Nearly a decade after smart manufacturing was introduced, the manufacturing industry is still dealing with many challenges to fully implement and benefit from this new way of working. The current situation and the future for Industry 4.0 were discussed during “Digital Transformation in Manufacturing: Connecting Theory to Practice”, a roundtable jointly hosted by The Economist and DXC Technology in Stuttgart on 2 July, 2018.

Changing, adapting and aligning the entire organisational culture with the new smart connected manufacturing and digital transformation plans, training the employees to gain new skills to work with the new technology and under the new strategy, as well as the questions of how to deal with the issue of an aging workforce in Europe are just some of the challenges that were raised during the roundtable discussion. Martin Rainer and Wolfgang Lucny, DXC’s manufacturing industry experts, talked about the takeaways from the roundtable in a previous THRIVE article, and in this post they are addressing the challenges that lie ahead for the industry, fundamental next steps and the importance of partnership and cooperation for smart connected manufacturing.

Essential steps manufacturers should take for future digital transformation

Martin Rainer: Do your homework first. That doesn’t mean you need to renew everything, but it requires cleaning up your legacy environment. Clean up in terms of basic infrastructure, data — it is extremely important to have a certain degree of centralization and standardization in your master data, especially product master data, customer master data — and how it all links up to different configurations of the product, how it translates into pricing. A challenge that has kept us busy for two decades is something that is absolutely necessary today as well.

Furthermore, while it is extremely important that you find a quick and relatively easy start into testing out a couple of use cases, it is equally important to create and maintain a bigger digital picture, including a vision about the reference architecture by the business model. Creating such a holistic picture and maintaining it as you move forward with your digital transformation is as important as getting a quick and easy start into testing out things, so that you know how the entire company and operating model are going to transform via digital technology.

Wolfgang Lucny: The effort that leaders must make shouldn’t be underestimated. Leaders should help the teams cope with change, outline the vision, motivate the teams, drive them through the organisational and cultural change. We often see that digital initiatives are driven in a bottom-up manner. But, it has to be a top-down approach; it has to be driven by the board and the company leaders, respectively. It requires constant effort and communication to guide the company, its employees and partners through that change, and to be very transparent and show what digital transformation will mean for each of them, and how everyone can prepare himself or herself for the future to address the upcoming challenges.

Don’t stress over the thought that you might be lagging behind. If you read the reports on smart connected manufacturing, such as Michael Gale and Chris Aaron’s book “The Digital Helix: Transforming Your Organization’s DNA to Thrive in the Digital Age”, you will see that only about 6 per cent of the companies worldwide have fully engaged in digital transformation. The rest are still trying to find the way. We are still at the beginning of the journey, even though we’ve been talking about Industry 4.0 since 2011.

However, don’t underestimate the need for digital transformation either. The change will come. It might not be as quick as we envisioned, but you have to engage in that area, you have to think what it means for your company and how you need to adjust. New competitors, who are not in sight today, might appear, and they might just eat your lunch if you are not prepared for the change. So, if you haven’t started yet — now is the time to do it.

 

The smart connected manufacturing era requires much more cooperation and collaboration than competition.

 

Alliances and partnerships are key 

WL: The smart connected manufacturing era requires much more cooperation and collaboration than competition. Openness has to become the new mantra — not only internally by tearing down the traditional functional silos to establish true end-to-end processes along the customer journey, but also externally by engaging your suppliers, your competition and for sure your customers in moving towards open innovation, new products and new business models. As digital technologies are at the core of digital transformation, you must have a strategy on how to secure the relevant digital capabilities, skills and competences which are becoming — at least in Europe — more expensive and less and less available.

If you are a manufacturer, you need to evaluate your current IT skills base, identify existing gaps, assess how likely are you to acquire fresh talent from the market, i.e., do you have the required reputation, and ask yourself whether you can ensure a fruitful career for people once they join your company’s IT space. Or, think whether it would be a better idea to partner with esteemed IT companies, which will bring onboard their know-how, high-quality skills and competencies. We see most companies are choosing the latter. They either acquire smaller IT companies to get competencies onboard or they partner with larger corporations, such as DXC Technology, on their way ahead. However, everybody should be aware that there is a war for talent out there, in terms of IT talents and especially regarding digital skills in analytics, artificial intelligence (AI), security and a few other fields.

Where are the start-ups in the whole equation?

MR: Start-up culture, as well as innovation driven by start-ups, is becoming more and more important since there is great value in learning from each other. Initially, most start-ups were in Silicon Valley. However, during the last years, the European start-up scene has become quite active as well, especially in Germany and cities like Berlin and Stuttgart. Enterprises can either engage with start-ups directly, e.g., through hackathons, or by participating in relevant start-up platforms.

Take for example, an innovation platform based in Stuttgart, which unites global young tech companies with the unrivalled tech expertise from Silicon Valley and the best of German engineering. DXC Technology as one of the founding partners helps support this platform together with other partners such as Daimler, the University of Stuttgart, BASF, ZF, and Porsche. How does STARTUP AUTOBAHN work? Several start-ups are selected, and the larger companies work with them for a 6-month period to accelerate their operation and help them thrive. Some of the areas this innovation platform is focused on are internet of things (IoT), manufacturing, location-based services, cyber security, customer experience and predictive analytics. You can imagine how powerful this collaboration is, as large companies provide coaching for the young creative people, helping them take the first step and grow their great ideas into a sustainable business.

Another advantage of such partnerships is that new and innovative technologies are incubated into the large enterprises and companies. Mind you, it doesn’t mean that the collaboration should end up with the large company buying the small start-up. That is not the purpose. The purpose is to create an ecosystem, a community that combines start-up culture, start-up innovation with the experience, capital power and the leadership of larger enterprises.

Partnering is vital but creates a new type of security issues

WL: This new way of working requires much more openness, partnering and knowledge-sharing among companies. Past competitors, partners, suppliers and customers need to collaborate in the new world and build a connected and integrated ecosystem. And collaboration means opening up and sharing information in a secure way, all the way down to even intellectual property.

So, by design this means that going forward the security challenges will be much broader. Not only because of the business ecosystem, but also because of the many smart products and devices which will be connected and integrated into your company’s network. This won’t only increase the complexity for companies, but it will also mean that they will have to have a proper information governance / data management practice in place to determine which information can be shared with whom and when. I strongly believe that most manufacturers have to do their homework first before they can participate in an open but secure collaborative platform business.

Curious about how these suggestions for Industry 4.0 work in practice? Take a look at some successful cases here: Real world examples of smart connected manufacturing.