The World Economic Forum’s Lighthouse Network is pointing the way to enterprise-wide transformation, business model change, and economic growth, believes the WEF’s Head of Advanced Manufacturing, Francisco Betti.
“My belief is that manufacturing is going to play a major role as businesses and economies are transformed in the years ahead.”
Francisco Betti, Shaping the Future of Advanced Manufacturing and Production, World Economic Forum.
Established in 2015, the World Economic Forum’s (WEF) Platform for Shaping the Future of Advanced Manufacturing and Production was created to reflect the growing recognition of manufacturing’s fundamental role in global economic growth. It now comprises a group of over 130 private sector companies, governments from across the world, plus representatives from academia, civil society, and labor unions, and is one of 17 WEF global platform initiatives which range in focus from Global Trade, to the Future of the Digital Society.
In 2017 the WEF adopted a sharper focus on the Fourth Industrial Revolution. A year later, the Advanced Manufacturing Platform launched a unique new project – the WEF Global Lighthouse Network. Its mission is to identify, recognize, and promote manufacturers who have achieved proven operational and financial impact in the adoption and deployment of transformational 4.0 technologies and who can act as beacons of digital industrial progress. Initially focused on individual production sites, the scheme soon expanded to embrace end-to-end value chains and now features 69 Lighthouse examples of transformational success from across multiple industrial sectors and numerous countries around the world.
In our latest Dialogue with a manufacturing industry thought leader, the Head of the WEF’s Platform for Shaping the Future of Advanced Manufacturing and Production, Francisco Betti, talks to Manufacturing Leadership Council Executive Editor Paul Tate about what the Lighthouse network is teaching the manufacturing industry about the benefits of digital transformation, new criteria focusing on sustainability, enterprise-wide transformation, and upscaling operations for the future, and how digital manufacturing operations are creating a new foundational mindset for business model change and economic growth across the industry.
Q: What excites you most about your role at the WEF?
A: In the current post-pandemic world, I think the most exciting thing is the potential that advanced manufacturing has to transform not just business operations, but to transform whole business models to enable a new era of economic growth. The promise of advanced manufacturing, and the combination of technologies that represents, is unique. My belief is that manufacturing is going to play a major role as businesses and economies are transformed in the years ahead. That’s very exciting and it keeps me extremely motivated every day.
Q: What’s the purpose of the WEF’s Platform for Advanced Manufacturing?
A: We are continuously building, growing, and animating a global community of executives and leaders from government, academia, and civil society who are looking at how to make manufacturing work for business, government, society, and the environment. So, we are constantly incubating ideas, hosting discussions, and developing insights to bring everyone to a common level of understanding of what challenges and opportunities there are for the future of manufacturing. Most importantly, we are always looking for gaps in the global production ecosystem that require public/private cooperation and new kinds of partnerships to move the agenda forward in the global transition towards advanced manufacturing.
“All these Lighthouses created a movement where every employee in the company became part the transformation strategy, and every level of employee played a role.”
A: When you look at the current landscape, it’s a scenario characterized by winners and losers. Our mandate at the Forum is to make sure that we bring everyone on board in the digital transformation of manufacturing. We may be partnered with some of the largest companies in the world, but it’s also about the small and medium sized enterprises, who are often the ones struggling the most, first to understand what digital transformation in manufacturing means, or looks like, but also how to embrace new technologies successfully. In some developing countries, for example, even a basic access to technology is a real challenge. So, our challenge is, how can we all work together – the private sector, governments, academia, and civil society – and cut across different industries, sectors, and geographies, to help the global production community transform itself at speed and scale and contribute to building a better future?
Q: How did the idea of a Global Lighthouse Network originate?
A: In 2017 we were doing some research with McKinsey & Company trying to understand what was holding back technology adoption in manufacturing across different industries and geographies. After consulting with over 400 senior executives in operations across different companies, we realized that only 30% of companies, if not less, were actually seeing the benefits of technology adoption across their facilities and value chains. The majority were stuck in what we define as ‘Pilot Purgatory’. There were massive investments being made in new technologies, and thousands of pilot projects underway, but very few were making it to the shop floor or delivering real operational financial value. So, we figured out something was wrong. Most of the global manufacturing community were stuck in this piloting phase, but there was a certain percentage who were starting to see the light at the end of the tunnel and actually delivering new operational and financial value through the adoption of technology.
We also realized that we needed to move away from just talking about individual technologies. We needed to talk about real use cases. Companies are trying to address very specific production or business problems through the adoption of practical use cases, which are very often the result of a combination of multiple technologies.
