Ever since the Industrial Revolution, manufacturing has been at the forefront of innovation. New technologies that improve efficiency and productivity have always been enthusiastically implemented, leading to great benefits for both producer and consumer. Today, an important new dimension is at play, as manufacturers find themselves in the midst of the digital revolution. Those who embrace the forces of disruption will prosper, while those who resist the inevitable will fall by the wayside.
Digital transformation is the only way to ensure lasting success, and manufacturers need to take every step necessary to ensure it is done correctly.
Manufacturers that do not commit to digital transformation will not be able to keep up with competitors who can offer data-based services to their customers. If they do not offer the latest services, buyers will find someone else who does.
The hurdles
Many manufacturers today have an incumbency problem. If their old business models work reliably, managers see no reason to change them.
Moreover, traditional evaluation methods put too much emphasis on short-term performance, which prevents organisations from taking the long view. Innovation projects require real investment that, while not guaranteed to pay dividends in the short term, could be a massive boon in the future.
Another obstacle to successful transformation is created through competing corporate cultures. The traditional manufacturing culture of constant improvement often clashes with the digital culture of constant innovation. For the transformation to be successful, a near-perfect balance must be struck between these two mindsets.
Promising signs
Most major manufacturers are already embracing the digital. Research indicates that 75% of large manufacturers will incorporate the Internet of Things (IoT) and data analytics into their operations by the end of 2019.
This kind of digital integration cannot come soon enough, as IoT technology is revolutionising the manufacturing world. Supply chain systems that were once linear and unchanging are now becoming increasingly interconnected and dynamic. Through the IoT, tools and machinery on the ground can collect and store data during use. This information can then be processed and analysed by artificial intelligence throughout every stage of manufacturing, and at every link along the supply chain.
In the past, such data could only be collected periodically and imperfectly. With IoT technology, it can be continuously harvested, analysed in real-time, and used to constantly improve machines, processes, and customer experiences.
Digital transformation represents a huge opportunity for advancement, and manufacturing leaders should take an optimistic, if cautious, approach to its implementation. Many major manufacturers such as Honeywell International, GE, and Siemens already glean half of their revenues from after-sales services, with digital technologies playing a major role. In fact, service contracts alone contributed around 80% of GE’s industrial earnings in 2010.
The keys to success
While revamping websites, managing social media accounts, and creating online sales channels are all good steps to take, digital transformation requires much more than a simple update of existing business processes.
Leaders need to coach their people to be receptive to change, and aware of its necessity. Only when the entire organisation – including people, processes, strategies, and technologies – has undergone a fundamental and well-managed change, will it be able to reap the full rewards of the transformation.
Digital transformation is an extremely complex process that involves careful coordination at all levels of the organisation. Many manufacturers do not have the in-house capabilities to oversee the entire process. In this case, it is wise to enlist the help of a third party that can act as an essential guide throughout the transformation, ensuring that the changes are designed to produce substantial and sustainable benefits.
Whether or not the organisation enlists outside assistance, the CEO must lead the charge and bridge the gap between traditional and digital business models. If the CEO is seen to have the right attitude towards change, and if the concepts and strategies behind the transformation are well communicated, then the other members of the organisation will follow.
For digital transformation to be successful, manufacturers need to be far-sighted, investing in constant innovation. They must also be aware of the fact that transformation itself is not a singular event. It is an ongoing process that requires consistent commitment.
Manufacturing has always been about staying ahead of the curve – and while the means this time are different, the fundamental concept remains the same. The entrepreneurial, forward-looking spirit that has always been characteristic of the best manufacturers is needed now more than ever before. Indeed, the future will belong to those who embrace it.
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