Manufacturers are making significant progress replacing a legacy hierarchical organization and decision-making model with one that is flatter, more agile, and based on collaboration. Technology is helping, but cultural resistance still poses barriers.

The era of Manufacturing 2.0, otherwise known as The Industrial Revolution, saw manufacturing leaders leverage inexpensive electricity to introduce mass production assembly lines which, in turn, brought about the notion of division of labor. Because products, processes, and plant equipment changed rarely in those days, individual workers could be trained and focused on one or a small set of repeatable tasks. Easily replaceable, workers and their immediate supervisors weren’t required to make decisions or understand the end-to-end production process. Orders came from up the hierarchical chain of command.

Today, hierarchical management structures and top-down decisionmaking are still the norm in manufacturing. But, slowly, the legacy is giving way to more collaborative organizational models and decision-making. Why? For one thing, rising customer appetites for constant innovation and customized products means that manufacturers must become not only efficient but also highly agile and responsive. Hierarchical organizational models are usually not the most agile.

Manufacturing leaders that can move the needle on culture and behavior believe they will emerge as more efficient, productive, and agile competitors.

At the same time, thanks to digitization and Manufacturing 4.0, manufacturers have access to real-time data that they can use to quickly react to changes in demand or even head off production problems before they happen. But making those real-time adjustments in the M4.0 era means that manufacturers no longer have the time to massage data, run it up the management hierarchy, and wait for orders. Decisions must be made in real time and as close to the product line generating the data as possible, by workers and supervisors who understand the full business and process implications of their decisions, and who can communicate effectively with colleagues whose functions may be affected.

In other words, they need to collaborate.

This transition to flatter, collaborative organizational structures and decision-making models is confirmed in new research from the Manufacturing Leadership Council. The Council’s Collaborative Enterprise study, based on a survey of manufacturing leaders, shows that, within the next five years, collaborative organizational structures will replace hierarchical ones as the primary model for manufacturers. And, the study shows, manufacturers believe that this collaborative approach to decision-making will lead to increased efficiency and productivity and fewer errors. Manufacturers recognize, however, that, to arrive at a more collaborative future, they will need to overcome and change current corporate cultures and individual behaviors.

Collaboration on the Rise

While 24% of manufacturing leaders surveyed by the ML Council describe their companies’ current corporate structure as collaborative today, 39% predicted it will be collaborative within five years. At the same time, only 19% predicted that their companies will be organized hierarchically in five years, down from the 37% who said their companies are hierarchical today. (Chart 1.)

A solid majority of manufacturers taking part in the survey—61%–said enhancing cross-functional collaboration will enable them to enhance productivity, reduce errors, and leverage worker skills. (Chart 3.) Also driving collaborative models, manufacturers said, are the need to cut costs and waste and the need to enhance speed and agility.

In terms of what corporate functions manufacturing needs most to collaborate with, 56% of survey respondents identified design and engineering as the primary target. (Chart 8.) Another 49% said manufacturing is most in need of collaborating better with the supply chain function.

Turning to collaboration involving external processes, the largest group of manufacturers—81%–said their organizations most need to improve collaboration with suppliers. (Chart 9.) The next-largest group—76%–said manufacturing most needs to improve collaboration with key customers.

While manufacturers are optimistic about the spread and impact of more collaboration, it appears that, today, efforts to drive collaboration are tactical and project-focused rather than strategic and enterprise-wide. The largest group of survey respondents—51%–said that collaboration most often takes place in meetings where multiple functions are represented, but only on a project-by-project basis. (Chart 4.) Only nine percent said their companies conduct regular reviews to assess collaboration, and just 30% said their companies conduct scheduled check-in calls to plan cross-functional collaboration.

At the same time, just 39% of manufacturers said that their companies formally measure and assess leaders in terms of their ability to drive collaboration and exert crossfunctional influence. Fifty percent said their companies currently do not do so.

Barriers to Collaboration

By a wide margin, manufacturers surveyed by the ML Council identified the need for company cultural and behavioral change as posing the greatest challenge to improved collaboration. Seventy-nine percent of respondents said culture and behavior are the greatest barriers to collaboration, while another 59% pointed to the need to continue to operate the business while attempting to shift to a more collaborative model. (Chart 5.) And, asked to identify key factors that will contribute to a successful collaboration transformation, manufacturers identified the need to engage senior leadership in addition to culture change. (Chart 7.)