So, we decided to develop a mechanism that helps identify those who are part of the 30% showing value and try to convince them to open up their facilities and their doors so that others can come and learn from them. Today, if you want to see what Industry 4.0 and advanced manufacturing looks like, I think the Global Lighthouse Network is the best ‘go to’ place for every company trying to get started in this digital transformation journey.
Q: What’s the scope of the Lighthouse Network today?
A: We currently have 69 members in the global Lighthouse network, all selected through an independent review process and assessed by an independent expert panel of over 30 of the world’s most experienced people in the industrial space.
The largest concentration of Lighthouses is probably in China and Asia right now. But most of these are greenfield sites, and it’s much easier to be a Lighthouse when you start from scratch, rather than transforming an already up and running facility that is 50 or 100 years old, which is more often the case when you look at facilities across Europe, the US, or the Americas more broadly.
What is interesting is that we have companies from a large variety of sectors, and that is by design. We have kept this cross-industry approach because, while every industry sector tends to develop its own different tailored applications, some of the operating principles, some of the enablers, and some of the journeys that companies have gone through are common across different industry sectors. The opportunity for cross-learning here is massive. It’s huge.
Q: What led you to expand the scheme from its initial single site focus to embrace end-to-end value chains?
A: When we first started to first focus on the successful deployment of use cases on the shop floor, we immediately realized, even after the very first wave of applications, that this is not enough. Many of the companies that have successfully transformed digitally are going beyond factories. They are transforming their entire value chains, connecting them end-to-end. And why that is important, why it is essential, is because it provides a foundation, not just for the transformation of operations, but for the transformation of business models.
If, as a company, you think about how you drive growth going forward, especially in the post-pandemic scenario, it’s by connecting your value chains end-to-end so that you will be able to get access to the data to inform your decisions at all different stages of your supply chain, to be able to expand and scale operational excellence, to develop and create new customer experiences and, therefore, to be able to try to grow.
We are still looking for the next generation of use cases at a factory level, of course, but we are also looking at companies that have been successful in connecting their value chains end to end to set the foundation for new customer experiences, business models, and growth.
Q: What has the Lighthouse Network taught us about the impact of advanced manufacturing? What areas of real benefit have you found most predominant across the Lighthouse companies involved?
A: We have identified five major KPI areas across which every Lighthouse, in one way or another, has made significant progress. In some cases, it’s up to double their previous performance, year after year, and even going beyond that, so it’s extremely enlightening for everyone to see what they have done.
The first is Productivity. Whether it’s factory output, or productivity, or OpEx, or quality cost reduction, every Lighthouse has made tremendous progress through the adoption of 4.0 use cases and advanced technology.
The second, which is a priority in today’s world especially, is Sustainability. Almost every lighthouse that has invested in digital transformation has had an extremely positive impact on sustainability. They have realized that it’s not a matter of cost reduction versus sustainability, or successful transformation versus sustainability, or productivity versus sustainability, but that these all go hand in hand. It’s by improving productivity through digital transformation that they are also reducing waste production, reducing materials consumption, and becoming more energy efficient.
For example, there are some Lighthouses that have reduced energy consumption by as much as 50%. And in the latest cohort of Lighthouse announcements this year, we had our very first Net Zero Lighthouse. So, we are starting to see Lighthouses not just driving the productivity discussion, but also the sustainability discussion, and becoming the ‘go to’ place for companies trying to understand that direct connection about how to meet Net Zero targets.
The third area is Agility. Whether it’s through the reduction of inventory, or the reduction of lead time, or the shortening of change response times, they have all made significant progress. Agility matters because we will need to respond very fast to disruption and changing demands in the post post-COVID world. Agility and flexibility are going to be essential to a successful response to changing markets, and to constantly and ever-changing environments which, most likely, is where we are heading right now.
The fourth area is Speed to Market. Whether it’s because companies have just reduced the time it takes them to get products to market, or the reduction of design-to-action time, this is another critical area of future improvement. We all know that customers want things faster than ever, right?
And that connects to the final point, which is Customization. The ability to be able to rapidly tailor products based on demand, or reduce load sizes, or be able to increase configuration accuracy, have been some of the major impact areas we have identified.
Q: When you stand back from these five main KPIs, are there other aspects that you’ve noticed in Lighthouse company performance?
A: We’ve also learned that all these lighthouses were not only successful in transforming themselves and seeing the operational and financial impact, were not only able to transform their operations to create more resiliency to navigate the COVID-19 pandemic in a better way than anybody else, but through these transformations they are setting the foundations for growth in the years to come.
