 Live from Las Vegas, Nevada, it's theCUBE. Covering IBM World of Watson 2016. Brought to you by IBM. Here's your host, Dave Vellante. Welcome back to the Mandalay Bay, everybody. This is theCUBE, the worldwide leader in live tech coverage. Gerard Baum is here, he's the chief digital officer at the Schaeffler Group. Gerard, welcome to theCUBE. Thanks for coming on. Thanks a lot. I'm happy to be here. So really interesting discussion off camera about the Schaeffler Group and what it is. But tell us, tell our audience, what is the Schaeffler Group? Schaeffler today is a technology company being present in 150 countries. Up to 87,000 employees, 30,000 engineers, 100,000 products, 75 plants, two new every year. So dynamic growing technology company. And the company being on the digital path, which is let's say the dimension of change and the dimension of new competitiveness. Okay, and talk a little bit more about the products that you guys provide and services. There are different products starting with the typical bearings, which also are on the way to get sensors and provide data. It continues with things like active torsion stabilizer, helping high-end cars to get more, let's say, confident, higher sportiveness. We are talking about double clutches. We are talking about thermal management and we are talking a lot of parts being in powertrain and drivetrain within most of the OEMs globally. So you're primarily a supplier to the automotive industry exclusively, right? Is that right? That's one part. The other part is we are a supplier to other industries, which is train industry, wind industry, machine tool industry with our components, which could be bearings, linear drives, motors, and things like that. Okay, so you are at the center of this whole IOT movement, obviously. So everybody talks at a high level about instrumenting the windmill is sort of the metaphor. So what's happening in the business? Specifically, talk about your role as the chief digital officer, how that came to be and how you're driving digital transformation in your company. I look basically for potential which coming out of integration, which is coming out of data and which is let's say in the past based on different, let's say, different divisions, regions and units being responsible was not in the high focus of the company. So I look at integration value, I look at additional value based on data and I'm looking as a nature of that digital business towards change. Well, it's funny because I mistakenly thought you were the chief data officer at the company but you're a chief digital officer but a lot of digital is data. Where do you draw the line between chief data and chief digital? It is there a chief data officer at your company or are you defecto? So data is the raw material, digitalization is additional value that you generate based on data but also that's the key for Scheffler. We have a very strong engineering capability. If you develop a strong digital capability and if you are not able to bring that together, you will not generate the value which is able which is possible and which you should generate. So digitalization means you bring mechanic, mechatronic and data together. So the data officer has data, the mechanical engineers, they have the, let's say the complexity, the precision and also the technical innovation and my job is to bring both worlds together. And essentially you're instrumenting the vast majority of your product set so that you can collect data in the end use cases, right? So what's that journey been like? What's the progression been? When did that start and where are you now? It started with a high focus more than 10 years ago. As of today, we have some of the products in operation. So for example, industry 4.0 machine is a machine with a lot of sensors and these sensors, they need to generate value and the value is uptime, is precision and this machine we have in our regular production line with the task to replicate it. In other areas, we are just at the beginning. We are developing the, let's say the blueprints. We have set up pilot projects and we are trying to evaluate the benefits. So there's a, let's say a very broad variety of maturity levels. How did you decide where to start? The deep conversation with the business, so was it, who wants to be the guinea pig? Okay, I think that's a key point. What I did is I first analyze what are the activities existing, then looked at experiences from outside where are the biggest wind potentials and then defined the roadmap. Let's say, with a priority list, reducing the number of activities to the key ones and adding someone who have a potential big impact. Talking to the business, convincing them and then setting up joint projects. In some cases with their funding and other cases with my funding. Interesting, we always talk about the role of developers in conferences like this. You got 30, I think you said 38,000 engineers at the company? More than 30, yeah. And it seems like in your world, the engineer is kind of the new developer. They've got maybe obviously a technical background, but also maybe a development background. What's that dynamic like? What does that person look like? I think that's a key point you mentioned. If we achieve that the traditional engineers being very innovative, being patent leader right now in Germany, competing with companies who are bigger than Chevrolet and they are still at the top of the patent list. If you are able to ignite them with digital innovation, bring these things together, then I think this is a formula to win. And this is just what I'm trying to, looking at their