Find here the China paradigm episode 55. Learn more about Bruno Lhopiteau’s story working in the maintenance of infrastructure projects in China and find all the details and additional links below.
Full transcript below:
Matthieu David: Hello, everyone. I’m Matthieu David, the founder of Daxue Consulting and the China podcast, China Paradigm. Today I am with Bruno Lhopiteau. He was the managing director and founder of Siveco China.
You have been in China for a while. I don’t want to say a number， but I think that’s close to 20 years you have been in China, since 1999. I want your confirmation later on on this. You created Siveco China in 2004. It’s the largest maintenance consulting company which provides services of infrastructure maintenance management in China.
You are helping, if I understand, companies to maintain, to understand how to extend the life cycle of the factory assets in China, but also to understand the regulations, how to manage a factory, and how to do infrastructure projects in China. You are very involved in technology as well. With IoT, with mobile in the factory, and that’s something I’d be interested, and I think everyone will be interested to know moreabout.
First question, what’s the size of your company?
Bruno Lhopiteau: Good morning, Matt. Your introduction was quite correct, great. Well, the company size, as you said, we are the largest in a very niche market. It is a company with 45 people. Headquartered in Shanghai, we have other smaller offices in Beijing and Hong Kong, a tiny office in Chengdu. But 45 people, that’s it. So it sounds very small. Our customers tend to be giant companies, big utility companies, very large manufacturing groups. They know we are the largest in our field, but when they look at how many people we have, they might think that we are a small company.
We are a small company. This is SME. It’s SME that is not going to grow much bigger in terms of the number of people. If we’re doing well, we might grow up to 100 people but never, never more than that. Hopefully, the revenue keeps growing, but we should be able to maintain a small stash size.
Just to correct a bit what you said, we are maintenance consultancy. So we have infrastructure projects in China, manufacturing plants to optimize the life cycle of the equipment; understanding its operation, maintenance of the equipment; planning for it from the design stage, installation, construction stage, managing the life of the industrial plant and infrastructure project. The design lifetime could be around 20 years, 30 years. It’s a long-term improvement.
There are lots of losses, some of them that you probably heard of or you imagine throughout the life of infrastructure, of equipment, especially when you have to replace the equipment early. A piece of equipment you designed for 20 years lifetime, you replace it after 5 years for whatever reason, that’s a problem. It’s a very high cost.
We had companies optimize these within strong and more strict and regulatory guidelines, environmental compliance, safety, security, which has a direct financial cost and an impact which is even bigger on the company, on the population may be. If you’re a water company, for example – we work a lot in the water industry – your water quality will have a huge impact on people and so on. We had optimized all these.
We do this by using technology. You mentioned something that we use high tech. It was not an afterthought. It’s not something we did. It’s not one plus the other. We have always combined. That was the idea of the company in 2004, where we combine specific industrial know-how in China, which was my know-how and that of my team maintenance management know-how, which was very hard to find in the Chinese market at that time. We combined the know-how and technological solutions in China that we designed to achieve to meet the needs of our clients.
Matthieu David: I understand. About the service you offer more precisely, could you tell us how you work? Let’s say I own a company, and I own a factory in China. I need to improve the life of my machines. I need to take care of them. What would you do for infrastructure projects in China? Would it be a 1-year contract, 10 years contract? Would you equip us with your technology? How can I apply my technology into my machine? What type of service do you provide? And how do you plug in your technology into an existing factory?
Bruno Lhopiteau: Let me try to break it down a little bit because the process is a bit complex. We work primarily with infrastructure projects in China. For us, it’s mostly water companies, water treatment, waste treatment, waste incineration, for example, and energy, different types of power plants, primarily. Those types of infrastructures represent about at least 80% of our business, mostly state-owned companies. Infrastructures are state-owned in China and in most of the countries. The remaining 20% are typically large industrial plants, asset-intensive, maintenance-intensive plants, typically your chemical plants or large automated factories.
How do we get in an infrastructure project in China? Ideally, we come in from the design stage. It happens on large infrastructure projects. For us, it happens mostly in large capacity power plants. You’re talking about very large infrastructure projects in China, these large capacity power plants. We did some gas turbine power plant projects in North Africa, for example. This is a billion-dollar project. It is not my project but the plant’s investment. It is just to give you an idea of the size – billion-dollar infrastructure. Those projects are so asset- and capital-intensive and maintenance-intensive. They know how important this is, and they call us in from the late design stage.
Matthieu David: Who is leveraging you doing infrastructure maintenance management in China? Is it the architect? Is it a design and build company? Is it the owner of the infrastructure?
Bruno Lhopiteau: It is the owner-investor. For power plants, it’s either a big national company or a major power plant investor-operator. That is the ideal case, and it happens mostly in the power industry, on very complex infrastructure projects in China. I’m telling you this to try to work through a project.
The other type of entry into the deal which is more common but those projects tend to be smaller is a company would call us years after they have started the operation. They already have typically a factory or small infrastructure. They have been operating, and they meet problems.
In the past 10 years or so in China, the business has been driven by. I would say either by accidents, industrial disasters, or industrial problems or, you can look at it the other way around, by stricter and stricter regulations. You have companies that have had problems. They had a major accident in the plant with people getting hurt, or at least a major financial loss, a downtime, production was stopped for quite a while, it cost them a lot of money, it took a long time to get the spare parts, replacement parts. They realized at that moment they were not that well organized. They realized that the inspections that their people are supposed to conduct regularly were actually not done or the order checklists are, “Yes, yes, yes.” It’s a typical situation.
Then the company’s management realized, “Maybe we should do something about our infrastructure maintenance management in China.” Sometimes it’s not recognized as maintenance. Maintenance may be considered a very narrow field that only the maintenance people do. It’s technical management of a facility. Usually, it is not the maintenance department or the maintenance manager of a company that brings us in, it’s usually someone else.
So either we come in at the design stage for infrastructure maintenance management in China, or we come in after a problem or recurring problems have happened in a plant, and then the company calls us in.
Then we come and do a type of audit or assessment of the situation. We try to understand the organization problems, the challenges, the opportunities for improvement, and we try to measure the benefits of us involving in the project. Based on which, we design what I call an improvement project. That’s how we get into projects.
