Digital acumen, collaboration, behavior change, and corporate restructuring will be vital to M4.0 leadership, says MLC Hannover panel.

A select panel of Manufacturing Leadership Council delegates took to the stage in the Automation Forum Hall at the world’s largest industrial exhibition in Hannover, Germany in April this year.

Moderated by Manufacturing Leadership Council Co-founder, Vice President and Executive Director, David R. Brousell, this special Hannover Fair event was focused on the topic of “Rethinking Leadership in a 4.0 World”, allowing MLC delegates to explore the need for digital acumen and transformational cultural change among tomorrow’s manufacturing leaders.

MLC Hannover panel delegates included John Fleming, former Executive Vice President, Global Manufacturing and Labor Affairs at Ford Motor Company and Chairman of the MLC’s Board of Governors; Pietro D’Arpa, Corporate Manufacturing Director and Supply Chain Director of European Logistics and Strategic Planning at Procter & Gamble and an MLC Board member; Dan Dwight, President and Chief Executive Officer of Cooley Group and an MLC Board member; Holly Baumgart, Vice President of IT at MLC member company, Sargento Foods, Inc.; and Andrew Bird, Director of Manufacturing IT at MLC member company, Merck & Co., Inc.

Brousell: The manufacturing industry is in the throes of transitioning to a new paradigm called Manufacturing 4.0. You are all dealing with new technologies, new organizational models, and a requirement to manage differently. How do you define your role as a leader in your company today?

Dwight: I believe 4.0 represents a major paradigm shift, breaking down command and control structures to become much more collaborative. Organizational structures in the future will move from traditional pyramids, to something much more circular and inclusive.

D’Arpa: 4.0 leaders also need to be change agents and create a culture and a workforce that is learning continuously. And that’s the key word – continuously.

Fleming: What we need in a 4.0 world are outstanding leaders and they have to continue to do what great leaders have always done. They have to understand the future. They have to be able to articulate that future, make sure the resources are in place – the people, time, money, and the investment – and they have to lay out a path for their people to follow. Articulating the vision, how difficult it may be today, but how good it will be in the future, I think is still really hot. The technology changes, but great leadership is important, regardless.

“If you want to change culture, you have to change behaviors. Behavior change, over time, will lead to culture change. And if you want to change behaviors, you have to change the structure of the company to force that transformation.”

 MLC Board Chairman John Fleming

Dwight: I agree the CEO needs to set the vision but, at the same time, you need to build a level of trust within your organization, and look to trust the data, trust the feedback, trust processes and, most importantly, trust your people to make the decisions they are trained to execute. Empower your people to make the right decisions. If they do, the team wins and the company wins. When they don’t, you have an opportunity to learn collectively from the experience. Give the organization room to learn. You make it a teaching moment. At Cooley, we’re driven by what we call “fearless innovation”. Allow the organization to innovate without the fear of consequences if you fail. We get about 40 percent of our annual revenue from new products so I think that level of innovation is really driven by a culture of learning form what works and what doesn’t.

Brousell: One of the most significant requirements for leaders in the 4.0 era is to develop digital acumen – the ability to think digitally about business models, business processes, and ways of engaging customers and partners – and to understand the potential of technologies such as AI, IoT, analytics, 3D printing, or AR/VR. What does this mean in terms of how you need to operate as leaders and approach your businesses?

D’Arpa: We call it “Digital Fluency” at P&G. Many senior and middle managers don’t have that today. So we’re doing a number of things to address this. For example, we have a specific digital training plan for leaders. We have also adopted a program of reverse mentoring where younger generation employees work with long-term employees to share new ideas about the possibilities of 4.0 tools to help drive a new 4.0 knowledge culture. I’m part of this too. I have a mentor who is a young manager in Germany, 25 years old, newly-hired, and with a strong analytics background. Once a month, we have two hours together where she trains me, and helps me to improve my own digital fluency.