challenges, looking at their processes and then trying to figure out, bringing both worlds together, what is the additional value add. They basically embrace it. They are engineers, they check you, they try to find the weaknesses and if they are convinced they are your friends and they push you to go faster. You know, Gerard, I was at a conference like this, I think it was an IBM conference. It was not maybe more than five years ago. And the speaker was in the automotive industry and he said that within the next 25 years we'll have autonomous vehicles. I'm laughing because the pace of innovation has occurred so fast. I mean, you started two years ago and I'm sure it could have come a long way, but I mean, what did we miss? How did it happen so quickly? I'm more than 30 years now in the automotive industry and I think there are some revolution, technology revolutions which happened during the last five years, five plus years and clearly the revolution of the micro sensors is one thing which has happened. There is a revolution of what we call big data and machine intelligence working with this data and there is also the computational power which increased significantly. If you look at big data, if you look at machine learning sensors, micro sensors and bring all these things together, this is the basis for revolution not only in automotive and highly autonomous. So when you think about the autonomous vehicle, what role do your products play in that? Sheffler right now is there where the things move, where the forces are, where the heat is and connecting this with let's say the integration of a sensor, the sensor fusion, integrating that with driving strategies and connecting them to the outside world. This is a long value chain and Sheffler's role in this value chain right now is we are providing functionalities which will be enhanced and we will provide data which will be used in this entire value chain to support highly autonomous driving. We do have research projects underway where we do have let's say very modern components like in-vehicle electrical motors which are brakes and motor and steering within one element and these components, these modules deliver a lot of additional data which then can be combined with high precise maps, could be combined with different driving strategies and also driving optimization algorithms. So we have a big chance to enlarge the picture we are right now in based on the data. The value chain, the supply chain within the automotive industry is very complex at least to an outsider. I think about the telecommunications industry for years because they would have this purpose built equipment with different protocols and standards and is it the same in the current state of the automotive industry as we begin to instrument products or is it more open source software, API connections that are more standardized? I think the standardization is around APIs right now. I think more could be beneficial but right now it's on that level and every company right now develops their own let's say cognitive environmental system, companies are developing their own strategy and steering algorithms and there needs to be some cooperation at different levels and at the API level it's working. I want to back to the conversation we were having about engineers. As you well know, engineers are very precise. I would say they tend to be conservative for products that have to get into the market many times they'll experiment but they tend to be a little bit of a control freaks, I'll say. Did you see a big resistance early on in terms of digitizing products or was there an enthusiasm to invent? Engineer is used to deliver things and be responsible for life-cycling so I at the beginning went into a lot of in-depth discussions, very deep, very open but up to a level of depth which is let's say astonishing in some cases. Astonishing. Yeah, because they really want to understand everything. What is the algorithm, how much data, how much is the latency, how to connect to things and after these in-depth discussions I saw a lot of openness. At the beginning a lot of check and balance but then opening up. So you feel like we've crossed that tipping point where there's big resistance to this sort of instrumenting the vehicles. I'll give you, we have a lot of time but last word. So where do you see this whole thing going? What's your vision as the Chief Digital Officer of Sheffield? I think at the end of the day it will be the CDO will be measured based on value we provides, value in product, in process, in let's say transformation of the company. So I see in the future CDOs being in most of the companies established and the success will depend on the bottom line impact he will do. I forgot to ask you, so are you doing anything with Watson, Analytics, IOT? What's your relationship with IBM? We have decided after significant benchmarking that we will partner with the IBM on the cloud technologies including Watson and we will use these technologies based on many things we are doing right now. So things like predicting failure, looking at past history, collecting data, analyzing it. Collecting data, doing analytics, doing prediction, doing optimization, doing model building, also looking at significant nano-mechanic and in-depth behaviors of structures. So there is a variety of projects started. Great. Gerard, thanks very much for coming to theCUBE. It was a pleasure to meet you. Thank you very much. You're welcome. Keep it right there, everybody. We'll be back with our next guest. This is theCUBE, we're live from Mandalay Bay in Las Vegas, we'll be right back. Okay.