Now, we operate primarily in China. Most of the clients are in China. The Chinese market has certain characteristics, which I think you and many of your viewers also know. To oversimplifies it a little bit, it’s an industrial market that has developed a little bit late. So you don’t have a long history of infrastructure maintenance management in China, of regulations and standards that you might find in Europe, or technical education and so on. These arrived very late.
Of course, the market developed very fast. I talked about infrastructures. Here we have the largest high-speed railway infrastructures in the world by far. Power generation is the same. In terms of specific types of power generation – hydro and nuclear – is the same. Everything is so big and developed very fast in the past 20 years. As you said, I’ve been here for 20 years, so I kind of saw that. All types of infrastructures or industries develop extremely fast in the past 20 years, and very successfully.
Of course, there’s a shortage of skilled resources. Of course, this is very difficult to manage – this growth – from a construction perspective, from a supply chain perspective, and from an operational and maintenance perspective, which comes next. You build your infrastructure projects in China, you have to maintain it.
Here we’re facing large scale challenges and opportunities. While we cannot rely on the Western way of dealing with maintenance management, just because you don’t have this ecosystem of infrastructure maintenance management in China, you cannot take people from school. A guy who’s a maintenance engineer, who already has all the methodologies, you don’t have such people, you don’t have such an education. So you have to do something different, which is why I started the company, actually.
As you noted, we also work outside of China, on the Belt and Road outside of China. Anyway, we can come back to that. Those places outside of China, we have slightly different challenges. Though, in practice, we noticed that what we have done in China applies very well outside as well, which is actually interesting.
Matthieu David: That’s a very interesting point.
Bruno Lhopiteau: I come to that to try to give you some background because you actually asked some very complex questions. What do we do? Knowing that, if it’s an existing installation, we start with an audit, we identify challenges and opportunities. It’s very important to know the opportunities, how we can improve, how people can improve, how many financial benefits among others that the company can get out of a project based on which we design a project.
For us, an infrastructure project in China is something within a six-month framework. Six months is a good time. It’s not too long, you don’t get bored, and people don’t change too much.
Matthieu David: Six months is the audit?
Bruno Lhopiteau: An audit is a short –
Matthieu David: A few weeks, right?
Bruno Lhopiteau: It depends on the size of the company. Frankly, some factory, we spend half a day there, it’s enough. Some larger projects, we spend two weeks. That’s the size of an audit, and some are very short. The project is the improvement project, design based on the audit. That’s around six months. It could be a bit longer, it could be a bit shorter, but six months is a good timeframe to get results. You want to get results out of a project.
What do we do in a project? We had the company organize itself around some basic principles that usually are not in place. There is a standard for this called ISO 55000, which has become a Chinese standard, actually. China has been quite involved in the standard in the past two years. It’s a good framework because it says that you need to have knowledge of your assets. What’s that? You need to have technical documentation in place for your most important assets.
Matthieu David: You can do that for them, right? Would you do that for them as well?
Bruno Lhopiteau: We would help them with that. That’s typically something missing. Important assets, which are they? Why are they important? Then make sure you have the technical documentation in place. Have a maintenance strategy in place. What are your people doing? What is your technical team doing and why? Then let’s say a maintenance strategy – is it in place? Do people know about it?
Then you need to have a system to verify that you are actually implementing your maintenance strategy. So it’s a feedback loop, which most companies don’t have because they rely on the paper process. The paper process is a checklist that you might have seen.
Probably you don’t deal with the infrastructure project in China so much, but a simple type of maintenance is cleaning. You go to the toilet in your building. There may be a sheet of paper on the wall with a checklist and they come and do cleaning rounds. It’s a kind of maintenance, a very simple maintenance – cleaning rounds. The cleaner is supposed to put the notes and then maybe put his name. It’s called checklist.
The checklist is always good. Whether the guys come on out, whether the job has been done or not, you don’t know unless you come and actually check. The checklist itself usually doesn’t mean much in a Chinese environment. This is how to get feedback. Cleaning is a very simple example but more technical maintenance requires more feedback. The steps you’re supposed to take are much more complex. You may have to make a diagnosis. You have to follow a methodology. How do you ensure that the technicians follow this methodology and how you get feedback so that you can analyze the results?
Now we touched the weak link of technical management in China and abroad. It’s methodology: how you do things and why. You may have very clever people in the company, you may have very clever people centrally in Beijing, you may have very clever people in the design institute at the university and so on, but the technician who is doing the job and troubleshooting the machine, does he know what he’s doing? Is he following the methodology that he understands? This is a big challenge in the context of growth, which I described.
When you have one factory, the manager can be there and check everything. But when you have 10, when you have 50, when you have hundreds all over China, some of them you acquired, some of them you built, how do you manage this? Plus staff turnover, which for multinationals tend to be high, for local companies tend to be much less. All of these compound to make the design and implementation of methodology very difficult. That’s the example of the checklist. It’s a kind of methodology, actually. How you do your cleaning? It’s a very simple methodology. So this is the core of the issue.
We design projects to implement the methodologies to infrastructure projects in China. But it’s not just consulting, and you could train people. They’d be very happy to be trained on what is preventive maintenance, for example. Are you avoiding breakdowns?
Matthieu David: You would supply the training as well?
Bruno Lhopiteau: We can train people. We can have them organize. We can say, “Here you need to have a planner.” Once we’re gone, is this organization going to stick? The answer is no. People will be very happy about training. We have very good trainers, we know the business, we’ve been very impressive. They say, “What you said was very good.” Then once you’re gone, everything will go back to normal, I guarantee it. This is what’s happening. Maintenance training in China, maintenance consulting doesn’t work. It never worked.
That’s also why we have so few competitors, by the way. We’re the largest in the market. The second one is maybe one-third of our size. They are nowhere because they do pure consultancy, which is not what we do.
So we have designed technology to help give more concrete aspects to what we say to train. I’m not just going to tell you, “ISO 55000 is good, preventive maintenance is good, look how you should do. This is a troubleshooting methodology that you should follow.” I’m going to give you a software designed for this purpose that’s going to make everything more visual, first of all.
Matthieu David: Your software?
Bruno Lhopiteau: Yes.
