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Many manufacturers ‘falling behind’ in digital transformation, says Deloitte

A large number of manufacturers are “falling behind” in the race towards digital transformation, according to a new study by Deloitte, one of the world’s largest management consultancies.

Deloitte says that even though the fourth industrial revolution, or Industry 4.0, was “born in the factory, many manufacturers were falling behind in adopting broader digital transformation initiatives that span the entire enterprise.

To provide a quick overview, digitalization refers to the practice of integrating operations technology, such as robots and other machines, with information technology, such as sensors, networks and, of course, computers. 

Not only does digitalization of this type provide new and precise ways to monitor and manage machines, they can also include software that integrates the design and prototyping with production, making the manufacturing process far more efficient and productive.

Even more benefits of digitalizaton include enabling staff across many sites and departments with one platform to prevent duplication of work and greater collaboration.

Some companies are even introducing artificial intelligence into the process to enable them to analyze vast amounts of data and help them make better decisions.

However, what the technology is available to make all of the above and more possible, according to Deloitte, only some companies are making the most of it.

Deloitte surveyed 193 C-level executives around the globe to identify frontrunner organizations in manufacturing that are leading on the path toward digital maturity and distinctive traits they possessed.

The report discovered these frontrunners demonstrated the following characteristics:

  • Adopting a long-term, dynamic approach to digital strategy: Frontrunners were nearly two times more likely to connect investments in advanced technologies to increase customer engagement than stragglers.
  • Using the power of the ecosystem: Frontrunners are 2.3 times more likely than stragglers to seek out ecosystem relationships that create new value for customers.
  • Confidence in leadership and workforce talent: Frontrunner manufacturers seem to have higher confidence in their ability to address these changes than overall respondents.
  • Customer-centric innovation powered by technology: Frontrunners are more likely to be adept at translating technology into innovation that delivers customer value.

Among the companies that Deloitte highlights are Airbus, Mitsui, and Deere (see below).

The move toward becoming a digital enterprise generally starts with successfully bridging what Deloitte calls the complex “physical-digital-physical” – or PDP – loop, a hallmark of the Fourth Industrial Revolution.

This is a term that is somewhat similar to “cyber-physical systems”, which is another term used in manufacturing and industry to illustrate the OT-IT convergence.

At its most basic, says Deloitte, this complex PDP cycle enables real-time access to data and intelligence throughout the business, giving actionable insights to operational leaders for making game-changing decisions.

In manufacturing, this PDP loop has become common in the product life cycle, whereby developers create a “digital twin” of a physical product they are designing and then use real-time data and analysis to optimize the product design across a number of parameters before sending the product into production.

Airbus: Wise in the skies

Airbus, a global aerospace and defense company, uses digital innovation to enhance value for its customers.

“Skywise”, an open-data platform created by the company, enables its customer to seek support of 20,000 Airbus engineers throughout the lifespan of an aircraft.

This platform offers features such as fleet analysis, efficiency monitoring, and predictive maintenance along with data analytics tools to minimize fuel consumption.

Airbus’s customer-centric innovation has resulted in more than 12 airlines and 2,000 aircrafts connecting to its digital platform.

Mitsui: New role for new times

Mitsui, a global industrial products conglomerate, focused on leadership and talent to enable and drive its digital transformation strategy.

It created a new role of the chief digital officer (CDO) to drive companywide precedence in digital transformation initiatives.

The new CDO set up a digital transformation strategy team consisting of existing employees from the company’s business innovation department and Mitsui Knowledge Industry as well as new employees with specialization in digital and cybernetics.

The digital transformation team works to identify business opportunities by applying AI capabilities to existing data and by using IoT to drive factory automation, predict system failures, increase efficiency, and forecast supply and demand.

John Deere: Down on the digital farm

Deere & Company, an American construction and heavy equipment manufacturer, is among the frontrunners in integrating innovative designs and solutions to its products.

The company identifies innovation enabled by technology and data analytics along with connecting machines with people, technology, and insights as critical to success.

Deere & Company has built smart, connected products with features such as satellite guidance and live data monitoring. The data is collected through sensors and pulled into a cloud for analysis, thereby helping customers make informed decisions.

Through a web platform, the company is also able to remotely diagnose machines in the field and help its customers with predictive maintenance, thereby reducing downtime.

Through digital innovation at the core, Deere & Company has been able to provide sustained value to its customers.

Money makes all the difference

Deloitte noted that the paths between the frontrunners and stragglers diverged when it came to their investment choices.

Frontrunners look to technology’s long-term impact and they care how that technology will increase customer satisfaction and engagement.

Both factors reflect a broader view of how advanced technologies are part of a long-term digital strategy, one that is in lock-step with customer needs to maximize business results and deliver customer value.

Frontrunners were nearly two times more likely to connect investments in advanced technologies to increasing customer engagement than stragglers.

In contrast to the “long-term impact”, stragglers were four times more likely to invest in technologies based on their ability to show “quick wins”.

Nonetheless, this short-term approach is limiting, and can stand in the way of digital maturity.

Deloitte makes the following recommendations, which it says may prove helpful for frontrunners, followers, and stragglers:

Hone your digital strategy: At this point, most manufacturers should be finalizing their digital strategy and, in some cases, already executing against defined goals.

To succeed, ensure there are short-term projects with measurable return on investment that tie into longer-term “big wins” that have the potential to redefine the way an organization delivers value to the market.

Talent and workforce: As one of the biggest potential stumbling blocks for digital transformation in manufacturing, getting talent right could be critical.

Invest in identifying how your workforce might need to change in the face of digital transformation.

This may involve building scenarios for the skill sets that will be necessary in five and 10 years, and working backward to develop training programs in addition to new recruitment tactics that align to the scenarios.

Technology: Advanced technologies can accelerate the pace of transformation in your organization.

Rather than starting with a business process that is “broken”, apply advanced technology like AI and robotic process automation to a business process that is functioning well because the positive results will likely build trust and demonstrate the efficacy of technology in a well-understood business area.

Value creation: Digital strategy creates new growth opportunities as smart connected products enable a deeper understanding of the customers.

Prioritize and invest in technologies that add value to and enhance the customer experience.

A more engaging and value-driven experience for customers is likely to help forge long-term relationships with them.