The Next Phase of Digital Evolution: Business Model Innovation
Data mastery and AI are key drivers for the future of manufacturing, say industry experts during a discussion of the MLC’s new Manufacturing in 2030 Project white paper.
“Manufacturing is poised to unleash the next engine of production,” declared Manufacturing Leadership Council (MLC) Co-Founder David R. Brousell, in his opening remarks at the recent launch of the MLC’s white paper on the future of the industry, Manufacturing in 2030: The Next Phase of Digital Evolution.
The pandemic taught us, noted Brousell, that manufacturing needs to be able to act with greater agility and be better prepared for future disruptions, whatever form they may take. The MLC recognized the urgent need for manufacturers to take a longer view of things to come, he explained. The Manufacturing in 2030 Project has been created to help enable those companies to envision what manufacturing might look like by the year 2030, to better plan their future, and to help their leaders find new ways to enhance value, competitiveness, and their contribution to society.
Brousell was joined by a panel of industry experts from Manufacturing in 2030 Project partners EY, Infor, NTT DATA, and West Monroe, plus MLC Board Vice Chair, Dan Dwight, CEO of the Cooley Group. They went on discuss key highlights from the forward-looking 52-page white paper, which explores the multiple megatrends and industry themes that will dominate the manufacturing world by 2030, from demographic shifts and global economic trends to rapid advances in technology, new approaches to workforce development, and the importance of greater sustainability.
Optimism for the Future
“For me, there are three reasons for optimism about manufacturing’s future,” commented Randal Kenworthy, Senior Partner and Consumer and Industrial Products Practice Leader at West Monroe. “The levels of investment in digital solutions that we are already seeing in manufacturing, the widespread recognition that manufacturing is essential to the future of the U.S. economy, and the opportunity to address one of the most existential challenges facing mankind: climate change. We have to solve this. Failure is not an option.”
“I certainly think digital is going to be the way of operation for survival in the future,” added Baskar Radhakrishnan, Senior Director, Manufacturing Industry Solutions at NTT DATA. Many of today’s factories are almost unrecognizable from the way they were 10 years ago, he observed. “And the industry is only going to continue to evolve. So, I envision future manufacturing organizations to be data driven digital enterprises, fully hyperconnected, with more distributed, agile, and value-driven ecosystems.”
Highlighting the impact of the numerous disruptive forces at play today, Brad Newman, Advanced Manufacturing & Mobility Industry Market Leader, Americas, at EY, noted that, “The collective sum of all those forces is creating a bias for action and a need for change.” The industry already has the building blocks and the technology tools in place today, he continued, “which will help business models to evolve to ensure functions are more connected and help build better and smarter products for people in more sustainable ways. All of this will make the manufacturing industry much more rewarding for all the workers and stakeholders involved.”
The Challenge of Complexity
While the accelerated adoption of ever-more powerful and intelligent digital technologies over the next few years will underpin many of those transformational changes, the huge increase in the volumes of data generated by those technologies will have its own challenges.
“It may take another 10 years to get to real maturity with AI, but that’s the technology we can see being highly important for the future,” commented Andrew Kinder, Senior Vice President International Strategy at Infor. “There are fantastic opportunities around AI and it’s only just beginning. But I think one of the challenges of that transition is that we have to pay more attention to data.”
Traditionally, noted KInder, manufacturing has always talked about people, processes, and technology, but he believes that companies now need to add data to that essential mix. “We’re already good at getting data, at streaming it into data lakes, and we’re getting better at turning it into actionable insights,” he added. “But now we need to focus much more on how we mature our data mastery for the years ahead.”
“But before you get to data mastery,” argued MLC Board Vice Chair, Dwight, “you first have to go from legacy to smart tech. The next phase then gets more complicated as the amount of data compounds and we start to adopt new AI approaches with complex algorithms. To make that work, we first need to develop confidence that the data we are gathering is telling us the right story and that becomes more complex as data volumes increase and spread across the enterprise. To cope with that, manufacturers need to be constantly rethinking their business model.”
And it’s not just about rising complexity within the four walls of the company, added EY’s Newman. “The bigger picture is looking at the end-to-end value chain,” he said. “For example, digitizing the supply chain with more accurate forecasting and optimized planning puts pressure on companies along the chain to catch up. As supply chains become more intelligent and complex, companies will need to be more flexible and agile to create more scalable and responsive digital platforms.”
New Business Models
However, warned Radhakrishnan at NTT DATA, “digital will become yesterday’s advantage if organizations are not thinking about moving to the next level. They must think differently about their transformation initiatives so that the traditional ways of operating become a thing of the past. So, with the people, processes, and digital infrastructures they create using new digital technologies, manufacturers should think about reinventing their business models with outcome-based business models, or usage-based business models, or product as a service, and offering their customers more customized products and services.”
Yet that’s a big step for many manufacturers, noted the MLC’s Brousell, and for some it may be a little scary.
“But to me,” added Cooley’s Dwight, “all manufacturing companies, regardless of their relationship to M4.0, demand reinvention. To rest too firmly on last year’s expectations and commitments, prevents your ability to evolve. As I say all the time, the only constant is change – and I don’t mean incremental change.”
“At Cooley,” he continued, “we went through a deep cultural transformation to break down silos to drive collaboration with the objective to become more adaptive and more agile. But for companies who are not change driven, who have not been investing in digitization, who are not rethinking and reinventing, they are the ones who are failing to see the power of digitization and the power of transforming on a constant basis.”
Leadership Advice for the Future
Brousell concluded the discussion by asking the panel: ”What’s your most important piece of advice for manufacturing leaders as they head to 2030?”
“Put together your strategic vision and plan,” responded Kenworthy at West Monroe, “If you don’t have that strategic vision for 2030, you need to start thinking about it now. That will set your roadmap for your digital roll out and plan for the future.”
“I think there a number of dimensions,“ added NTT DATA’s Radhakrishnan, “Develop a fully integrated strategy with very clear transformation goals; leadership commitment all the way from the Board and CEO to middle management; having the right team of high caliber tech talent and subject matter experts; adopt an agile mindset that will drive the broader adoption of digital technology; track progress and measure well-defined success; and, finally ensure there are business-led, modular, technology and data platforms to enable the real transformation”.
“Leaders also need to focus on people,” suggested Infor’s Kinder. “The talent shortage is global and it’s not going to go away. Technology will help, of course, and there is already a change from location centric, to human centric, so leaders need to focus on the reduction or elimination of any non-value-added tasks when intelligent equipment can do that and leave humans to do the high value decision making work. Focus on the people and bring the people with you.”
“Building a digital business ecosystem is only going to reach its full potential when the entire organization is digitally driven, and driven seamlessly across traditional functional lines,” said Dwight. “As the white paper says: ‘Digital is agnostic about functional boundaries.’ I believe this transformation is going to be the most difficult piece of digital evolution that leaders are going to have to grapple with.”
EY’s Newman also added his final thoughts: “While the future will be centered on cross-industry collaboration,” he observed, “I look forward to seeing the manufacturing industry take the lead when it comes to innovating new business models and engaging ecosystems. I think our ability to do this will wildly change the trajectory of the industry, driving better investments across safety, sustainability, technology, and most importantly, the development of our people.”
* Download the full MLC White Paper, Manufacturing in 2030: The Next Phase of Digital Evolution
* Listen to the insights shared during the Manufacturing in 2030 White Paper Panel Discussion