Manufacturing: What it takes to drive transformational change
The digital transformation trend is causing a seismic shift across every industry, where emerging technologies, such as blockchain, automation, augmented reality and IoT/M2M are transforming the way products are made and services are delivered. For the manufacturing sector, robotics and automation have been a core part of the factory for decades, but the real competitive advantage will come from those that are able to use innovative technology to optimise all aspects of the business, from operations through to employee productivity and supply chain efficiencies.
Manufacturers are not afraid of change. Servitization is at the heart of the sector and manufacturers are continually developing new capabilities to provide services and solutions that support their product offering. To this point, a recent Digital Change Survey commissioned by IFS, found that 68 percent of respondents say Servitization is either “well-established and is already paying dividends” or that it is “in progress and is receiving appropriate executive attention and support”. Furthermore, nearly four fifths (79 percent) claim that Servitization gives a competitive advantage or keeps their company abreast of competitors. It should be of little surprise then that manufacturers are bracing themselves for digital transformation.
Of those surveyed, 80 percent regard their businesses as ‘enabled’, ‘enhanced’ or ‘optimised’ to leverage digital technologies. There is consensus that DT is a near-term business priority and company boards are putting their money where their mouths are, with 89 percent of respondents indicating that their business has ‘advantageous’ or ‘adequate’ funding in place for digital projects. The survey found that over a quarter (27 percent) of companies say digital transformation ‘makes them more competitive’, giving them a vital differentiating edge, while 29 percent see the main benefit as ‘accelerating innovation’.
While this is striking, it suggests that companies – not just in manufacturing, but also across oil and energy, aviation, construction and contracting, and service provision industries – have not yet fully grasped the full potential of digital transformation.
Innovation can make or break a company and study after study demonstrates that it as a C-level priority. So why doesn’t it appear to be a driver for digital transformation? Considering technology investments, this could mean that the majority of funds are invested in making internal processes more effective and thereby failing to enable innovation. If ‘improved internal efficiency’ is the key reason to explore DT, this may be short sighted, as it fails to exploit the strategic benefits and makes it more difficult to win the understanding and commitment of the staff.
Employee engagement and upskilling are pivotal to digital transformation. The survey reveals that 42 percent of respondents view ‘aversion to change’ as the main barrier. Manufacturers therefore need to carefully consider how they position IoT and other disruptive technologies, and explain why they are adopting them and what benefits they will bring, thereby transforming staff from ‘data-phobes’ to data fans.
The most successful technology shifts are embraced from the bottom up, as well as the top down—they’re driven by people. The buy-in from staff is mission-critical. The opportunities for growth and improvement for all need to be communicated clearly and openly. Imagine a service engineer hearing predictive maintenance is to be deployed. “That’s going to put me out of a job” would be a common reaction—even if closer questioning found them in need of new inspiration and working methods and open to new opportunities.
Digital transformation is like many other big change projects all about winning the hearts and minds of the people who are actually going to enter the data or use the system hands-on. It needs to be managed on a human scale. We all understand that no amount of short-term savings will make our jobs, or businesses, more secure if the firm isn’t staying competitive in the long-term. Positioning digital change as a strategic, rather than tactical decision, is vital.
The IFS research, which surveyed 750 organisations globally, found that a third of companies are still ‘unprepared to deal with the digital skills gap’. Smart businesses are already spotting potential data candidates like our service engineer above, who have the appetite and skills to expand their role. How can companies bridge the skills gap affordably, sustainably and creatively?
- Consider how your organisational structure needs to be developed to foster digital development. For large companies, there is the option of creating new departments dedicated to digital initiatives by hothousing analytic skills and nurturing them in-house;
- Conduct digital competence inventory: there is a significant need for training staff in managing and analysing data. This must be met for companies to succeed with digital initiatives. Establish what technology in your company is key for development. As part of this digital inventory start earmarking individual staff members who have the drive to upskill;
- Developing skills properly is paramount. HR teams need to identify which roles need to be transformed and where new talent is needed. Bring in external trainers to provide new perspectives;
- Work together with local universities, both to attract talent and to influence the schools to focus their education programs in the right areas. Placement schemes offer undergraduates real-life programming experience, growing the firm and the student. Apprenticeship schemes discover local talent and give them support and a place to grow.
There are three elements to succeed with digital transformation—technology, investment and people. The technology aspect is often mastered most successfully, as it is driven by technology experts with clearly dedicated areas of responsibility. The main question is whether you are focusing on the right technology to drive transformation at the right time. Do you want to be the pioneer taking risks or can you afford to stand still and instead jump on the bandwagon when the technology is more mature?
Regarding investments, manufacturers tend to think that they are investing enough in digital transformation, but are they focusing on the right areas? The results indicate that there is a heavy focus on process efficiencies, so there could be a need to steer the focus towards more innovation-focused investments.
Finally, people is the factor that is most often forgotten in the digital transformation process. This is important from both a talent and communications perspective. If over 40 percent of companies view ‘aversion to change’ as the main barrier to embracing digital transformation, employee communications is of utmost importance to make sure that your staff know the purpose of change and how they are affected.
So it’s high time to ask: Where do you need to focus to strengthen these elements and be successful in your digital transformation?
Antony Bourne is the Vice President of Global Industry Solutions at IFS.