The Definitive Guide: Digital Transformation in Manufacturing
February 6, 2020
Forty percent of all technology spending last year went towards digital transformation. Yet, few manufacturers are responding to opportunities and threats presented by the digital revolution in a comprehensive, coordinated way. Technology has outpaced the evolution of business processes, and it is time for us all to catch up. Those that fail to act now will be left behind.
Digital transformation in the manufacturing industry means so much more than simply digitizing long-standing paper-based processes. Digital transformation means integrating digital technology into all areas of your business. It means redefining your business strategies, creating new business models on the back of technology, and making technology your unfair advantage.
Digital transformation is the Fourth Industrial Revolution. It marks a transition away from a global economy powered by machines with human operators, and towards one powered by artificial intelligence, augmented reality, robotics, 3D printing, and the cloud.
If steam powered the First Industrial Revolution, then data is powering the Fourth. Data is dragging strategic decision making out of the shadowy world of gut instinct and opinion into the light of machine learning and intelligent predictive outcomes. We are living in the era of Industry 4.0, where traditional manufacturing and industrial practices collide with the technological world.
The First Industrial Revolution (1760-1840) saw the transition to new manufacturing processes; the Second Industrial Revolution (1870-1914) was driven by the advent of steel production, electricity, and petroleum; and the Third Industrial Revolution (the 1960s) was triggered by computing and high-level automation in production.
Digital transformation in manufacturing promises the merging of operational technology with information technology, building a cyber-physical production system that delivers greater efficiency, better quality, and stronger relationships between producers, suppliers, and customers.
Digital transformation covers a vast range of technologies, but there are five that are most crucial to the manufacturing industry. They are as follows:
Digital transformation does come with associated risks. It takes power away from human actors who have a nuanced understanding of manufacturing processes, and puts it into the hands of computers. If errors are codified into complex systems, it can lead to problems that spiral out of control. Cyberattacks, data breaches, compliance, and third-party vulnerabilities are all challenges that we have to take very seriously.
Overall, however, it is clear that the risks associated with a “do-nothing” approach vastly outweigh those of taking action. Technology has leveled the playing field, and barriers to entry are low. Companies need no longer spend vast sums of money on building the technology they need – they can ‘lease’ it from SaaS providers.
Manufacturers all over the world are waking up to the opportunities and threats of digital transformation. A cursory flick through Made in China 2025 (the Chinese government’s 10-year plan for manufacturing) leaves us in no doubt over the centrality of digital transformation to the country’s plans. The same applies to Germany’s Industry 4.0 Strategy, which aims to position Germany as the “world’s leading user and provider of digitalised (sic) production technologies.”
One fun and inspiring example of digital transformation in action is the case of Barilla, an Italian company based in Parma that is a significant player in the production of pasta, sauces, ready meals, and snacks. Barilla teamed up with TNO, a Dutch Applied Research Centre located in Eindhoven, to create the world’s first (and only) 3D printed pasta.
Barilla launched an online contest that challenged customers to design the most creative pasta shape. The project (a collaborative effort between Barilla’s agronomists, food technologists, chemists, microbiologists, engineers, and marketers) drew tremendous media attention, casting Barilla as a forward-thinking, innovative company in what has traditionally been viewed as a somewhat dull industry. Besides the PR boost, Barilla gained valuable insights into its customers’ tastes and desires.
Having developed 3D pasta printing technology, Barilla can now explore several new revenue-generating opportunities. They could develop a domestic 3D pasta printer with an associated Barilla app for customers to print pasta at home. They could install pasta printers at pasta shops, supermarkets, or restaurants, creating a unique gastronomic experience. Or, they could move into ecommerce, selling pasta directly to consumers based on their custom designs.
Examples of the digital transformation industry can be found in every sector. BMW’s much-lauded iDrive in-car control and infotainment system has attracted new buyers to the brand who would never have chosen a BMW on engine specs alone. General Electric has increased its annual energy production by 20% by using interconnected sensors, data networks, and analytics that tweak turbines for peak efficiency. And, Lego Group has clawed its way back from the brink of bankruptcy by shifting focus away from manufacturing plastic bricks and towards movies, mobile games, and mobile applications.
The team that has taken your company to where you are today might not be the one to guide you towards a digital future. You need to plug skills gaps with new employees experienced in areas such as AI and machine learning, and all your efforts need to be headed up by a dynamic and passionate CIO.
There will already be passionate, digitally-minded employees at your company who have begun small-scale digital initiatives themselves. Others will have strong views about which direction the company should take on its digital journey. These people and their ideas are incredibly valuable and should be surveyed early.
Your strategy has to be one that your entire enterprise understands and buys into. That means all the right stakeholders should be involved in its creation. Digital transformation spans long-term planning horizons. CIOs have to master emergent strategies – ones that develop and respond to feedback from a complex array of economic, social, and governmental interrelationships.
Any technology shift needs to be backed up by a corresponding shift in culture. You need to cultivate a ‘growth’ rather than a ‘fixed’ mindset – one in which taking interpersonal risks, such as asking for help, admitting mistakes and vulnerabilities, or expressing concerns, are not only tolerated but actively encouraged.