

When we look at a room, we get massive amounts

of information instantaneously.

The problem now is that the digital interfaces

we have today are really not maximizing

our most powerful information source, which is our sight.

Augmented reality is a set of technologies

that allow us to actually take the digital information we have

and the choices we have, and actually overlay them

on a human's view of the real physical world in real time.

What you see here is, the information

is not on the 2D screen on your dashboard in the car.

In heads-up display, the information

is actually overlaid on your windshield.

It's projected on your windshield.

So you're looking at the real world.

You're not having to look down and up.

You're seeing what you need to know overlaid

on the actual real world, where you're

going to have to make the choice about what to do about it.

And this just massively improves your capacity

to assimilate and process this information.

JIM HEPPELMANN: It starts with physical things.

And if these things are smart and connected products

or smart and connected operations,

that means they're streaming data up to the cloud.

We now have a way to interpret the sensor data.

And quite frankly, we could send control commands

back down to the objects out in the real world.

But when we're looking at the data,

we're not looking at the physical world.

And when we're looking at the physical world,

we're not really looking at the data.

What augmented reality does is it brings this data down

into devices.

Then, what I see becomes augmented with information

coming down from the cloud, from this digital twin,

and illuminates digitally what I see physically.

Now, it's hard to conceptualize AR,

and it's actually pretty easy to demonstrate it.

Say I want to interact with this motorcycle.

The software, looking through the computer vision technology,

can see that motorcycle.

This would work fine with a real motorcycle.

It's just a little difficult to bring the real motorcycle

into the room here for this event.

You see it's actually morphing between digital and physical.

Now it's a 3D CAD model of the digital twin.

Well, what could I do with this?

Well, I could do a sales and marketing use case.

And it says, Jim, let me tell you about the features.

For example, here's what you should

know about the motorcycle.

It has the 1190 RC8 engine, and it's highlighting

the engine in the details.

But let me switch to our end user view.

So now I'm the owner of the motorcycle.

And I might say, for example, tell me

the status of this motorcycle.

And it's using IoT or smart, connected product data

now to map a dashboard onto the motorcycle.

Now, if I just use my hand here to move the motorcycle,

you see that the data is literally

attached to the motorcycle.

So it's communicating to me both physically and digitally

at the same time.

Now, a service technician might use this idea

and say, help me assess the condition of the product.

And it uses some data that's coming down from the cloud,

some analytics explaining what the problem is.

And then I might say, well, why don't you

show me how to fix it?

And it gives me a procedure here,

where you see the rear wheel, some bolts are coming out

and, the caliper is being removed,

and then the axle nut is coming out.

The axle itself gets removed.

And then finally, the rear wheel will come off.

Using the camera, the iPad could see the physical motorcycle.

And it said to the cloud, tell me what

you know about that motorcycle.

And the cloud gave me a way to visualize, for example,

how much gas, how much fuel, what's the temperature,

to instruct somebody in the operator sequence or a repair

sequence.

It allowed me, potentially, to interact with the motorcycle.

I could have said start, and maybe the motorcycle

would have actually started.

But anyway, a very powerful way for a person

to interact with the physical and the digital

in the very same integrated, visual experience.

There was no cognitive distance, no cognitive load

in trying to understand what was happening there.

PTC did some studying of our industrial customers.

And we asked them, what are you using augmented reality for?

And the percentages here actually showed

the distribution of use cases across design, manufacturing,

sales and marketing, operations, service, and training.

So that tells me that this technology has the potential

to impact practically everything that a company does.

What we found is that most companies

are reporting 30% to 50% improvements

in human productivity for operations

that can be guided and optimized with augmented reality

technology.

So smart, connected products is really

about digital technology that makes the product better.

And now we're talking about technology

that makes humans better.

And that's a great segue, I think,

to what you want to talk about, Michael.

MICHAEL PORTER: Well, thank you, Jim.

And as all of you have seen, there

is much to talk about here.

But let me step back a little bit from all of this technology

and all of these business applications

to think a little bit more broadly

about what AR might mean, actually,

to how our society evolves.

The capacity and capability and optionality of machines

is dramatically improving.

But as we discussed, it's very hard for humans

as we are to actually access the power

in the data and the capabilities and the analytics

of these supercharged machines.

And that is kind of limiting the access of humans,

particularly those that don't have computer science degrees

and engineering degrees to actually access

this digital transformation.

They're kind of getting left out.

But what we know and from careful study

is that, actually, humans have unique advantages.

Humans can come up with new ideas.

They can change the frame of reference

in thinking about something.

If you're playing checkers and then you turn to chess,

the human can easily switch from checkers to chess.

A human can kind of fix or repair any part in a machine

and not have to be programmed to do that.

We have these enormously powerful capabilities.

But it's been very, very challenging

so far for the humans to take advantage of the increasing

power and productivity advantage and optionality

of these new powerful machines.

Augmented reality is the great equalizer.

It is going to create a balance between what the machines can

do and what the humans can add, by making

the humans able to access the power of the data

and the analytics and the machine advantages.

AR also is transformative of the whole process

of education and training.

We've been sitting in a classroom.

Now, we can actually work with real objects

and participate in this digital transformation that's

well underway.

AR is both a profound next step in transforming competition

in business, but it's also going to be, I think,

a very important force in kind of resetting and reenergizing

the capability of humans to really participate

in the economy, something that we've

been losing over the first decades of the IT

transformation.

And so in that sense, it's very, very encouraging.

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