Matthieu David: That’s the one you call Bluebee, isn’t it?
Bruno Lhopiteau: Yes. We have several pieces of software that work together. We can come to that if you want. Bluebee is the core of these because we want to make sure that we have designed a maintenance plan, for example, a preventive maintenance instruction. Then you want to be sure it is implemented properly. Maybe it’s not, and if so, you need feedback. So you understand why it has not been implemented properly. Does the technician fully understand what he’s doing? Do you lack resources? Do people need more training? Was the methodology wrong? Or was the work instruction wrong and not reading properly? We need feedback. Bluebee is a tool we designed to achieve this. This is an example of mobile applications for maintenance in the Chinese market. It’s an app.
The worker is equipped. The weakest link is the people, of course. It’s you and me. It’s the worker who is going to do the job. And he’s not just the weakest link, and he’s everything. Because without the worker, you do nothing in your plant. You rely on people even in a highly automated plant.
By the way, there are all these stories of 4.0 and everything will be automated, you have robots everywhere, people do nothing, sleep. No way. The more automated you go, the more you rely on clever, educated, highly skilled people. With automation, you are not less reliant on workers, and you are more reliant on skilled workers, which are very hard to find. Small hands doing repetitive jobs have always been very easy to find. But skilled technical workers who can maintain robots, who can maintain sensors, those guys are very hard to find. So you rely more and more on people.
We designed the Bluebee to address the significance of software to ensure the maintenance strategy. It’s a very user-friendly app. The example of the checklist, which a very simple example, I have it here actually. I have a phone with a Bluebee here. Maybe you cannot see it here.
Matthieu David: We can see. Not perfectly but we can see.
Bruno Lhopiteau: Then you put tags on an inspection point, the place, the machine where the guy is supposed to do a weekly cleaning and maybe lubrication. You put a tag on the machine, an NFC tag. It could be just a QR code like this.
Matthieu David: Okay, it’s a QR code. So you have the QR code and –
Bruno Lhopiteau: NFC. The tag is just like RFID. Every phone can read this now nowadays. So then, on your inspection point, you put this on your machine, and when the guy receives his work instructions, he has to do the weekly lubrication on that machine. He has to come because he has to scan this. The work instruction defines; it actually says you have to scan. So he comes and he scans. It’s mandatory. So the first achievement, you know the guy has been here. So that’s already something. We found that when people come, they tend to do the job.
Then he will receive step-by-step work instructions. It could be a picture, a movie with different things to help him. And then he can report directly on the phone what he has done, take a picture. The picture can be mandatory. This is not a control point. You make the picture mandatory, before and after, for example. It could be the measurement to take, it could be different things depending on the work itself.
This is Bluebee. It’s a software to ensure the maintenance strategy, that the policy you have defined and the methodology, the best practice is actually implemented, and to get feedback from the worker to the central engineers. We can then analyze the situation and make decisions.
This is the core of what we do. The project is using our technology to train people to help structure the organization. Then when we finish the project, we leave our tools there, we leave the Bluebee system and the organization is up and running using the system on a daily basis so that they are able to monitor and to constantly audit what they are doing. We can also assist them.
So typically, on a monthly basis, we go and look at the system remotely. We can follow some KPIs, we can track reports of usage, reports on the number of breakdowns, reports on cost, and we can advise the client. It’s a way for us to remain there without having to put people on-site full time. That’s how we can manage with only 45 people, by the way.
When we started the business in 2004, factory directors were always asking me, “Bruno, can we get a good maintenance manager from you?” or “Can you help us hire a good maintenance manager?” I heard a lot of things like, “Bruno, your people are very good. If one of them can be the maintenance manager, we’ll pay you very well. Then how many people do I need?”
This is not the right solution. I always say, “You want a good maintenance manager? You won’t find it if he’s that good. If your maintenance manager is that good, he’s already the factory manager. Then next year, he is the GM of the plant.”
There’s a shortage of such resource. I oversimplify it a bit. Of course, there are a few good maintenance managers. But you cannot rely on hiring the right people. You need to build a system for infrastructure projects in China. Same for us. So I cannot have an auditor behind every client full time. I would grow to such a size where I cannot hire such people or train such people. They will have the same problem as my clients. So we design software to ensure the maintenance strategy, to help us and to help our clients manage this.
This is how Bluebee came to be born in 2009. I think the first release of Bluebee was 2008 and we officially set up our R&D center in Shanghai in 2009. Ten years.
Matthieu David: To summarize, you had an audit part. You have then an execution part of creating a new organization for six months. The auditing part can be from half a day to a couple of days, a couple of weeks maybe, but not more than a month, if my understanding is correct. You have six months for execution to shape the organization, to reorganize the factory.
Then at the same time, you implement Bluebee. I believe most of the time, you implement Bluebee. At least you want to implement Bluebee to be able to follow up the organization and that it’s executed in the way you suggested it to execute. I feel there are three main services.
We understood the three types of services you’re providing. I’d like to focus a bit more on the technology part. You’re talking about the mobile to be used in the factory. When you started the business in 2008-2009, I think that was the beginning of the iPhone, the beginning of the mobile as we see it now. At that time, we had more Blackberry, you have other mobile devices. Did you have this intuition that everyone will have a mobile phone, and everyone would have a screen, and you have to download an app and so on, so you have to be in this race as early as 2008 and 2009? Others came later. Could you tell us more about how you had this intuition of mobile applications for maintenance in the Chinese market? Which I feel – but maybe I’m wrong – is a bit counter-intuitive for people who are working in factories where you have specific devices at that time to go into the factory.
Bruno Lhopiteau: It’s a good point. Different types of mobile devices were used in factories for inspection purposes, different types of condition monitoring purposes for a long time. When I started working in the mid-1990s, we had portable vibration monitoring devices, for example. They were not mobile phones. Normal people didn’t have a mobile phone at that time. I certainly didn’t have one as a young engineer. But in the plant, we had a few portable devices, very specialized devices. The idea to use such devices for maintenance was there. When the first industrial PDS was introduced in the late 1990s – we called them PDS at that time – we already had maintenance management applications on those devices. But normal people outside of the factory didn’t use mobile phones.
