10
Principles for Leading the Next Industrial Revolution PART II
CONTINUES FROM PART I
Embracing New Practices
4.
Raise your technological acumen.
No matter what industry you’re in, you live in a
programmable world, and software will be key to your competitiveness. Take the
German auto industry, for example. For years it has traded on a worldwide
reputation for excellence in mechanical and powertrain engineering. But from
now on digital excellence will be at least as important. This change is forcing
some hard thinking about future industrial strategy, in a country that is
known, according to the Financial
Times, for relative weakness in IT. “In the
future, 50 to 60 percent of the value of a car will consist of digital devices
and tools,” said German federal chancellery chief of staff Peter Altmaier, one
of Angela Merkel’s senior advisors, at a panel debate in November 2016. “And 20
percent [will be] batteries. If we’re not careful, [German manufacturers will]
only be responsible for the windows, seats, and wheels.”
Every company, even if it’s in Silicon
Valley, will need to improve its technological acumen during the next few
years. This is a matter not just of recruiting people with software
expertise, but of raising the skills of everyone at your company. They need not
just the technical training to use digital tools, but insight into the patterns
of technology — for example, how to create an operations footprint that can
take advantage of the Industrial Internet, or how to accumulate the type of
data that can foster machine learning.
You will be adopting manufacturing execution
systems that link the elements of enterprise resource planning with all the
factory operations of a company and its suppliers. Augmented reality will
enable operators and decision makers to see data about operations (or
anything else) on wearable devices. A schematic might pop up, helping an
engineer (or, in another setting, a surgeon) determine where to direct a probe.
Digital fabrication will allow a wider range of components and products to be
created close to where they are needed, rather than being shipped long
distances or going through customs; the costs of this technology are dropping
about 10 percent per year. Interoperability among all these technologies is
much more common than it was in the past. This allows even the largest
enterprise to coalesce around a more coherent global strategy — and when your
people have the right kind of digital acumen, they can make use of systems far
more effectively.
The industrial infrastructure will make it
easier to design your workplace for digital acumen. Set up displays with shop
floor or financial data, offering opportunities for employees to discuss their
meaning and how to improve them. If your factories have robots, design them as
“cobots”: collaborative robots, equipped with sensors that make them responsive
to the people who work nearby. The robots handle the rote tasks, such as moving
parts into position; the people handle the more fine-grained parts of the
operation, where judgment or artistry is required. Tailor office environments
to the work needs, learning opportunities, and emotional engagement of the
people who work in them, with collaborative workrooms that bring teams together
easily with videoconferencing and other digital connections. In general, design
your work spaces as opportunities for your people to learn — from experience, from
analyzing data, from the increasingly intelligent technology around them, and
from one another.
As people throughout your company become more
comfortable with the Industrial Internet, they will develop a collaborative
culture of innovation. They will also better understand the risks of the new
world — for example, risks related to accidents, privacy violations, and
cyber-attack. This insight will be invaluable, not just within your company,
but across the platforms you inhabit.
Because possible points of attack or
vulnerability are spread throughout the ecosystem, responsibility for their
security needs to be shared broadly, and frameworks for legal liability need to
keep pace with technological developments. CEOs and their boards may need to be
as good at judging when the world is not ready for their technology as they are
at judging when their technology is ready for the world.
5.
Innovate rapidly and openly.
Innovation and leadership go hand in hand in the next
industrial revolution. Many companies will seek disruptive innovation, but a
steady stream of incremental innovations can be more profitable. Smaller
innovations will be easier to generate and, more important, easier to test in
the market. With the tools of the Industrial Internet, you can prototype new
products, manufacture them in small batches profitably, distribute them
rapidly, and see how your customers respond before rolling them out worldwide.
As you continue to develop incremental innovations, they can sometimes snowball
into disruption. That’s what happened with the smartphone, which evolved
between 2000 and 2007 from a music player (the iPod) into a world-changing
device.
Rapid innovation is more effective when you
are open to collaboration with those outside your own company’s walls. Draw on
a broad group of participants, including the organizations that are
connected to your platform. Much of the technology in the Industrial Internet
is not just cross-functional, but cross-industry. When whole supply chains and
customer ecosystems are automated, integrated, and transformed, innovation
follows a similar pattern.
Siemens, for example, is making a
billion-dollar investment in what Lak Ananth, the head of the company’s Next47
startup unit, hopes will be “a new era of collaboration between hungry
early-stage startups.” (The name Next47 echoes the landmark year of 1847 when
the company was founded.) Areas of collaborative venture capital investment
include artificial intelligence, autonomous machines, decentralized
electrification (smart grids), connected mobility, and blockchain applications.
6.
Learn more from your data.
The
exponential increase in real-time data — gathered from customers, equipment,
and work processes — is giving companies new insights. Gathering and analyzing
data are important, but they are only the beginning. It is critical to use the
analytic results to recognize important patterns, and to gain insights that
help you make the right choices and keep improving on the fly.
