Big changes in corporate culture will be necessary for manufacturers to make a successful transition to the digital era, a new Manufacturing Leadership Council survey on Manufacturing 4.0 culture reveals.
By Penelope Brown
As Peter Drucker once said, “Culture eats strategy for breakfast. ” As manufacturing evolves to an increasingly digital industry, it’s not just the technology that’s changing. The evolution also demands a correlating change in business culture, one that moves away from hierarchy and siloes to one that is more responsive, empowered, data-driven, and collaborative. The Manufacturing Leadership Council created its latest survey, M4.0 Cultures: Collaborative, Innovative, and Integrated, to find out exactly what manufacturers are doing to achieve this goal.
The work in establishing such a culture, if it doesn’t exist already, can be a daunting challenge. It can’t be done with simple, bandage-type solutions such as posting a mission statement on the walls or offering free pizza once a month. It requires an honest assessment of the current company culture, directional consensus and strategy from leadership, buy-in from employees, and continuous reinforcement throughout the organization. With so many complications from the get-go, it can be easy for many companies to quit a culture change initiative before it’s even begun.
But for those who can stick with it, the payoffs are hard to understate. Improved employee morale can lead to a better committed workforce that is more efficient and productive. Unity between teams and focus on a common goal can lead to improved collaboration and faster innovation. Great culture is also an important recruiting tool for companies looking to add new talent. While this might sound merely like feel-good details, all of this has a measurable and significant impact on the bottom line, not to mention opportunities for future growth.
The movement toward collaborative, innovative cultures will only intensify as Manufacturing 4.0 continues to advance. Manufacturers will need to establish the right mix of leadership, strategy, and perseverance to position themselves for a better future.
PART 1: OVERALL COMPANY CULTURE
1 Value statements are the industry norm
Q: Does your company have an explicitly stated culture or values statement?
2 Most see culture as everyone’s responsibility
Q: Who in your company is responsible for corporate culture?
3 Many say their cultures are collaborative and customer-centric
Q:What terms would you use to describe your company’s culture today?
Manufacturers will need to establish the right mix of leadership, strategy, and perseverance to position themselves for a better future.
4 Most see cultural change as a must in the era of M4.0
Q: Thinking about the requirements of the digital age, does your company believe it needs to change its culture to embrace this new era?
Change is a Must
When it comes to the need to make changes, most respondents agree it’s necessary – 74% in fact said their companies believe culture change is necessary to embrace the M4.0 era (Chart 4). But in terms of the challenges that hinder culture change, survey respondents identified concerns about cost/ROI, a lack of leadership bandwidth to take on a culture initiative, lack of employee buy-in, and no formal strategy (Chart 6). However, 24% said that their company is either satisfied with their current culture or actively working to improve it.
Most companies already have some form of culture declaration in place – 88% of respondents said their companies already have an explicitly stated culture or values statement. But as far as what change would look like for these cultures (Chart 5), top responses included more data-driven decision making, more agile and responsive operations, employee empowerment to make decisions at the lowest level possible, and faster innovation and time-to-market for new products.
Indeed, when asked to select the top three descriptions for their current culture (Chart 3), it appears that many companies may already be on the right track in cultivating these qualities – the most popular responses were customer-centric, collaborative, and empowered. Other top responses were traditional/conservative, agile/responsive, siloed, and hierarchical.
While most respondents felt that all employees are responsible for corporate culture (49%, Chart 2), others said the CEO bears responsibility (25%) followed by the senior executive team (17%).
Collaborating on a Better Future
A whopping 91% of survey respondents said that a collaborative culture is very important and even necessary for survival (Chart 11). It makes sense, then, that companies are looking at a mix of technology and company structure to improve collaboration.
Survey respondents believe that their overall corporate structure will shift toward one that’s more collaborative in the near future. Today, 39% of respondents described their corporate structure as a matrix, followed by 30% as a traditional hierarchy/command and control, and just 17% saying the company has a collaborative corporate structure (Chart 7). However, when asked where they expected their corporate structure to be in two years, the majority answered collaborative (61%), followed by 17% as a matrix and 14% as traditional hierarchy.
5 Change would mean better decision making and responsiveness
Q: Which description would best capture what that change would encompass?
6 Leadership challenges, lack of buy-in hinder path to culture change
Q: What are your company’s biggest challenges to cultural change?
7 Factories move away from centralized management
Q: How would you characterize how your factories /plants are managed today and what do you anticipate will be the primary way they will be managed in the next 2 years?
PART 2: COLLABORATION
8 Most manufacturers see only partial or limited collaboration
Q: How would you characterize your company’s collaboration progress so far?