Then something happened in the early 2000s. Actually, I arrived in China in December 1999. We actually thought of using mobile applications for maintenance in the Chinese market, consumer type of technology which became more and more common, maybe 2005-2006. Around that time, we already had very user-friendly software used on a PC. We were trying to make it more and more user-friendly, so it could be used on simple screens, touch screens in the factory. Then the mobile phone started to become very common and we thought, “This is what we need.”
Some companies in the West already had mobile applications for maintenance, but they were focused on what I call Western issues. I mentioned the history of maintenance, Western countries like France, UK, have a long history, a hundred years of managing maintenance. Their focus in the 1990s, 2000s were not on methodology, were not on helping workers with good practices. They were on cutting down the number of steps. They were on reducing overtime, reducing the direct cost of people.
So they all developed apps. At that time, we didn’t call them apps. The mobile software focused on-time reporting. “Bruno, you use this to report how much time you spend doing lubrication on this machine. When do you start? When do you finish?” Or software to help people report some measurements, for example, to make them more efficient in the reporting process to save time.
We thought this is totally not our problem in China. Absolutely not our problem. We actually want to hire more people so that we train them so that we can deploy them in the other factories we are going to open—totally reverse situation. Our people don’t have the training and the methodology in mind. Whereas the people in France and in the UK, if you were going to tell them to follow a step-by-step methodology, they would refuse. They would say, “What do you think I am? I’m a qualified technician. I don’t want your methodology. You don’t trust me? Are you trying to control me?”
But in China, we needed that. So we decided to design such a solution, which we called Bluebee, like a busy bee going from on one machine to another. We really started software development in 2008. It took a while. I was thinking about this a lot for several years. We started in 2008. It took a while to get started because developing software costs a lot of money. It was really a step, a major investment for us. We already made quite an investment when we started the business but software development was something else.
We officially set up the R&D center in 2009. The product has a 10-year history. Of course, technology changes a lot. Mobile technology changes a lot. We started development on Windows Mobile applications for maintenance in the Chinese market. There was no Android at the time. I don’t remember. But then Android came, it became prevalent very quickly. Consumer type of devices became good enough to be used in a factory.
Quickly after that, then things like WeChat started coming. Developing mobile technology, which is quite complex applications, actually, they have to be very user-friendly, but in the background, they do a lot of things which is very complex. So we have to adapt. We had to keep adapting our software to all these changes. It’s very expensive, but it has been a tremendous tool for us. Today you can see our business is based on having developed such a solution. It closes the loop between the worker and the management in a way which we could never achieve before.
Matthieu David: Does it mean that you have a new program now on WeChat, you have a native app? What do you have in terms of format? Is it responsive how you open the browser? Is it responsive how you’re going different app? Is it negative? Is it a mini-program?
Bruno Lhopiteau: What we have focused on since 2009 has been a native Android app. Android is the only mobile OS for which you have of course lots of consumer type of devices. Some of them are very cheap, which is good when you deploy on a large scale, but also industrial-grade hardware which, for example, you can use in chemical industry. It takes us on, one for example, which is an explosive atmosphere type of environment. Chemical plants, some areas you cannot bring a normal mobile device, it brings an explosion risk. Of course, you don’t want an app running on that. For the last five years or so, you have industrial devices running Android. Actually nowadays, you get infrared cameras, vibration monitoring instruments running Android. All those very technical devices can also run our app.
So we have a native Android app. It has to be native. It cannot be what you call responsive app or like a webpage because some of our competitors do that and it limits their scope. If it’s a simple app just to receive a work instruction and say you’ve done the job, “I’ll report I’ve done the job, this problem that problem,” that’s okay just to get a webpage.
The key is inspections. Inspection is like a checklist on many different equipments. You might have to do a measurement, you might have to take a picture. It’s a little bit deep in terms of the work instructions. You cannot use a responsive app for this.
Matthieu David: Other features as well.
Bruno Lhopiteau: In terms of the app itself, the fact that it’s a real app. I can say that for simple mobile applications for maintenance in the Chinese market, we have Bluebee for WeChat, which is something we launched in 2016. We tend to do things a little bit too early.
Matthieu David: It was early 2016 for many mini-programs in China.
Bruno Lhopiteau: It was not a mini-app at that time.
Matthieu David: ‘85.
Bruno Lhopiteau: Yes. I think the mini-app was not released as it is today but it was running within WeChat. Taking advantage of WeChat, which everybody had already on their mobile, and now we have the real mini-app as it is understood today, the WeChat mini-app ecosystem. We have customers using it typically for simpler applications. This is for workers. We call it “scan and work” for simple work where you don’t have detailed work instructions, where you don’t need detailed feedback of the work.
Cleaning is an example. Cleaning is always a bit silly example because it’s normally not that important so we don’t want to manage it so strictly but also simple. In a factory, you have all these TPM or lean manufacturing type of work construction where the operator on the machine is supposed to do a daily inspection, visual inspection, some cleaning, some lubrication. The instruction is already written on the machine, but you want to be able to report problems, you want to be able to report that the job has been done, so you just use the WeChat mini-app, scan, work maybe some simple report, you report a problem, and that’s it.
Matthieu David: I understand that your app helps you to connect the machine with a person and to create a to-do list task and so on. We’re talking now about the factory – I don’t know where we are, 2.0 or 2.3 or 4.0. I don’t where we are – but we’re talking about factories, which is connected with low signal. We know Sigfox, a French company which is going global now putting IoT everywhere. Does it include as well your solution? The opportunity to get that front itself and connect with your dashboard, is it something you’re already doing? Or is it hype and that’s not yet the case? Could you tell us more about this automated, connected factory or the future of now?
Bruno Lhopiteau: It’s a bit of both. It’s obviously overhyped. It’s also something very useful. It’s a big topic. Let me try to break it down a little bit.
The ability to get information from the machines had been there for a long time. It was not IoT but a scalar type of systems, DCS, plant control systems. I mentioned we work a lot in power plants. Power plants are controlled by something called DCS, a distributed control system. We can collect real-time information on the machine condition operating parameters. And for a long time, for 20 years already, we have built an integration between subsystems and ours.