Part 1 : STRATEGY AND ORGANIZATION

1. Most Are Still Hierarchical, Not Collaborative, but That’s Changing

Q: Which statement best describes how your company’s overall corporate structure is organized today and how you expect your company’s overall corporate structure to be organized in 5 years’ time? (Select one)

2. Digitally-Enabled Collaboration Still Rare

Q: How would you characterize how key functional areas such as manufacturing, product design, supply chain, and R&D are organized today? (Select one)

3. Productivity, Efficiency Goals Driving Collaboration

Q: What are the chief forces driving cross-functional collaboration in your company? (Rank top 3)

Part 2: INTERNAL AND EXTERNAL COLLABORATION INITIATIVES

4. Collaboration Is Being Managed on a Project-by-Project Basis

Q: What statement best describes how your company’s collaborative efforts are being managed? (Select one)

The survey showed that perceived barriers are different when it comes to improving collaboration with external suppliers and partners. There, partner unwillingness to share information poses the most significant barrier, 39% of respondents said. (Chart 10.)

Perhaps not surprisingly, the largest group of survey respondents, 47%, identified middle managers as the group in their companies most resistant to the migration to a flatter, more collaborative organizational structure. (Chart 6.) Only 26% said senior executives are the most recalcitrant.

Asked what key qualities or behaviors senior leaders should adopt to drive collaboration, 61% of respondents said it is important for them to be proactive in engaging in enterprise-wide collaboration initiatives. Another 47% said it’s most important for senior leaders to engage everyone in the organization in collaboration.

Digital Thread Gaining Momentum

Although manufacturers identified company culture and behavior as the most important factors influencing the successful migration to a collaborative model, technology is playing an increasingly key role, particularly Digital Thread approaches which enhance cross-functional communication and processes by establishing standard data models and workflows that define designs and products through their life cycles. Already, 41% of manufacturers said their company has adopted or is adopting a Digital Thread strategy in order to drive increased cross-functional collaboration. (Chart 11.) Thirty-four percent said that, already, their Digital Threads connect with external suppliers and partners as well as across internal functional boundaries.

Fully 83% of manufacturers surveyed said that, over the next five years, Digital Threads will be very important or important in driving crossfunctional collaboration and communication. (Chart 12.) And 79% said the same about the potential for Digital Threads to improve collaboration with external suppliers and partners.

Manufacturers also believe cloud-based systems supporting shared applications and data will have a significantly positive impact on collaboration. Sixty percent of respondents said their companies already use such systems, and 88% of manufacturers said cloud-based systems will be important or very important in driving collaboration over the next five years. Manufacturers were a bit less positive about the impact that social collaboration tools such as Microsoft Sharepoint and Google Drive will have on cross-functional and inter-organizational collaboration. While 71% of manufacturers said their organizations are already using such tools, only 14% said they are highly effective in enabling collaboration. Eighty percent of respondents said they are partially effective.

5. Culture Poses Greatest Barrier to Collaboration

Q: How would you rank the following challenges associated with collaboration in your company? (Rank top 3)

6. Middle Managers Pose Greatest Resistance to Collaborative Integration

Q: From what parts of your company does the greatest resistance to collaborative integration typically come? (Select one)

It’s quite clear that manufacturers expect technology to play an important role in supporting their transition to more collaborative organization and decision-making models. But, at this point in the transformation, it’s not the most important factor. Instead, changing decades of cultural and behavioral norms to encourage cross-functional communication and teamwork is the more pressing prerequisite for achieving greater collaboration. Manufacturing leaders that can move the needle on culture and behavior believe they will emerge as more efficient, productive, and agile competitors.

7. Changes in Culture Will Drive Collaboration

Q: In your opinion, which of the following factors will have the greatest influence on the success or failure of your company’s internal collaboration efforts? (Select one)

8. Better Collaboration Needed Between Manufacturing and Design/Engineering

Q: With which internal functions does your company’s manufacturing organization most need to improve its collaboration? (Select top 3)

9. Manufacturing Needs to Improve External Collaboration with Suppliers, Customers

Q: With which external groups does your company’s manufacturing organization most need to improve collaboration? (Select top 3)

10. Concerns About Information Sharing, Security Inhibit External Collaboration

Q: What do you feel is the greatest challenge to increasing collaboration with external partners? (Select one)

Part 3: COLLABORATION TECHNOLOGIES

11. Digital Thread Is Making Headway

Q: Has your company adopted, or is it in the process of adopting, a “digital thread” approach to enabling collaborative end-to-end sharing of information?

12. And the Importance of Digital Thread Will Grow

Q: In your opinion, over the next 5 years, how important will digital thread strategies be in driving internal crossfunctional collaboration and information sharing at your company? (Select one)