It’s hoped that those structural changes will show themselves with better collaboration results – only 13% said that their company is highly collaborative with an end-to-end approach across the enterprise (Chart 8). The majority said their companies were partly collaborative in an ad hoc fashion (47%) or collaborative in specific areas only (33%). Of the level of collaboration between product design and manufacturing teams, 30% of respondents said that those teams were highly collaborative on a regular basis, while 54% said they were somewhat collaborative in working together occasionally, and 14% said they were collaborative only on a low level.
Many are employing the digital thread to enable end-to-end data sharing in manufacturing (45%), followed by IT (35%), supply chain (35%), customer service and support (29%), and design & engineering (28%) (Chart 9). However, 24% say they aren’t using a digital thread in any part of their company functions.
Innovation: An M4.0 Survival Necessity
Most survey respondents indicate that their companies are moderately innovative and willing to experiment with new technologies, products and services (62%) (Chart 12); 19% said their companies were highly innovative, continually developing new products, and 16% said their companies operated at a low level of innovation and were mostly committed to their current products and business practices.
A lack of innovation might be keeping some survey respondents awake at night – 41% said they were concerned that a lack of innovation would leave their company vulnerable in the future (Chart 15). Others felt their company wasn’t highly innovative but it wouldn’t leave them vulnerable (21%), while 39% said their company’s current innovation efforts were adequate.
When it comes to sourcing new ideas for products and processes, companies most frequently look to their customers (84%), followed by company employees (74%) and external partners (54%) (Chart 13). In the comments from the survey, several respondents cited their own company innovation/incubation centers, and one comment said “competitors.”
When it comes to improving innovation, most felt that visionary leadership (76%) and the freedom to make mistakes (73%) were the most important enablers (Chart 14). Others cited collaboration with partners and customers (67%) and a strong innovation culture among all employees (66%).
9 Nearly half connect manufacturing through an end-to-end digital thread
Q: Which of your company functions are connected to a digital thread to enable end-to-end data-sharing and collaboration?
10 Design, manufacturing teams are frequent collaborators
Q: How would you describe the level of collaboration between your product design and manufacturing teams?
11 Collaborative culture overwhelmingly seen as necessary for competitiveness
Q: In your view, how important do you think a collaborative culture is for competitiveness?
PART 3: INNOVATION
12 Only one-fifth of respondents describe their companies as highly innovative
Q: How would you describe your company’s current level of innovation?
13 Customers are the No. 1 source of new product ideas
Q: Where does your company source its ideas for new products, processes, and/or business models?
Making Moves on Integration
Once upon a time, in the not-so-distant past, prevailing business wisdom was that you could get the best performance out of people if you kept them focused on the tasks and needs of their own team, department, or division. Intended or not, this could sometimes lead to unhealthy rivalries and dysfunctional relationships that could have far-reaching consequences in allowing a business to operate smoothly. These days, however, companies are moving toward flatter organizational structures with more cross-functioning and cross-training between teams, which can improve employee retention and growth, lead to faster problem solving, and improve overall responsiveness and agility.
While many MLC members will say that IT and OT teams haven’t historically been good bedfellows, the growth of digital technology on the shop floor is increasingly demanding more integration. Currently, 43% say their IT and OT teams are somewhat integrated, working collaboratively but separately, and 29% say they are only partially integrated (Chart 18). Just 10% say that their IT and OT teams are one team, fully collaborative and integrated.
More than half of survey respondents said their companies had already made either significant organizational changes (24%) or partial changes (31%) to create a more integrated enterprise (Chart 16), with 28% just getting started on making changes. The majority of manufacturers are engaging in cross-training for employees, with 39% saying many employees train for and perform different job functions throughout the company, though 42% of respondents said it was only hour employees that participated in cross-training and cross-performance (Chart 17).
While technology and leadership are essential to a successful M4.0 journey, culture, as Peter Drucker would say, is essential to a successful digital transition. The pathway toward change isn’t yet clear, but those who are willing to walk it are the ones who will most likely emerge as winners on the other side. M
All of this has a measurable and significant impact on the bottom line, not to mention opportunities for future growth.
14 A mix of leadership, collaboration, and culture are drivers for innovation success
Q: What do you see as the most important enabler that drives a successful innovation strategy for a manufacturing enterprise?
15 More than 40% fear their company isn’t innovative enough to survive in the future
Q: Do you feel that a lack of innovation will leave your company in a vulnerable position in the future?
PART 4: INTEGRATION
16 More than half of companies have made significant or partial structural change
Q: Has your company made changes to its organizational structure in order to create a more integrated enterprise?
17 Cross-training takes place at more than 80% of manufacturers
Q: Are your company’s employees cross-trained for different job functions?
18 IT and OT integration remains a work in progress for most
Q: How would you describe the level of integration between your IT and OT teams?
19 Top integration challenges are resistance to behavior change and needing to mind current operations
Q: What are the most significant challenges to improving your company’s integration?
Survey development was led by Content Director Penelope Brown, with input from the MLC editorial team and the MLC’s Board of Governors.