There’s no turning back: the digital transformation is in full swing - we all know that. However, manufacturing companies should by no means see Industry X.0 as a threat; on the contrary, it’s a major opportunity to create value and surpass competition. But, this is only possible if you know the answer to the million-dollar question: “How?” This was top of mind for the participants of the ‘Digital Manufacturing’ roundtable session, which took place on 3 October in Accenture’s Liquid Studio in Utrecht, the Netherlands.
‘The digital transformation is unstoppable. What matters now is figuring out how to make the most of it because we have the opportunity to shape it. There is no tried-and-tested formula to make it happen, the journey must be tailored to each enterprise individually,’ says Eric Schaeffer, Senior Managing Director at Accenture and author of the renowned book Industry X.0 - Realizing Digital Value in Industrial Sectors. This laid the foundation of the roundtable discussion, and the leaders of some of the largest Dutch and international manufacturers present were all eyes and ears.
Changes Beyond RecognitionSchaeffer. ‘The transformation affects all aspects of business, from the manufacturing of products and internal operations to client relations and future workforce and alters them beyond recognition. Technologies like Cloud, IoT and analytics are changing the industrial landscape drastically. As a result, the product changes just as drastically: it’s no longer just about the product, but about the service around it and the outcomes it delivers.
Like Michelin, for instance: the days they “just” manufactured tires are long gone - now, Michelin offers a whole service around the product that made them famous. The product still lies at the heart of the transformation, but the focus is on the outcome: safe tires under all conditions that help to save fuel costs. But, what does this imply for manufacturers? How do they need to transform the products?’ The Michelin story is just one example of a successful digital transformation, but there are many like them.
The Core of the Digital Transformation
‘Products these days need to be smart and connected: that’s the core of the transformation. For this to take place, products must be reinvented. Software becomes the connective tissue that facilitates the continuous reconfiguration of enhanced features. Moreover, it allows for the creation of real-time, adaptive user experiences and interfaces. Smart and connected products are at the forefront of the industry and will continue to be in the future,’ says Schaeffer.
The Tip of the Iceberg
But, then again, we don’t have crystal balls, so who knows what tomorrow looks like? ‘We have only seen the tip of the iceberg, the future remains unknown. Waves of technology will keep succeeding each other at an increasing speed, like the emerging technology of quantum computing, of which we don’t quite know the full extent of its impact yet. It’s up to us to harness them successfully. Embracing innovation is key, and it’s something we should have done yesterday and rather not wait for tomorrow,’ warns Schaeffer.
The roundtable participants wholeheartedly agree on the urgency of hopping on board the transformation train. But, in between words and actions, wide gaps are waiting to be filled. ‘There are tons of ideas on how we should go about digitizing products, but in all fairness, nothing is really happening yet,’ confesses one participant. Other participants also acknowledge the difficulty of actually implementing new processes and “getting things done”.
‘In the upper echelons of the organization, everyone is aware of the fact that a major shift needs to occur, but no one is actually taking action at scale. New digital initiatives are typically triggered from the top of the organization; however, they often result in "just" a business case study in the lower ranks of the organization. At the end of the day, it just never really takes off," concludes one participant.
Just Believe and Go for It?
Another interesting dilemma manufacturers face in light of the transformation is whether to take it step-by-step and wait for proof of added value or throw caution to wind and implement it holistically. It’s an interesting topic that provokes divergent responses. It is quite puzzling that, considering most of the industry leaders are itching to get on board, it remains difficult to get everyone in the organization (from management and operations right up to IT) on the same page and convince them to commit to embarking on a digital journey even though the value hasn’t been explicitly proven.
A few roundtable participants also shared their concerns regarding planning a complete process overhaul. For instance, as one participant pointed out, is it really worth developing a strategy and laying out a detailed roadmap for the next decade or so if we know the digital landscape can change in a flash? ‘It is good if the top of the company can present a digital manufacturing strategy for 2020, but in reality, it no longer works to work out a complete plan and stick to that plan.’ The majority of participants seem to prefer the step-by-step approach, where trial and error can expose weaknesses that can be dealt with in stride. This approach is still considered to be rather “progressive” in the controlled and risk-averse world of the manufacturing industry.
Data Integrity: My Data Is (Not) Your Data
However, there is still a lot of uncertainty about some elements of the digital transformation, as the participants brought forward. More specifically, looking at big data, which is essentially one of the underlying pillars that started this transformation in the first place. Big data and analytics are key in directing any product towards a service and outcome-based design, especially when data is shared with other parties in an ecosystem and connected to other resources.
The importance of creating this ecosystem of partners in your end-to-end supply chain was stressed by a leading semiconductor equipment manufacturer. ‘Who actually has ownership of the data?’ is a question virtually every participant had on their mind. ‘What happens when we share information? How do we know who’s using it and is that even allowed?’ Data integrity remains a hot topic for which a sustainable solution needs to be fine-tuned.
Funding Remains a Challenge, but Wait It’s Already There
Another key challenge in getting the digital manufacturing up and running quickly is definitely funding, especially in the manufacturing business where the main focus is on cost-efficiency and operational effectiveness. Replacing all legacy investments and assets is expensive, but it’s often not even necessary. Legacy systems combined with a spark of innovative creativity often provide a great foundation to shape an effective future-proof platform.
As Schaeffer states: ‘Sure, rotating to the new requires funding; however, what most organizations are unaware of is the enormous amount of existing value that’s currently locked in companies. Supported by mainstream technologies like analytics, the Cloud and IoT, companies can unlock this value! Up to 80 percent of this value resides in interaction with the customer, as well as in digitization of internal operations. Sometimes creating value is not about implementing new business models, but about extracting it from inside the organization - as long as you know how to. Analytics and new technologies help to untrap this unidentified potential. Once an initiative has proven to add value, funding for the next one opens up almost automatically: by leveraging the insights and benefits from the previous project to fund the next ones.’
Roadmap to a Successful Digital Manufacturing: 3 Steps to Take
After the urgency to welcome transformation with open arms was reconfirmed and the idea that funding is a major obstacle was debunked, participants wanted to know what ultimately defines a successful digital transformation. Eric Schaeffer happily shares his recommendations:
Analytics are the basis
The starting point should be leveraging data and analytics in all business domains;
Trial and error is okay
Experimentation is the way to go! There is tremendous value in experiments, and in those that fail;
You can’t start an ecosystem on your own
Open up to the outside world - proactively connect with startups, bring in knowledge and data from other parties, and look beyond the borders of your own industry;
As we experienced during the roundtable discussion, some organizations are already more advanced in the roadmap to the transformation; some still find themselves at the beginning. While virtually everyone in the room agrees that steps should be taken quickly and implemented more holistically, there’s widespread agreement that it all starts with belief, conviction and a vision. The roundtable has sparked some ideas and new approaches on how to convey this message throughout the organization in order to "get going". This will ensure that digital manufacturers embark on the most dynamic journey the industry has ever seen.
As the importance and urgency of digital manufacturing is increasing, we’re definitely far from done talking about this subject. We look forward to diving deeper into specific themes and challenges manufacturers or their customers are faced with. The next roundtable event is will be held in Rotterdam on November 22nd 2017, focusing on the digital enterprise for chemicals and refining. Should you wish to attend or have any other questions, please get in touch with us.