What IoT brings is much more flexibility and much more cost in modifying the sensors and getting that information out. So that, factories that were not so automated or didn’t have control systems, unlike a power plant, can do it now at fairly low cost with a lot of flexibility. So this is something we want to use. But the technology involved, the design principles involved have been well-known to us and to companies like us for a long time, there’s really nothing new.
We’re able to capture an alarm type of information – there’s a problem, what is the problem, where is the problem. We’re able to capture meter value or measurements, a value that instrument is measuring. So this has always been the case. It was the case with the DCS but today we’re able to combine data from DCS, from a scalar and from IoT instruments at a fairly low cost.
Of course, we utilize this data. So in many of our projects, we connect to an IoT cloud and to such systems. We are able to influence the design and sometimes we recommend what type of sensors, what type of measurements will be useful to have in the system. But we complement this with what has always been a blind spot, it’s data from people.
Today, in highly automated factories, you still have people taking measurements with a portable device. There’s always a mix of online and offline, but it’s quite common you have a guy taking vibration measurement with a portable device, a guy taking infrared pictures with a portable infrared camera. Where does this information go? We are able to retrieve this information and put it in the same central database so that the people who make decisions can look at all these. That’s one. It’s still a type of digital information but it’s captured by someone who carries the reader.
The most important one is actually people doing the work. This is what I described before – people doing inspections, people doing repair, people doing preventive maintenance, people supervising something in the plant, and how to put them in the digital picture of the plant. So this is really what we do. But then, of course, we will combine with IoT.
Now the big overhype. My team was at a conference in Kunshan last Friday, a 4.0 conference. Everybody was talking about IoT because everybody wants to listen to the IoT industry 4.0. Everybody was saying the number one application is predictive maintenance. You might have heard this word “predictive maintenance.” There was even someone talking about “prescriptive maintenance.” What is prescriptive maintenance? I don’t know.
Everybody says the number one application of IoT is … then you ask what you have done? What project? Where? How? Usually, there’s nothing. It is a very interesting field with a lot of hype, very little real-life application or a lot of misguided applications. We see a lot of EC meters to collect on IoT, energy meters. So people say, “We’re going to monitor the energy used in a plant and based on these, we’re going to do something related to maintenance among others.” Then you monitor your energy consumption, you have a lot of nice graphs. Then what? It’s not as simple as that. It’s interesting.
There are new technological capabilities, they are not enough but we believe that by combining them with specific industrial know-how in China with people, what people know, what people do, then you able to get something out of it. This is what we do. It’s what we do on a fairly large scale.
So we have very, very large clients in the water industry, for example. I think our largest clients are water companies, state-owned Chinese water companies that are doing that. They have implemented a centralized maintenance management system, they collect data from sensors, they collect data from their people and they ensure that people actually implement the regulatory inspections, implement the preventive maintenance plan and they use this as a continuous improvement tool with very good results.
I mentioned how we start a project with an audit, and we identify the challenges and opportunities. Based on this audit, we design a project. Part of the project is to define KPIs so you can measure how much results we have obtained. If you don’t get results, how do you adjust? We’re able to monitor the return on investment.
Those clients, typically in the water industry, have obtained very good results. The first result is usually that you’re able to prove regulatory compliance. You’re able to prove that your people are doing the job, doing all the checks as they should be. This is already something quite major. When you’re a water company, you get audited by the government more and more. The Chinese government has become very strict, especially when it comes to water quality, safety in general and environmental compliance. So these people are under a lot of pressure.
Before, to prove your compliance, it was very hard. You have to go through a lot of paperwork, you have to talk your way out of it. Now, it’s just there. The auditor comes and looks at the system. It has very high reliability because of the QR code scanning. Because of the picture taking, you know that the guy has actually been there. You can prove because he scanned the QR code, it has the GPS coordinates, you have a picture, and you have the login name. It proves to the authority that you complied at the level that you never had before. That’s how we use the mobile technology and in combination with IoT, I would say.
Matthieu David: It reminds me of Peter Thiel, the founder of PayPal and early investor of Facebook ad, with his company Palantir, he said, “Where there is something to do is where there is a need of technology and a need of human together.” That’s what you are describing.
I’d like to go back on what we call the Factory 4.0. Does it mean there’s a limit to Factory 4.0? The machines which have been built and which are used currently may not be fully equipped to be connected and then you cannot add up this connection in all the things we are talking about to make it fully connected. What’s wrong with what we hear, what people say on the scene as you heard and what’s really going on? Why is there such a gap?
Bruno Lhopiteau: The great advantage of today’s IoT type of technology is that you can easily equip even older machinery. It gives you much more flexibility at a low cost. It basically gives you much more flexibility there.
The difficulty we see from all the players dealing with IoT or 4.0, the problem is everybody’s doing it. All kinds of companies get into this market and are telling you that they are going to do a plant IoT and they’re all telling you that the number one application is infrastructure maintenance management in China. Alibaba is doing it, Tencent is doing it, all the big automation suppliers which have been in this industry for forever actually are telling it. All kind of software companies are doing it. There are a lot of startups six months ago, they invented some new kind of sensors or they invented nothing, they just know an opportunity and they assembled a small team of students doing it. Everybody is doing 4.0. This creates confusion of course, but it’s nice to see.
What’s missing in most projects, applying such technology for maintenance – just talk about maintenance because it is my fear – is specific know-how. A lot of people misunderstand it, they think it’s easy. If you’re doing maintenance, “I’m going to have a sensor to measure something – temperature.” When the temperature is high, why do we know there’s a problem? It’s going to send an alarm. Then the maintenance guy will see the alarm, he would go and look at the machine. That’s predictive maintenance because you see something before a problem happens.
There are a lot of problems with that. First, it’s not predictive at all. It’s just alarm management. If you capture an alarm at a high temperature, there’s already a problem. It may be a hidden problem but it’s already a problem. So you first have a problem with your concept of what is predictive, what is preventive, what is infrastructure maintenance management in China.
Most people are not even aware of the concept, the definitions which are well-known in this industry. There are international standards that define the meaning of the words that have been around for 20 years, 30 years in some cases. A lot of beginners who have good technology are trying to apply them for maintenance but it’s misguided. They don’t really know.
