PASSPORT TO INNOVATION
A Q&A with Tacton CEO Frederic Laziou, in Chicago
Frederic, please explain how Tacton came about and where Sweden is in the smart manufacturing evolution.
Tacton was founded in a spinoff from the research institute SICS (the Swedish Institute for Computer Science).
Sweden is not known for manufacturing. But Sweden is well known for innovation. We see that Sweden has been super innovative in retail furniture: Ikea is one of the global leaders. The same goes for clothing: H&M is one of the three top clothing companies in the world. And it goes, as well, for dynamite: Alfred Bernhard Nobel invented it in Sweden, and today there’s this famous prize (the Nobel prize) on a yearly basis that comes from this country. So Sweden is more about innovation than manufacturing. At the same time, Sweden today leverages a great ecosystem of tech companies that mix innovation in manufacturing and the technological system that populates a lot of great startups out of Stockholm.
When you said in December you were aggressively expanding operations in the U.S., you mentioned the company was investing $12 million to establish a joint HQ in Chicago. How will you spend that money?
We are on a growth trajectory, and it is well beyond Europe. If we are born and raised in Europe, we have identified and defined North America as a growth pool. And it is a priority in the years to come for us.
First, we want to get closer to the customer, so customer intimacy, customer success, as well. So we really want to expand the number of customers, as well as partners.
Second, to do that and be successful we need to create a North American hub, bringing together talents. And we’ve chosen Chicago to put together that hub. It’s going to be mostly for marketing and all customer success-related expertise, meaning professional services and support.
Is the move partly designed to strengthen smart manufacturing partnerships with SAP, Salesforce and others?
We have strong partnerships with these players. Beyond that, we cannot have the ambition to be a global leader without being here. Gartner has produced a “magic quadrant” for CPQ, and we are part of it. It validates how our strategy works. But if we want to keep that position, we need to be a large enough actor in North America. North America represents about one-third of the total addressable market for us.
How have Tacton Configure Price Quote, or CPQ, software and design automation solutions specifically helped the likes of Caterpillar and Siemens manage the complexities traditionally associated with producing customized and configured products that meet strict customer requirements?
First of all, our vision is to enable manufacturers to do smart commerce. It’s not about configuration. It’s not about pricing. It’s not about quoting.
Our customers come from a world where they were selling one piece of hardware—a truck, propulsion line, a pump, or a packaging line—and now they’re shifting into selling this asset as a service—and it totally changes the way they engage with the customer.
We have the technology platform to address different use cases in smart commerce. One of them being companies with a high degree of engineering to order. Meaning that it’s not a standard catalog product. It’s at the real last minute usually, you need to refine or even do something that is new just to win a customer.
Caterpillar Propulsion, a customer of ours for a couple of years, is a great example. It is focused on marine vessel propellers and shafting. And usually when a vessel takes months, years to produce or build a vessel, the very last part is the propeller. So they need to quote quickly the product with high variance and with some parts that are custom made. Caterpillar Propulsion is using Tacton, the configurator and design automation tools, to produce, as well, 3D, 2D drawings to put in their quotes.
And what about Siemens?
We’re working with Siemens Turbomachinery. They build huge turbines. In that space, there are two major things: First, you need to be quick and be able to quote. Before, they were a ping pong ball between sales and sales engineering: It took weeks to be able to quote. Using Tacton CPQ and other technology, Siemens can now quote within 20 minutes. A second big value we help our customers with is to remove errors in quotes. They are really costly. Think about a big turbine, which costs tens of millions of dollars. If, at the very last minute, you need to tell the customer, “By the way, it’s not really what you ordered,” it could cost you a lot of money.
How do you actually do that?
This goes to where we come from: our configurator, which enables our customers to, at any point in time, have a valid solution. In our AI constraint space technology, you don’t even need to ask the configurator; at any point in time, you have a valid solution. You don’t need to be a qualified engineer to know the solution that is proposed is valid. We are digitizing a lot of processes. Then we use machine learning to enrich the engine and to help our customers make smarter decisions—mostly in pricing.
What’s another example of a success you’ve had helping companies with digital transformations?
We had the chance to support Wilo, a German industrial pump manufacturer: We have been part of redefining the entire sales process. And at the same time, they’ve been looking at how to engage with the customer in the modern way. We are redefining marketing and sales. And then when the product is commissioned, it’s ‘How do I serve the customer post sales?’ Predictive maintenance is now part of (post-sales) service. So they are really taking the end-to-end approach.
Do you also have an offering for smaller organizations as they grow into your CPQ offering?
For companies that digitize the entire sales process, we have Tacton CoDesigner. It helps customers collaborate in the cloud and make sure they digitize all processes around engineering to order, and even configure to order, connecting the product to the sales process.
Let’s say I’m doing conveyer for the packaging industry. I have a CAD team and a sales team, and usually sales is frustrated that it takes ages to get a 2D or 3D drawing. We are connecting all of that so companies can shorten the sales processes—and automate some day-to-day engineering tasks so that the engineer can focus on innovation.
Frederic, what is the biggest pain point remaining for manufacturers with which you do business, and how will innovation address it eventually?
A big challenge for manufacturers is to be able to compete on value, not on price. If you are manufacturers in the Chicago region or in Germany or in Japan, you need to compete on value. And if you want to do that at scale, you need to make sure that you offer variance to the customer—via mass customization.
To do this profitably is a key challenge. Every company needs to address the ‘segment of one.’ And our innovation capabilities can support this—not only in configuration but also in pricing: having machine learning, AI recommend the right price for a solution and then finding how to support that.
Which market segments do you focus on in the U.S.?
We focus on machinery; production line; power generation or everything that is related to turbine; medical tech/medical equipment (we are working with Siemens Healthineers, GE Healthcare and Canon Medical); heavy and commercial vehicles (we just signed a deal with Ryder), and airflows and fluids.
What do your offices in Warsaw and Tokyo focus on?
In Japan, we are focusing on sales to medium to large international companies, as well as the largest manufacturing groups. In Poland, we are focusing on engineering.
What’s happening in Poland that might surprise people?
A few years back, it was only software companies going to Poland for software engineering talent. Now we’re seeing manufacturers opening near-shore, offshore facilities in Poland—because software is not only entering but leading the manufacturing business. We’re seeing even large companies like GE become a software company.