And we need to change the broader digital culture of the company too. There are three ways to do this: build, borrow, and buy. Build: let’s build internally the digital skills we need. Hire the right people. Train the right people. And develop the right solutions. Borrow: if you cannot build because it takes too much time, you can borrow. You can build partnerships with other companies or other groups, other teams, other functions inside the company to develop the solutions that are required. The last is buy; that’s to go outside and buy from a company that developed the knowledge, that we can work alongside and gain the levels of digital fluency we seek. This is not just a challenge for the future; it’s the challenge of today.

Baumgart: Technology is changing so rapidly that it’s difficult for anybody to keep up. What companies that are going to lead in 4.0 will need to do is look across their organization and really work together. That means manufacturing, IT, and engineering coming together, breaking down internal barriers or silos that previously existed, and using each other as talent for what they know, to come together to form the best ideas and projects that will enable the company to progress. No one individual group is going to be able to know it all or be successful in their own. In order to keep up, you’ve got to use everybody you’ve got, and bring them all together. At Sargento, we’re working closely with these three departments to form a joint roadmap for 4.0 of all the things we’re going to work on together. That feels really powerful, and a way to get through all the noise.

Bird: That’s the key item, right there, the cross-functional nature of what we have to do. With 4.0, the “App Culture,” or whatever you want to call it, it’s about the federation of knowledge that is spread across the organization. IT cannot live in a command and control world anymore and be the only people available to build a technology-driven business or drive the business cases. Using business knowledge, the technical knowledge, and other knowledge even from outside the corporation – bringing all that together is where we, as leaders, have to push and help the company drive forward.

Saving that knowledge is another critical part that we’ve been dealing with – getting that knowledge from older workers, that are very good at what they do, but may not be able to explain it scientifically. Getting that knowledge and saving it into our Knowledge Management structure is one of the key items we’re also working on.

Brousell: Is success with the idea of developing digital acumen dependent on information being available to everybody in the organization to achieve cross-organizational collaboration? You’ve got to have the information, of course, but if you’re not structured right with your information flow, could that be a constraint?

D’Arpa: Everybody talks about the democratization of the information process. This process is inevitable and it’s a big benefit to the organization. We need to help people understand that this is the only way to work. The power of new digital technologies is to free up people from repetitive, manual tasks and allow them to look at the overall system, to help them stay one step ahead, and focus more on value-added aspects like innovation. People now have the time and energy to look all across traditional boundaries, across functions, both inside the supply chain and outside the supply chain, and to work in partnership manufacturing with R&D to uncover opportunities that nobody was looking at before.

“Everybody talks about the democratization of the information process.This process is inevitable and it’s a big benefit to the organization. We need to help people understand that this is the only way to work.”

Pietro D’Arpa, P&G

Brousell: So M4.0 is not just a technological revolution, it’s also a cultural revolution. Why is this culture piece often so hard to implement, and what are the best ways to change it?

Fleming: If you want to change culture, you have to change behaviors. Behavior change, over time, will lead to culture change. And if you want to change behaviors, you have to change the structure of the company to force that transformation. I think our job, as leaders, is to work out what that structure change is, and then reward our employees based on the behaviors we want for the future.

To drive digital transformation, we have to train people and make sure that the people we put in place understand it. Then we have to drive, every day, a metrics-based system that looks at whether or not they’re using the data we have available or not. If they’re not, we need to keep going back and identify the reason why. Eventually, we start to move those people who can’t handle this change out of the organization, and let some other people come through. Just saying; “We’re going to change the culture. We’re all going to use the data. We’re going to be digitally-enabled,” is not enough. We have to make it real, otherwise it’s simply a soft, woolly idea. It has to be tough. It has to be about structure, then behavior, and then the new digitally-focused culture we need will come out of it.

“What companies that are going to lead in 4.0 will need to do is look across their organization and really work together. That means manufacturing, IT, and engineering coming together, breaking down internal barriers or silos that previously existed, and using each other as talent for what they know.”