We see a lot of proof of concept type of projects. You’re dealing with a lot of startups so you’re familiar with that idea. You try something on a small scale and it’s not too expensive, maybe it’s free. People are very happy because of the startup doing it. If you’re a big company, you’re very happy because you sponsor a startup so you can do some marketing around it, “We’re a bigger group, we ally with startups. We set up an incubator and they try new stuff in our plants.” So there’s a lot of proof of concept that does not go anywhere after the initial project. That is something we see a lot, and it’s a pity.
I think is going to slow down and you’re going to have a lot of companies that will disappear. Obviously, if you don’t pass the proof of concept stage, you disappear. You need to make money as a company as well. We see this with Alibaba. Alibaba is one of our partners, they have great technology, they have very huge financial means, obviously, and they have great technology and they have a good customer base, and they recognize that they need expertise as well. We have a partnership with them for a couple of years already but in the last, approximately one year, it has become much, much tighter because they realized they need specific know-how and technological solutions in China into the project that they don’t have such know-how.
So we use their cloud platform, we use their IoT platform. We actually are trying to use one more there. They have specific software for machine learning, for example, because our customers have very large databases with a lot of data from sensors, from people, all kind of data accumulated over the years. So this is very good to do machine learning. Alibaba has the tools for that. We bring in specific software and specific industrial know-how in China, our software to ensure the maintenance strategy, Bluebee cloud that runs on the Alibaba platform.
This is what’s going to happen. I think the combination between technology vendors and more generalist technology vendors and companies like us, we do the same with automation suppliers. We work with ABB, for example, have different types of monitoring technologies and they use us for our specific industrial know-how in China. When you combine this, it works.
Matthieu David: Everyone knows about the cloud of Alibaba but you mentioned two other tools, which are IoT platform and machine learning tools from Alibaba. Could you detail a bit more and be more specific on the two platforms which are I think much less known?
Bruno Lhopiteau: Alibaba has invested a lot in these technologies. They have been able to work with municipal governments. I think that’s how they started to monitor all kinds of sensors in the city. Obviously, they have strong technology.
So they have these as part of their offering for maybe a couple of years already. They have a number of large clients for what I would call the simpler mobile applications for maintenance in the Chinese market, which are not that simple. A lot of sensors but simple sensors, not industrial sensors. They are trying to get into the industry. They have very good technology for IoT. Their competitors also have. Tencent has this as well, they are direct competitors. They benefit from their very large scale and investment capability and their capability to acquire certain large clients easily.
Then there’s the machine learning, which I think they have developed for their own use for the Alibaba main e-business platform. They have developed artificial intelligence type of technology. As I believe, I guess, Amazon and Facebook have done for their own applications.
Matthieu David: So it’s mainly API you are using in these cases?
Bruno Lhopiteau: It’s not just APIs. They have a software platform that connects to our database. We have a big database. We have clients managing hundreds of sites for several years already with a lot of data. Once you start using mobile applications for maintenance in the Chinese market, you collect a lot of data. Every worker has as the app. So every day is a lot of data in it. We can plug in their tools, which are used to analyze the data. And because we have specific industrial know-how in China, we’re able to act as kind of specialized data scientists using the Alibaba platform.
Early on, we said we don’t want to develop technologies that have already been developed by other people. So we don’t want to become an IoT company or a machine learning company. We develop only what is not available in the market such as the Bluebee app, but then we use technologies available in the market. So we have been working with open source software for machine learning for several years already. Then when we found Alibaba had very good tools, we started to use their tool as well.
Matthieu David: I read in one article – I can’t remember where it was – written by you. A quotation, you said that when you’re in China, you can have Chinese clients. You mentioned that you have a lot of state-owned enterprises as clients. I think a lot of people want to have Chinese clients, a lot of companies want to have Chinese clients, but it’s hard. Very few foreign companies are able to actually secure Chinese clients.
Could you tell us how you had been able to get into SOE, a state-owned enterprise, which is set at least as close, as not easy to enter, as sometimes a bit old-fashioned in the way they work based on Guangxi, based on connection, and they’re Chinese. How do you manage to get those Chinese clients?
Bruno Lhopiteau: Foreigners asked me this question a lot. I think, first of all, my background. When I started working in China at the end of 1999 for another company, I was employed by Swedish company, my market was Chinese and Swiss, the power plants. I was involved in a lot in large scale power projects, hydropower, nuclear power at the time. Three gorgeous projects, for example. My customers were all state-owned companies. That was normal for me.
Then people were telling me, “Bruno, you work with Chinese companies. It must be so hard. They are very corrupt and they don’t pay and they don’t recognize the value of service.” I was like, “I’m doing very good business with those companies. But maybe you’re right, maybe it’s much easier to work with multinationals.”
So when I started Siveco in 2004, one of the ideas was to go and work with multinationals. There were two reasons. First, that I heard so many good stories about multinationals. As a foreigner, I thought, maybe it’s a good idea and it’s somewhat easier for me. Then I thought also, I didn’t want to compete with my previous company. We didn’t do exactly the same but quite close so I didn’t want to appear competing with my previous company either.
I thought, “Let’s go for it.” We’ve initially focused on multinationals. Then I realized – at least that was my conclusion – multinationals are very slow to make decisions. Corruption exists in multinationals. I’m tempted to say, more than in infrastructure maintenance of Chinese state-owned companies. The type of state-owned companies I work with and I used to work with are big companies under strict control.
I remember around 2002, my customers in the nuclear power industry at the department manager level, they had their personal bank accounts audited, and some of them were worried. It’s very tight control, which of course you don’t have many private multinational companies which open doors. This, plus the fact that the manager is usually an expat that doesn’t know what’s going on and that is leaving after a while, opens the door to many funny issues with the purchase manager, with the maintenance manager, which you have to find ways to go around.
So I discovered that there was a lot of corruption with multinationals, I discovered they were very slow to make a decision because they needed to report to headquarters. Because also the kind of business I’m in – I’m not selling printers or selling printing leaflets or some kind of local service – I’m selling something a little bit strategic with IT, with expensive services, so they usually have to report to headquarters or they have to go and check how do we work in the UK, how do we work in Germany. Of course, they don’t work with us in those places. That makes decisions very, very, very slow. There are also lots of payment problem with multinationals, and so they lose the contract. Of course, not everything is like this but it’s definitely not easier with multinationals.