For
example, getting accurate information about progress and cost on
construction sites has always been a challenge. Now, a construction company or
investor can use drones to gather photographic images, overlay them with the
original site plans, verify contractor reports, and spot discrepancies as small
as a centimeter wide. In the agrochemical sector, farming companies also use
drones, along with data from weather reports and sensors mounted on their
machinery, to fine-tune their planting, fertilizing, and harvesting practices.
Industrial companies of all sorts now use data gathered from factory floor
sensors to inform maintenance and operational decisions. GE’s chief digital
officer, Bill Ruh,
estimated that just one performance increase
resulting from these efforts, in locomotives, saves one railroad US$200 million
per year.
In the military aerospace sector,
manufacturers are able to use the data set that is fed back from an aircraft to
create immersive and experiential simulation software and training programs
that can transform the training economics for fighter and other flight crews.
Wear and tear on the airframe can be minimized and the aircraft reserved for
the missions that matter, substantially reducing the overall cost to customers
of military training and preparedness.
And of course, in all industries, companies
are now able to develop highly customizable, on-demand manufacturing, with
customers having real-time access to design, supply, and demand systems. Direct
feedback and interfaces between manufacturing systems and customers’ own
ordering and demand planning systems are shortening lead times and improving
capacity utilization planning. One of the great frontiers in data analytics is
materials. A plastics maker that notices a customer using a polymer in one
way could propose a different approach, based on analysis of what other
companies have done with that same polymer.
To make the most of your data, integrate your
analytics teams. Schedule regular sessions in which people talk about what they
are finding, and how it could affect the business. Ensure that data from all
your operations and customer insights is considered. Draw in relevant
information from other companies and from the government. By doing so, you
balance your proprietary interest in your own data against the fact that open
data sharing allows for much more insight. Platforms make sophisticated data
sharing of this sort far easier than it used to be. Finally, in addition to any
business changes you make, revamp your analytics approach so that your data
gathering and synthesis will be still more effective next quarter.
7.
Adopt innovative financing models.
New
large-scale technologies inevitably put pressure on the old ways of raising
money for them. As the Industrial Internet expands, the ability to finance
major capital projects will remain one of the hallmark capabilities of an
industrial company. But the particulars will shift.
Infrastructure projects will closely follow
the example of the software industry, where cloud computing has sparked a quiet
but pervasive change. Software users no longer buy packages; instead, they
subscribe to software-as-a-service, paying rent to the provider in exchange for
access and continual upgrades. This approach affects the type of financing that
tech companies need, and the ways they manage return on investment.
Larger industrial firms will similarly
move from financing the ownership of factories and machinery to financing a
pay-as-you-go system, with smaller but more frequent rent charges for more
flexible installations. There will be less interest in replacing old equipment,
and more interest in continuing to upgrade it, using 3D printing and other
forms of digital fabrication to manufacture and customize new components.
Industrial companies will take a cue from Silicon Valley and finance more of
their investments through equity and venture capital, rather than through debt.
Adjustable pricing will also be more common; technology will allow B2B prices
to vary by time of sale, amount of use, and type of application.
Amazon has been a pioneer with innovative
financing, particularly in the way it scales up and upgrades its platforms. It
consistently innovates in areas such as cloud computing and warehousing, which
require large but targeted investment. It has done so by repeatedly raising
money from the stock market and making a convincing case that these investments
are going to pay off in the long term. It has thus been able to put in money
where other companies didn’t have it. GE has had similarly strong financing
acumen, drawing its investment capital from the management (and divestment) of
multiple businesses. It’s building an enormously expensive platform almost from
scratch. The company has a staff of about 28,000 software engineers.
In the end, to fully develop the Industrial
Internet (and thus to continue the viability of industrial civilization), it
will be necessary to replace or upgrade every aspect of the world’s industrial
infrastructure, with capabilities and systems that didn’t exist before.
Financing all this will require as much expertise and creativity as the
technological innovation. The technologists understand this. They are
establishing metrics for tracking short- and long-term returns, balancing
immediate payback and long-range aspiration. They are also embracing new
mechanisms, such as blockchain, to ensure that pricing, billing, transfer
payments, and subsidies are reliable and free of undue influence. By the time
they are finished, the capital infrastructure could be as boldly innovative,
and as different from that of the past, as the physical infrastructure that it
made possible.
Making a Better World
8.
Focus on purpose, not products.
As a
leader in the Industrial Internet, you will probably develop a wide range of
products and services during any given five-year period, potentially in several
sectors. Many other companies will use the same platforms to enable their
capabilities. To differentiate your company, you need to develop a clear
purpose: a value proposition, more effective than anyone else’s, that applies
to everything you do. This means looking closely at the reasons people come to
your company, the outcomes they expect, and the ways you can deliver. When you
are clear about what your company is, and why you sell what you sell, people
will trust you to deliver what you promise.