And that’s how the world of operations connects in a very unique way to the world of new business models for the very first time. We have seen this especially in the Lighthouse companies that are looking at operations not just as a cost center, but as the foundation that will allow them to set their organization up for success in the years to come, mainly through the transformation of their businesses and by creating new customer experiences.
I also think that in the post-COVID scenario there’s going to be no resiliency without sustainability. All these Lighthouses are starting to factor in sustainability as one of the major drivers towards successful resilience.
“Sustainability is a critical aspect in the current context. We are now discussing how to ensure that sustainability becomes an even stronger criteria when it comes to the identification of Lighthouses.”
One final thought. Hopefully, these Lighthouses will also be able to maintain the same pace of innovation that they were able to develop before the pandemic, that accelerated during the pandemic, and that will allow them to continuously differentiate themselves from the rest in the future. I’m passionate about innovation, and when you look at some of the companies in the Lighthouse network who are taking a bottom-up approach to innovation, that are allowing new use cases and solutions to emerge in places that are relatively remote, like facilities in Southeast Asia, or North Africa, or Latin America, and how those use cases are now getting adopted at a global company level. We have really seen a change in the way in which we are now driving and sourcing innovation in manufacturing. I think that’s fascinating.
Q: How can companies get actively involved in the Lighthouse Network?
A: The Global Lighthouse Network is a World Economic Forum initiative in collaboration with McKinsey & Company. There is an open and transparent application process. Companies start by contacting us to express an interest and by filling in an application form to share information about the top five use cases they have adopted. These can be either within a single facility, or across their value chains. They then highlight their major achievements on both the operational and financial side. It’s important that companies have a track record that shows they have made significant progress across the key KPIs over time, so the level of maturity also plays an important role in the application.
There are also specific questions that focus on some of the enablers, like their strategy to upscale their workforce, the way they were able to build new teams with different skill sets, such as merging the OT/IT types of skills, or how they were able to align their digital transformation strategy in manufacturing with their sustainability strategy.
The last element of the application is what we call the change story. As I mentioned before, it’s not easy to build a Lighthouse when you are transforming a brownfield facility, compared to a building a greenfield site, especially if the brownfield is in a very remote location when even access to connectivity may be a challenge. So, the change story counts and plays an important role there.
The next stage is a site visit. Right now, because of the pandemic, we are running these virtually. The goal is to build a report, and to support the company in building the best possible application, which then goes to the independent expert panel. The panel convenes on a quarterly basis to assess all the applications, vote, and decide on those who finally get recognized as Lighthouses in the network.
“If you look at the Lighthouse network companies, they all went through an amazing mindset change process to get there.”
Q: What’s next for the WEF Lighthouse Network? Where does it go from here?
A: We aim to continue growing and expanding the network in three directions, mainly because there’s a growing demand from the global manufacturing community to be able to learn more about these areas.
Sustainability is a critical aspect in the current context. We are now discussing how to ensure that sustainability becomes an even stronger criteria when it comes to the identification of Lighthouses. Not just because of all the pressure that’s coming from regulations and customers, but also because companies truly believe that it’s the right thing to do to become carbon neutral, or even carbon negative, as soon as possible. Companies are already factoring in sustainability as a key building block of their resiliency building strategies and realizing that it’s not a choice between productivity and sustainability, but that both run in parallel. So, we will be making sustainability a much heavier criteria in the selection process of Lighthouses for the future.
The second area is about expanding digital transformation strategies beyond manufacturing and into other functions of the organization, such as procurement, or marketing. That means taking this Lighthouse mindset and going beyond a production site or end-to-end value chain to transform operations across different lines of the company so we better understand how companies can take a more holistic approach to digital transformation by learning from what has happened in manufacturing and building on that. It’s the idea that manufacturing can be the foundation for the transformation of the broader organization. We believe that’s the next area where transformation is going to be happening at speed.
The third area is what I call the “upscale concept” — companies who are transforming multiple facilities, or multiple value chains, or multiple functions. For the very first time, we are starting to see some initial examples of that happening. I don’t think we have any company who is truly at scale yet. What we have are many companies who have successfully transformed one site, one value chain, and are in the process building a strategy to deploy and replicate that approach more broadly. That’s the third element that will be looking for as these new operational business models develop.
On final comment. There are over 10 million manufacturing facilities around the world today. We only have 69 in the network so far. Let’s see how many Lighthouses are really out there. The process of scanning and assessing this vast landscape of manufacturing companies is huge and we’re still at the very beginning. Even if we don’t find many more, we can at least help those other 10 million companies and factories successfully transform and accelerate their own transition towards advanced manufacturing.
