DIGITAL
CHAMPIONS part i
The
interlinked platforms that make up Industry 4.0 represent a new kind of
challenge for manufacturers and other technology-intensive companies. With four
key business ecosystems, they can make this new world their own.
Most manufacturers, energy
companies, and raw materials providers know they face a strategic challenge.
Industry 4.0 is coming. Dubbed the “fourth industrial revolution” by World
Economic Forum founder Klaus Schwab, this orchestrated system of digital
advancement has also been referred to as an industrial renaissance. It is
emerging from a number of different companies and government initiatives, most
notably in Germany, the United States, and China.
In all cases, the promise is the same. The last industrial
revolution (known as Industry 3.0) involved the automation of single machines
and processes. This new wave of operations integrates every aspect of the value
chain in one end-to-end digital platform, using sensors and analytics
throughout, incorporating the Internet of Things (IoT), with cloud-based
software driving the entire process. Companies can use this new shared smart
infrastructure to make their manufacturing and logistics more efficient, to
offer innovative products and services, and to keep improving their production
on the fly, responding in unprecedented ways to customer and consumer demand.
The benefits are immense, and impressive examples of Industry 4.0
have begun to emerge. The connected industry platform at Bosch Rexroth, a global
electronics and engineering company, has set a goal of realizing €1 billion
(US$1.2 billion) in savings by 2020 and offering similar sensor- and
software-based solutions to its customers. GE Digital, the enterprise that
oversees GE’s industrial Internet platform, set a similar target in 2015,
aiming to realize US$1 billion in productivity goals by 2020 — a target it
reached in 2017. Daimler credits its “smart production” Industry 4.0 initiative
with helping it set seven consecutive annual production records for its
Mercedes-Benz cars, with all its vehicle models and drive types rolling off the
same fully flexible production lines. Li & Fung, which provides logistics
and supply chain services to the consumer products and apparel industries, has
dramatically reduced time-to-market. For example, its apparel manufacturing
clients use the company’s virtual reality environments to see how garments
would look on purchasers and rapidly adjust designs. French aerospace and
defense components manufacturer Safran, with its “factory of the future”
initiative, is approaching growth rates for its four-year-old LEAP turbofan jet
engine that the engine’s predecessor, the CFM56, never reached in 20 years of
volume production.
Cases like these are noteworthy for two reasons. First, they
demonstrate the advantages that manufacturers can enjoy from Industry 4.0:
improved pathways for revenue and profit growth, greater customer satisfaction
and loyalty, increased operational efficiency, reduced product development
cycles, faster scalability, and more gainful supplier relationships. Second,
they illustrate the challenges involved in realizing those gains. Industry 4.0
is not a group of technological platforms that can easily be adopted as a
purely operational upgrade. It requires a clear strategy and top management
commitment; the transformation of key operational activities; and a deep
understanding of collaboration, across internal company boundaries and likely
with other companies that share the same platforms and technologies.
Many business-to-business enterprises claim to have already
adopted this concept. Indeed, in the industrialized world, Industry 4.0 is
becoming as essential as lean strategy: If you can’t claim to have mastered it,
you may be out of the game. But of companies in the most relevant sectors —
makers of automobiles, consumer goods, electronics, and industrial equipment,
along with engineering and process industries — only about 10 percent have
mastered the strategic, operational, and cultural changes necessary to make
Industry 4.0 succeed. We call these companies Digital Champions. By their
account, they have used the technologies of Industry 4.0 in a comprehensive
way, to consistently and significantly improve their results.
We saw the power of these champions of the industrial renaissance
in the last quarter of 2017, when we surveyed more than 1,100 executives at
global manufacturing companies, asking them about their digital operations. By
awarding points for specific digital capabilities and strategies — a maximum of
40 points for digital ecosystems, 40 points for implementation of new
technologies, and 20 points for fostering a digital culture — we were able to
place each company on a digital maturity scale, representing the degree to
which they had implemented Industry 4.0 and related technologies.
About 22 percent of the respondents’ companies were Digital
Novices, employing isolated solutions and applications at the functional or
department level only. The lion’s share — 42 percent — ranked as Digital Followers.
They practiced vertical integration, a hallmark of Industry 3.0, linking
internal functions such as sales, manufacturing, sourcing, and engineering.
About 27 percent of the companies were Digital Innovators. They connected their
operations to those of external partners and customers, using integrated
platforms for collaboration and information exchange. The remaining 10 percent
made up the Digital Champions category. One measure of their success is the
future orientation in their product mix; Digital Champions already generate, on
average, 56 percent of their revenues from digital or digitally enhanced
products and services, compared with 35 percent for Innovators, 15 percent for
Followers, and only 8 percent for Novices.
Some Digital Champions are household names, among the largest and
most accomplished industrial manufacturers in the world. Others are innovative
middle-market companies, or startups at the edge of manufacturing practice.
They use advanced technologies to raise their levels of product development,
production, supply chain management, logistics, and distribution. This gives
them more interactive and intimate relationships with customers.