Customers recognize when a company fulfills
its purpose. They are interested not in products or services, but in outcomes.
Consumers at a premium retailer are buying more than clothing or a coffee
drink. They are buying a distinctive experience as well. Instead of
thinking of your company as providing a particular type of product or service —
electric power, health records management, or automobile components, say —
think of it as a producer of outcomes. The customer needs to get somewhere, so
you’re not a car company; you’re a facilitator of mobility. Already in many
cities, customers are using vehicle sharing apps for short-term rentals (often
of electric vehicles), reserving cars where they need them and dropping them
off when they are finished. The house is cold, so you’re not just a fuel
supplier. Your purpose is to help make the home warm, possibly through energy
consultation.
Ask yourself whether your company truly has
an outcomes focus or is still stuck in a physical product mind-set. Are you
judging success according to the meaningful differences you make to customers
in terms of satisfaction, quality of life, and productivity? Could better
outcomes be possible for customers if you could produce or provide goods and
services in a different way?
9.
Be trustworthy with data.
You
already collect a vast amount of data. As the IoT spreads to wearables, consumables,
cars, and every conceivable part of the home, what you know about people will
increase exponentially. The Industrial Internet will bring that level of data
collection into your workplace. Shared data is the fuel of the next industrial
revolution. And just as earning digital trust will be key to success,
forfeiting people’s trust will be a surefire route to failure.
You will need not only to manage customers’
behavior, but to prevent outsiders from gaining access to critical information.
Strong risk management, cybersecurity, and data integrity systems are essential
in helping companies avoid breaches and better manage disruption to operations.
Transparency has to be an integral part of your strategy. Without a clear idea
of how rules are defined and implemented, for example, stakeholders may
question a company’s fairness and honesty.
Keep
up with leading-edge approaches to protecting sensitive information from
cyber-attack or theft. Cloud-based systems built into most digital platforms
will make it easier to protect data by enabling companies to track and
recognize intrusion in near real time. As PwC
cybersecurity experts David Burg and Tom Archer put it, your company will most likely protect
itself in the future “by monitoring activity across all its online systems,
studying not just the moves of hackers but the actions of legitimate customers
as well. Both types of visits, after all, are forms of repetitive human behavior,
opposite sides of the same coin.”
It might seem as if the lack of trust in
large businesses and government institutions, endemic throughout the world,
will compromise your ability to be trustworthy and transparent. But it actually
creates a powerful opportunity to differentiate your company. In PwC’s latest
global survey of CEO opinion, many CEOs recognize as much. Just under
two-thirds of chief executives (and three-quarters of those who head companies
with revenues of more than $10 billion) believe that how their firm manages
data will be a differentiating factor in the future.
10. Put
humanity before machines.
You
might think the principle of putting people before machines is so obvious that
it goes without saying. But the history of technology is full of examples where
the opposite has happened. The Industrial Internet places unprecedented power
in every enterprise. As machines become increasingly interconnected, the
quality of user experience will spread in viral fashion. If people are shut out
— of jobs, creative opportunities, income, and customer satisfaction —
embracing technology will backfire. Business, in particular, will thrive in
this new world only if its leaders understand the place of human values.
Set up
your enterprise to foster better connections among people, to encourage humane
behavior, and to build the requisite capabilities that overcome technological
isolation. The most important skills for accomplishing this will be those that
can’t be replicated by machines. Your company will need people who can
understand the technologies of the industrial infrastructure, such as
artificial intelligence and analytics, but who are also adept at working
with an
organization’s culture. Helping people take pride
in their endeavors, as our colleague Jon Katzenbach suggests, will be
critically important; so will establishing a diversity of points of view, so
that people from different backgrounds can challenge one another’s perspectives.
Most important of all will be a basic
attitude of respect for human beings; as technology becomes more proficient at
this larger scale, the most distinctive thing about people will not be their
ability to solve problems or achieve results, but their empathy, intuitive
judgment, and authenticity; their abilities to care, connect, and choose, in
ways we can’t predict in advance.
What place will your company occupy as the
next industrial revolution unfolds? It depends on your ability to bring all
these principles to bear. You will combine your people, your capabilities, and
your technological acumen in ways that you never have before. We will soon not
just see individual fortunes change, but also see them move forward in ways
that provide stability, self-sufficiency, and a high quality of life. In a
sense, this represents the culmination of the wave of digital technology that
started in the 1950s, and it still has a few years to go before it stabilizes.
By that time, we’ll be just about ready to start all over again with yet
another “next” industrial revolution —assuming this one works out as well as we
hope.
by Norbert Schwieters and Bob Moritz
https://www.strategy-business.com/article/10-Principles-for-Leading-the-Next-Industrial-Revolution?gko=f73d3&utm_source=itw&utm_medium=20180522&utm_campaign=resp
No comments:
Post a Comment