After a few years, I decided to go back working for infrastructure maintenance of Chinese state-owned companies. I never really stopped but it was a very, very small part of my business in the year 2004 to 2006 or so. Then I decided, “Let’s go back to infrastructure maintenance of Chinese state-owned companies.” Today, over 80% of my business is with these companies.
Of course, the business is there. I’m dealing with infrastructure projects in China. In one way or another, they are state-owned. Even if they are privately operated, you could argue. In many cases, they are still state-owned or the so-called private company used to be a state-owned company. It’s more or less the same. In China, in the end, everything is state-owned. Everything is owned by us in the end – the land or the factories in one way or another. It’s natural in China to work with state-owned companies.
In many places outside of China, on the Belt and Road, the infrastructures are also state-owned. It’s just business as usual for us. We are doing very well with such companies. Of course, we don’t work with every state-owned company. We work with – I cannot say the best – but we work with large, forward-looking companies.
I could mention Zhongshan Water in the city of Zhongshan in Guangdong Province. The other company that manages the water treatment, water distribution and a few other things, a few other infrastructures, we work with that type of company. In a second-tier city, let’s say a municipal government company, these are very good companies. The management there is very, very clear-minded, we’ll be an enjoying very good business with them for, in this case, Zhongshan Water, I think three years maybe. We keep getting more business with them because they are large, they’re expanding the scope of our solution. They’re expanding their own scope. It’s an example. Business is profitable, they pay well, and they pay on time. It’s good.
Matthieu David: You talked about Belt and Road. That’s a very good transition to this topic. At the same time, you talked about the fact that Chinese factories, you don’t have the same challenges as Western companies and factories in the ‘90s, in the 2000s. Now those Chinese companies are going overseas. The Road and Belt is one of those initiatives actually where you see those Chinese companies working with local companies going overseas – it could be in Middle East, it could be in even Europe now – what do you see now as different challenges? I know that you have been involved in countries like Africa and 70 other countries on the Road and Belt initiative.
Bruno Lhopiteau: Our first project outside of China was in Malaysia, I believe, in 2007 with a Chinese company that builds gas turbine power plants there. They faced the typical challenge of Chinese infrastructure builders abroad. They got the contract but then they are questioned on the quality of their construction, which is a common issue. So the idea that Chinese build cheap and fast but the quality is not that good and it brings you problems down the line. Down the line means when the account is operating or you maintain the plant. So, maintenance problems. There has been a lot of bad press on this. By the way, if you look at infrastructures/power plants in China, they’re working well.
To put it in a nutshell, what’s happening abroad is you don’t have a Chinese ecosystem. You don’t have a whole bunch of Chinese suppliers, subcontractors. We’re all sister, brother companies or part of the state in the end or classmates, friends, people who know how to work together. When you take the Chinese construction company abroad, they bring some of their suppliers, of course, the turbine supplier, some major equipment suppliers. But they cannot bring the entire Chinese ecosystem into Malaysia, for example. Of course not. They have to work with local companies, local customer, local service companies, local operators, and so on.
These bring challenges. You could say there are cultural technical-cultural challenges, just because this usual ecosystem is not there. So companies learned to work within a different ecosystem. This results in what appears as a quality product. Usually, the symptom of that problem appears in relation to maintenance.
It’s things like technical documentation of the plant. A Chinese plant-based in China doesn’t have to be so well documented because anyway all the suppliers know each other. So you want to get spare parts, you don’t have clear specifications for the spare part but you call your friend Mr. Joe in the supplier company down the road and they’ll find a way. They’ll find a way to make it and to deliver to you the next day. When the plant is in Malaysia and you want the same spare parts, and the Malaysian operator is trying to look for the spare part and you find it has no specifications, or the spare part number he has doesn’t match by the supplier in Guangzhou is telling him, big problem.
With this type of documentation issues, which are not documentation issues, it’s bigger than that, but through technical documentation-related exercise or project, we’re able to make it run smoothly. Then, in the end, it’s the same type of infrastructure projects in China. We deliver a consulting project and the system but it’s usually around technical documentation for the new plant to help smoothen this communication of cultural issues that Chinese companies have abroad, and that approach is working quite well.
So, of course, more and more Chinese builders, especially power plant builders know us. They can bring us in. More and more owners in the target country also know us. Usually, they know there’s a challenge, they have some kind of concern, and then they can find us. We have done a lot of marketing in the past 10 years through mostly on the Internet, through our newsletter, for example. We have a newsletter, we publish a lot of stories and case studies. So more and more of these owners in the target country in Malaysia, Indonesia, in North Africa, and in different countries where Chinese are active know about this and they might also ask their Chinese supplier to work with us. Or at least they would hint that maybe a company like us could be useful. That’s how we get into more and more projects.
So indeed, we’ve been working a lot in Southeast Asia, we’ve been working a lot in Africa as well. There was recently a project with the China state grid in Brazil. We have a network of partners in different countries, a lot in Africa, a little bit in South America as well. We get to work together with a local partner that can take care of all the local issues and the long-term support while we focus on the Chinese issue and the technology or the core consulting, maintenance consulting job is.
Matthieu David: I think you have a real passion for your business that you keep thinking about how to innovate. When you’re talking about Bluebee, the app and so on, I think you know in-depth what’s going on and you think about it constantly. How did you get inspired? How did you keep up to date in this very technical environment? How do you keep up to date about your competitors to make sure you are still in the race, you are still leading the race, and you are keeping the position as the largest maintenance advisory company in China?
Bruno Lhopiteau: I don’t look at it like this. Let me try to think about it. We are in a very niche market, very specialized market where very few people are actually in this business. No foreigner is in this business in China or some people come and go more on a project basis. I happen to be the one. And we’re dealing with infrastructure projects in China. I’ve been here for 20 years so we have seen the infrastructure build up the success of what the Chinese government has done when nobody thought they will.