Q: What kinds of skills do you think the next generation of manufacturing leaders will need in that new era?
A: If you look at the Lighthouse network companies, they all went through an amazing mindset change process to get there. They’re now thinking about digital transformation and looking at operations and manufacturing in a new way. They’re not thinking about manufacturing simply as a cost center. They are thinking about the foundational blocks that will set their companies up to succeed and really advance in the years ahead.
What is common, or at least is present in all of them, is that there is a vision that is embraced and supported by the CEO. The future of operations and digital transformation has become a top priority on the CEO agenda. For example, at our recent gathering of Lighthouses we had 15 global CEOs on stage. That could not have happened a couple of years ago.
But more than that, we are under the impression that there is a trend that we will most likely see going forward where Chief Operating Officers will become the next generation of CEOs. Those who know how to successfully run operations by transforming them digitally are most likely going to provide top leadership positions in the near future. They understand the power of change, that transforming operations can be a foundation for success, and the importance of bringing people on board as an essential part of that process.
“There is a trend that we will most likely see going forward where Chief Operating Officers will become the next generation of CEOs. Those who know how to successfully run operations by transforming them digitally are most likely going to provide top leadership positions in the near future.”
Q: Looking ahead, what trends do you think will define the manufacturing industry by the end of the decade, in 2030?
A: I think there are three main trends that have driven the transformation of manufacturing and forcing companies to rethink the way they were designing their operations. And these will continue to drive change in the post pandemic world.
The first is the fourth industrial revolution. Technologies are evolving at speed and scale, and you need to catch up with that change or you will be left out. It’s provided the ability to create new customer experiences by merging IT with OT and will continue to transform manufacturing in the years ahead, simply because technology is growing and developing exponentially.
The second big trend is the sustainability imperative. We knew, before the pandemic, that something was happening with climate change, and we needed to find new ways to future growth and to strengthen our value chains against potential disruptions.
The third is the geopolitical and economic landscape, which is extremely complicated and more volatile than ever before, especially since the pandemic brought in new disruptions. It’s not yet clear how long this is going to last, but it has already played an accelerating role when it comes to the transformations that we have seen.
It’s the combination of those three mega trends — the fourth industrial revolution, the imperative for sustainability, and the economic geopolitical landscape – all accelerated by COVID-19 and the pandemic, that will continue disrupting and having an impact on the way in which we will run manufacturing companies going forward. Companies will have no choice other than building more agility and flexibility into their operations, continue to invest in their people at the center of every company’s operations, and they will need to build greater resilience.
If you look at those mega trends in combination and you look at the years ahead, then the crises we will face will most likely intensify, happen more often, and have a deeper impact on our global value chains. So future proofing yourself against that is going to be extremely critical.
But on the positive side, if you transform digitally, and you do that by bringing your people on board, you have not only become more productive, you’re not only becoming more resilient, you’re not only becoming more sustainable, but you are setting your organization for growth in the years ahead. Why? Because you will be able to develop new customer experiences, transform business models successfully, and enter new spaces in which you were probably not present before. And that’s the conversation that every CEO wants to have in their company today: how to transform the organization for the next 10 years to come.
Q: Finally, if you had to focus on one thing as a watchword for the future of manufacturing, what would that be?
A: It’s about growth. We are not just talking about the transformation of operations, we are talking about the transformation of companies, of businesses, to set the foundations for future growth. That’s going to have a positive impact on industry sectors, national economies, and the global economy. And because of the positive results we have already seen on the way we work, and on the environment, then it’s also about the future of society. M
HQ: Cologny, Geneva, Switzerland
Business Sector: International Organization for Public-Private Cooperation (NGO)
Membership: 1000+ Members (Industry,
Academia, Government, Research, etc.)
Funding: $396 Million (2020)
Employees: 600 (2020)
Presence: Europe, North America, Asia
Title: Head of Shaping the Future of Advanced Manufacturing and Production, Member of the Executive Committee, World Economic Forum
Education: Bachelor’s degree, political science, University of Cagliari, Italy; Master’s degree, international relations, Sapienza University of Rome, Italy.
Languages: English, French, Italian, Spanish
Previous Roles Include:
– Head, Advanced Manufacturing Industry, WEF
– Future of Manufacturing & Production Lead, WEF
– Government Engagement Manager, WEF
– Assistant Manager, International Development, PwC