Organizationally, they seek to master four business ecosystems: customer
solutions, operations, technology, and people.
An ecosystem, in this context, is a cluster of vital industrial
activities, some inside the organization and some outside, tied together
through common digital connections and practices. Each ecosystem is connected
to the others through digital pathways that foster sophisticated
multifunctional capabilities. Manufacturers that hope to climb the digital
maturity ladder can achieve their competitive advantage by orchestrating and
integrating these four ecosystems.
Each of the ecosystems is pivotal. None can be ignored. For
example, a well-designed customer solutions ecosystem, oriented to understand
and respond to market conditions, represents a good first step toward a
digitally mature business model. But if that company’s operations ecosystem
does not have the requisite capabilities, partnerships, and technology, and
does not plan to propel efficiency and effectiveness, it won’t be able to
produce its goods as profitably as its Digital Champion competitors do, and its
business model will fall flat. If its technology ecosystem is outmoded, or its
people ecosystem is unfocused, it will similarly be unable to deliver and
compete.
Each Digital Champion has its own form of Industry 4.0 prowess.
Some have highly effective go-to-market strategies. Others excel at
implementing a transparent and integrated supply chain, or at attracting
talented people. But on the whole, Digital Champions distinguish themselves by
a continuous effort to improve their capabilities in all four ecosystems and by
integrating and orchestrating them.
Customer Solutions: Meeting the Market
This is the ecosystem with the greatest visibility to the outside
world. Its activities include defining digitally enabled product and service
offerings, attracting customers, and maintaining relationships with customers,
directly or through third parties (such as retailers or online channels). In
the customer solutions ecosystem, insights about retail shopping behavior and
preferences are linked (with software and data analytics) to the development of
products tailored directly to customers. Digital Champions tend to have broad,
sprawling customer solutions ecosystems, with links to a range of external
companies as well as their own internal groups, which might have been connected
in only limited ways before. Now they capture and share relevant customer data,
gleaning insights that allow them to develop individualized products and
services and offer them through a variety of routes to market, such as
third-party vendor platforms, e-commerce, retail outlets, and apps.
These joint ventures and informal partnerships with external
companies distinguish a customer solutions ecosystem from a vertical,
customer-centric product development function. By adding external expertise —
often from other companies with deep experience in particular niche or
technology arenas — Digital Champions can fill important gaps in their
go-to-market strategies. Li & Fung, based in Hong Kong, maintains an
Industry 4.0–oriented platform for apparel makers around the world, drawing
regularly on its participating companies for data and expertise. On its
customer portal, clothing makers and retailers enter designs of new fashions.
Its vendor portal hosts suppliers and contract manufacturers, which can
immediately produce new collections or replenish existing lines, depending on
customer demand, for their customer-facing counterparts. Li & Fung’s
customer solutions ecosystem provides dense digital connections among all the
companies that use these two portals, generating real-time consumer purchasing
and preferences data from stores and other apparel outlets and feeding it back
into the supply chain. This enables designers to change product volume and
features instantly, numerous times a season. In turn, manufacturers use this
data to anticipate new production runs even before they are ordered.
Another customer solutions
ecosystem play is the partnership between GE’s Predix — its industrial Internet
platform — and Apple. Predix apps are available for iPhones and other iOS
devices, allowing industrial customers to write asset tracking and maintenance
programs for their handhelds and gain operational mobility. At DuPont, the
customer solutions ecosystem enabled a joint venture with Chinese equipment
company Hebei Nonghaha Agricultural Machinery Group, created to develop a
device that plants one corn seed per mound. General Motors developed a customer
solutions ecosystem play around autonomous vehicles and self-driving cars,
prototyping a number of experiments with business offerings in this domain,
including alliances with ride-sharing companies such as Lyft
and fostering a new set of designs oriented toward shared or autonomous
vehicles.
Some Digital Champions place themselves at the hub of a customer
solutions–oriented platform; all participant organizations communicate directly
with the Digital Champion rather than with one another. Apple fits this
category, with its huge coterie of app developers creating products and
components directly for iPhones and iPads. So does John Deere, which integrates
technology and designs from third-party companies into its precision
agriculture equipment to help farmers measure the use and performance of water
systems, seeds, pesticides, and soil enhancement products. Other companies’
platforms, such as Siemens MindSphere and GE Predix, permit their participants
to collaborate more easily.
To facilitate collaborative partnerships, drawing on the widest
number of companies and individuals at low cost, Digital Champions deploy open
platforms with low-friction networks that make it easy for participating
companies to link in their own customer solutions ecosystems. For example, they
might tailor products directly to one another’s customers, cross-branding as if
they were one enterprise. These applications can generate huge revenue streams
and capture customer loyalty. The survey found that 50 percent of Digital
Champions have already implemented open, collaborative platforms, and 68
percent offer individualized products and services through portals with
enhanced customer experience. It also found that 63 percent go even further
with more intricate, data-enhanced integrated partner networks.
CONTINUES IN PART II
No comments:
Post a Comment