Every year, you hear about how China will collapse, how the infrastructure projects in China will collapse, how those high-speed projects they plan to build are just ridiculous, it will never happen. Then, of course, it happened very consistently. Of course, it’s very motivating to see this, to be part of this, to play a very small, tiny part of this. Infrastructure maintenance management in China is a small part of this big build-up. What I’m doing with maintenance is even smaller part of a small part. We’re part of this big move and it’s very exciting. I think it feels very good.
We create this business. The concept of combining maintenance consulting and technological solutions doesn’t really exist abroad. You go to France, for example, you have software suppliers. Knowledgeable about maintenance but they have software suppliers. Then you have consulting companies that don’t have software. They are going to tell you, “We are strictly consulting the company and we will be independent of the software supplier.” That is their business model and it makes sense abroad. In China, I think it doesn’t make sense. So we created a new type of business. It’s very motivating, it feels good.
We had to train people. I hired young people. I keep hiring young people but I hired young people 15 years ago, and many of them are still with us. They’ve become well-known experts in our industry. This is very nice. I feel very good about this. They feel good.
I do whatever I want with this company. Whatever mistake I’ve made is my mistake. I don’t have to report to headquarters as I had to before. Long time ago now, but before 2004, I was employed by a company. We did very well but I had to report to people back in Sweden, and they didn’t totally agree with my strategy, there were political issues which I don’t have today. If there is a political issue, it is my problem because I’m the boss and the main shareholder. That also helps to keep high motivation but I think it’s a lot of fun. So we are having a lot of fun being a pioneer in those industries.
Sometimes my own staff tells me that sometimes we do things too early. When we released our first WeChat app two years ago, people were saying, “Nobody wants that. Why are we doing it now? Why do we spend money on that?” I told them, “This is a lot of fun and we’d be the first doing that. We’ll announce it and we’ll get one client, a second client. We will have a lot of fun telling people we’re the first to do this.”
Sometimes it doesn’t work out that well and we spend a little bit too much money and it gives us trouble, especially those years where the business was up and down, we were losing money. We lost a lot of money over the years. But in the past few years, we actually were making money with good profit and we are growing faster than before. So, all of these contribute to a kind of “feel good” effect.
Finally, I would say – and I’m thinking aloud here – because I never really tried to think about this but the business is changing. Some core issues we are dealing with are still the same. Although infrastructure projects in China are changing, everybody says that China is changing very fast but at the same time, some things never change.
This constant change in technology, in the competitive landscape, in regulations, and what our customers do is very interesting, especially when we know we can rely on foundations that we have. So it gives us some kind of understanding of where the market is going, a kind of fundamental understanding. Because I think we understand the logic of it. But it’s changing. So it’s always a lot of fun but I think we know where we are going.
My competitors are a funny bunch. It’s changing very fast. We used to have foreign competitors, two of them are very large American IT companies and the maintenance is a very tiny part of business, its subdivision. We see them but they don’t really involve in the market. They sell their software in some other local company, we do the service. They are not maintenance-focused.
We had some specialized competitors, foreign companies, they left. This year, two companies left. Two of our competitors left the market. They withdrew from the market. They say they never made money in infrastructure maintenance management in China so they just gave up. They will make money in their home or market somewhere else. It’s very interesting.
Then we have local competition but it’s a very fragmented type of competition. There are hundreds of IT companies that sometimes try to do what we do but they’re not specialized, they’re IT companies. So they come and go, the competitor change from one project to another.
Then there are a few copycats. Especially we do a lot of marketing and we have this newsletter and then we have the WeChat account where we publish a lot of news. So there are always companies that come and go and try to copy what we do. Usually they believe it’s easy. They think it’s easy. “Oh, it’s just an app. It’s just an app that can scan. We put a tag on the equipment. It’s so easy. We’ll be like Bruno. We’ll make a lot of money.” They come and they disturb us in one or two projects, and they disappear. It’s not strong competition.
That’s also very interesting, to see this changing competitive landscape and to still be there. If we were getting bankrupt, maybe I would not be good. But we are actually doing better and better. All these together make us feel quite passionate about it. I think if you talk to my team members, you will have the same feeling.
Matthieu David: One last question. I’m comparing the video I see now and your picture on LinkedIn and there’s one thing which stays same, it’s the statue behind you. You have a statue behind you which is kind of elephant. Could you tell us the story behind it? I’m sure that you want it on the videos and pictures.
Bruno Lhopiteau: It was behind me all the time. It’s where it is. This is a wooden structure. This is Lord Ganesh, the Indian God. I don’t know if you can see from there.
Matthieu David: I see.
Bruno Lhopiteau: This is Lord Ganesh playing his trumpet. It’s a gift I got on one of my trips to India. We have very little business in India now but before, in my previous company, I used to have a business between China and India, which is very difficult actually because these are two very different countries. When you go from one to another, you really have to switch off your brain or change something. It’s exhausting.
Anyway, I got this in one of my trips to India. I don’t know. Maybe it brings me luck and is a reminder that we do business for infrastructure projects in China and outside of China, which is also very interesting that we are able to see – and my people actually – that what we do in China has reached the level of excellence, of quality, of relevance that we can export. Usually, it’s together with a Chinese construction company but sometimes also on our own, we get projects outside of China and they usually go better, they are usually easier to perform.
We have projects in Thailand, for example. My staff always tell they are very excited to go to Thailand for projects and the projects are easier outside of China. That’s very exciting also. Maybe Ganesh is also for us a reminder. Actually, you cannot see the rest of the room here but I have several items like this that show that we do business on the Belt and Road.
Matthieu David: Congratulations on everything you’ve achieved. I’ve been very impressed to see how many clients you have working and serving several enterprises. One thing you have achieved actually I didn’t mention in the talk and I’m very impressed by is that as a consulting company, you have a product. You have mobile applications for maintenance in the Chinese market. You have a retainer. You have you a SAS system which is very rare and which is what every consulting company is dreaming of and you have achieved it. I’ve been really impressed by this and hearing that you’re going overseas as well.
Thanks again, Bruno, for your time. And for the technical issues of today, that happens sometimes with the Internet. Thank you very much for your patience.
Bruno Lhopiteau: Thank you so much, Matt. Thanks for having me on the show.
Matthieu David: Thanks. Bye-bye, everyone.
Bruno Lhopiteau: Goodbye.
China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.
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