 Holly Baumgart,Sargento,

Dwight: When I took over running the Cooley Group, the company was about as functionally-siloed as a company could possibly be. To break down those silos, we actually formalized a collaboration process and built a stage-gate process called “Cross-Function Projects” (CFP). Now, whenever we have a material business issue in the company, we manage it under a CFP. There are infinite ways to solve a problem, but in our experience, inviting input from individuals across teams within the organization is the most effective way to enable collaborative, effective, and efficient problem solving. Since establishing the CFP process, we’ve completed over 50 cross-functional projects and engaged over 40% of the employees, including over 60% of the salaried people and 25% of our line operators. We took the collaboration right down onto the factory floor, and then we extended it externally to our suppliers and partners. For half the projects, we have either a customer or one or more vendors in on the project as well. Collaboration isn’t just internal. It has to reach beyond the company boundaries and extend externally.

Baumgart: It’s human nature that change can sometimes be difficult. As leaders, we have to help people navigate through that change and create an environment where it’s okay to fail or not to be successful the first time around. Creating that inclusive environment can help people navigate through the different changes they will face in the future. There are different drivers of behavioral change. One could be structure; another could be metrics. For example, within IT at Sargento we started changing the metrics we used towards customer experience, versus just addressing IT issues. That changed the behavior and the mindset of our people to be much more customer-focused. Once we started measuring those metrics every month, and posting them for everyone to see, people changed their behaviors and we ultimately got the cultural change that we were looking for. It was really a simple shift. So I don’t think you always have to change the structure. Even tweaking the metrics can get results.

Brousell: According to many industry observers, one of the most transformational technologies of the future will be artificial intelligence (AI) and machine learning. What do you think the impact of AI will be on our workforces and our management ranks in the future?

“I believe 4.0 represents a major paradigm shift, breaking down command and control structures to become much more collaborative. Organizational structures in the future will move from traditional pyramids, to something much more circular and inclusive.”

 Dan Dwight, Cooley Group

D’Apra: The biggest impact, in my opinion, will not be on the number of jobs. It will be on the content of the jobs than many of our people working in business management will do. A lot of the repetitive work today can be eliminated by artificial intelligence. But artificial intelligence and machine learning can replace the decision-making process, too. So we will need to reskill and up-skill these people. What we need today are people with more analytics skills who can focus on aspects like continuous improvement, on innovation, on analyzing data and extracting value where, today, it’s not possible because we don’t have enough skills. So we need a different generation of employee in an AI world, with different types of skills. Mathematics and analytics will be fundamental to using these technologies to help us transform the company.

Dwight: As we talk about digital transformation and driving a cultural transformation, we need to reimagine the control structure. Eliminating the command and control, top down, pyramid structure, leaves all middle management at the empowered center. At Cooley we use a round organizational chart to represent equally the contributions from the entire team.

Baumgart: At Sargento we have some examples where we’ve implemented a new technology and are having to reskill some talent. But the good news is we actually are growing and we need more talent, so we need everybody. Our people know that they have a position with us, and we’re going to continue to help them evolve and take them along on the journey. We believe that everybody has the ability and desire to learn, and we want to give people new opportunities, which quite frankly, many of them are excited about and ready for.

Bird: At Merck we’ve gone from what we used to call a “manual process review,” which is really just looking at a process and looking for step changes, to using an AI-based tool that does continuous process verification. So, there’s no person that has to go and grab data and put it in spreadsheets and do some analysis anymore. But now they can look at the reports and then act on those changes or look at where we might need to change a raw material, or some other thing. So they’re freed up to do their actual job, which is improving the process. Their job should not be to create spreadsheets and reports. They are now free to be more innovative, to work on things that are more interesting, and that can help us drive more product out the door, and that helps more individuals across the world. At the end of the day, that’s what our mission is: to get that medicine to the people that need it the most. So if we can drive our costs of our medicines down, we can get it into places that had difficulty purchasing it before.

“Using business knowledge, the technical knowledge, and other knowledge even from outside the corporation – bringing all that together is where we, as leaders, have to push and help the company drive forward.”

 Andrew Bird, Merck,

Fleming: I think, in some ways, we shouldn’t be shy about the fact that AI will have a major impact on organizations. If it doesn’t, we will have missed a huge opportunity. In a lot of our work, we’re always looking for the elimination of waste and to be able to use the resources we’ve got to create more value for the customer, and for the boards, and for the shareholders. If you think what AI can do is to take the learning we have and to use that to help make better decisions, it’s fascinating. If we get more product to market faster, it has to have a major benefit and it has to have a major impact.

How we face that, and how we talk to our people about it, how we get them comfortable with it, is another issue. In most countries, we actually don’t have enough people to meet the requirements of our business right now, so there’s a long way to go before people have to fear being out of a job. But they are going to be fearful that their jobs are going to change. And as Holly said, if we then take those people, we reskill them, we up-skill them, we use them more. Let the computers and all the smart things help us to go to a place we haven’t been before to improve the profitability of the business. We have to help people understand that there is a better way. I think it is up to us, as leaders, to help people get through this. From a business point-of-view, it can only be a huge advantage.

Brousell: So how do we manage the whole idea of becoming a more data-driven business, where leaders do not just use their intuition or experience alone, but instead, have to listen to the data and make decisions on that data?

Fleming: This is a problem that’s been around for a long time. Most of us progressed based on our experience and what we knew. So, when people had a problem, the first thing you do is you look inside, to your experience, and try to explain to them what they’ve missed, so they can go away and fix it.

An old boss of mine who used to have a statement on the wall behind his desk that said, “I truly believe in god but, everybody else, bring data.” That is as relevant today, and actually more relevant, as we go forward. We have to drive and force our organizations to use data and to question how decisions were made. Sometimes, you’ve got to be reflective. We have ask constantly ourselves “Are we using the right methodology to come to the answer?” This is part of the structure-drives-behavior-drives-culture-change. If we, as leaders, continue to demonstrate that good decisions will only be made on data, I think, eventually, we will get there.

Baumgart: If leaders can start looking at the data that they’re presented with and making decisions on it, their people will see that activity happening and they’ll recognize that the data is being used to make those decisions, and then they’ll drive that cultural change and that behavioral change around that. So often, data is presented to leaders and they look at it and they might like it, but they don’t actually make the decision on it. We, as leaders, have to hold ourselves accountable to do that. Once that happens, that will drive that cultural change and really create that data-driven mindset all the way through various levels of the company.

Bird: I’d definitely agree. It’s all about walking the walk. If you say you want to use Lean or whatever is the next big thing in the company, but on the shop floor the manager isn’t doing it, it pretty much dies right there. You have to instil that data mindset all the way down and have everything and everyone working in that way. You may have do some hard things quickly sometimes if someone is not doing that. You have to hold people accountable, at the end of the day, to foster that type of culture that you’re trying to drive, and it has to start at the top.

Dwight: At Cooley, there’s a bit of a joke: don’t walk into Dan’s office until you’ve done your math. I welcome your opinion, but it better come with the data to reconcile that thought-process. That was really my way of forcing the organization to change and make the data part of the decision-making process.

Baumgart: One easy way to start is just to review the data and ask questions on it. You may not be ready to make a decision off that data yet, but as soon as your people can see that you’re looking at it and you’re asking questions about it, that will also start to drive the cultural shift.

Brousell: So, to conclude, when you think about the persona of a manufacturing leader in 2025, just five or six years from now, what’s the one characteristic that you think will be most important for success in digital transformation?
Bird: Network collaboration.

Baumgart: Passion.

D’Arpa: People development.

Dwight: Leading smarter.

Fleming: Vision, every time.   M