Follow by Email

Wednesday, August 8, 2018



Operations: Rapid, Relevant Response
The operations ecosystem is the workhorse for Industry 4.0 activity. It includes the day-to-day inputs and outputs that support a Digital Champion in delivering value to customers. Among its functions are the supply chain, product development, innovation, production, logistics, distribution, and post-sales customer interaction. A highly functioning operations ecosystem can create benefits that have previously eluded manufacturers. For supply chain planning and execution, it can greatly improve efficiency and product customization by adjusting the pace of production to match real-time customer demand. For research and development, it coordinates a network of internal functions, suppliers, academia, researchers, and sourcing and logistics specialists. For manufacturing, this ecosystem vertically links and automates factories (owned by the Digital Champion or contracted out) and connects the shop floor directly to supply chain and customer demand activities.
Companies with a high level of digital maturity can design their operations ecosystem to respond more rapidly and interactively to the customer solutions ecosystem. As demand changes for products or services, the operations ecosystem continually adjusts. Suppliers or factories may be needed in new regions; warehouses and parts management may require more flexibility to deliver on accelerated just-in-time schedules; and innovative logistics partners may be added. Even if much of this happens automatically, it is critical to regularly reevaluate the operations ecosystem against performance metrics and capability requirements, drawn from the customer solutions part of the business model.
The Digital Champion Bosch Rexroth has mastered the operations ecosystem for, among other product lines, its hydraulic valves used in agricultural equipment. In one of the company’s most advanced plants, in Homburg, Germany, customized orders are assigned to a manufacturing line with a special feature: Products guide themselves through the assembly stations with the help of RFID chips. The nine intelligent stations on the line recognize how the finished product has to be assembled and thus which operational steps are necessary. Displays show workers the corresponding instructions for any of the more than 200 versions of the component that is to be processed. The assembly line integrates the human, the product, and the machine in a system of flexible mass production.
An interactive cockpit oversees the Bosch Rexroth effort, tracking key performance indicators related to the manufacturing process, along with the quality of the assembly. The cockpit collects all relevant data from the connected production facilities, updates them dynamically, and makes them available in real time.
This approach allows the company to match products to customer specifications so that the products are tailored for use in particular agricultural environments, while maintaining the speed, scale, and cost efficiency of mass manufacturing.
With the launch of its Nexeed software and service portfolio for industrial Internet applications, Bosch has pooled all its Industry 4.0 activities to support customers in connecting the value chain from end to end and integrating it into an operations ecosystem. Nexeed represents an entry point into the connected factory, tailored to customers’ needs. It allows individual lines to be combined, and interconnects factories and plant networks, including their internal and external logistics. A variety of apps and software solutions support workers in their daily tasks. Relevant manufacturing data is more quickly accessible to employees through their mobile devices; this ultimately leads to greater machine availability in production. Internal transport processes and flows of goods outside the company can be seamlessly monitored and traced back. Workers are kept informed of the location, condition, and delivery time of goods. The result is increased productivity and agility, which boosts competitiveness.
With an operations ecosystem of this sort, a company can gain at least five significant benefits.
• Transparency: It has a complete end-to-end view of the value chain.
• Real-time data sharing: All the participating departments and companies can see the same information simultaneously.
• Extended collaboration: Operational links develop organically with trusted partners (such as suppliers), becoming deeper and more synergistic over time.
• Responsiveness and flexibility: Companies can respond instantly to changes in end-user demand; they can shift plans easily and execute those changes promptly.
• Connectivity: Product life-cycle management, supply chain management, and customer information are all integrated seamlessly.

We analyze how advanced a company’s operations ecosystem is in two ways. First, we assess the manufacturing process, emphasizing the degree to which production is automated and transparently connected across the company’s own plants, along with partnering manufacturers, suppliers, and logistics channels. Ideally, all of the ecosystem’s elements are exchanging data continually and acting on it in real time. This approach is so advanced that only 5 percent of the companies we interviewed, including only 33 percent of Digital Champions, had adopted it. Digital Champions score better when it comes to linking their factories with some form of integrated digital connection; almost half of them have done this, whereas most of the companies we interviewed — about two-thirds — have just selectively automated single factories.
The second way to assess operations ecosystem capabilities is by measuring supply chain integration. Digital Champions are well ahead of other companies in this respect. More than 80 percent of Digital Champions have at least near-real-time, end-to-end integrated networks with supply chain partners that offer full collaboration and visibility among the companies involved. This customer-driven supply chain lets participating companies quickly assess the impact of potential changes in demand and resolve any constraints that would hinder a rapid shift in production and distribution schedules. Among the companies surveyed, only 27 percent have reached this high level of digital supply chain mastery.
Technology: Incessant Innovation
Because the customer solutions ecosystem determines the company’s business model, and the operations ecosystem organizes its most complex capabilities, many business strategists seem to feel they have their hands full with just those two clusters. They tend to regard the technology ecosystem as being made up of more routine functions, to be delegated to service bureau–style departments. But that is a mistake. The technology ecosystem consists of activities embedded throughout the organization in every business entity, all linked together. They include established enterprise applications such as resource planning, customer relationship management, financial analytics, and cybersecurity, along with applications tailored to new platforms and revenue streams. Digital Champions gain a back-office performance edge from this ecosystem because they incorporate latest-generation technology: advances in cloud storage and collaboration, data analytics, human–machine interfaces, customer and employee experience, and hardware and software integration.
In designing and implementing this ecosystem, Digital Champions are risk takers with discipline. They insist that their business strategy should determine which technology they adopt, while continually keeping up with digital advances that have the potential to enhance strategy, particularly involving speed, flexibility, customization, and efficiency.
Rather than having a “not-invented-here” bias toward homegrown and stand-alone systems, Digital Champions readily form partnerships with outside companies, including vendors and other users of platforms, hardware, and software, to more quickly implement new digital applications without redesigning the wheel. These attributes undoubtedly play a role in their impressive track record as innovators: More than 90 percent of the Digital Champions among our survey respondents said they were planning, prototyping, or already implementing advanced technologies such as robotics, digital twins (real-time simulations of on-the-ground operations), and the industrial IoT. The comparative figures among Digital Novices were below 40 percent.
Intriguingly, Digital Innovators, the group just below Digital Champions on the digital maturity scale, foresee revenue gains of nearly 20 percent, outpacing Digital Champions. We suspect that this figure reflects the fact that Digital Champions have already enjoyed initial revenue bumps from technology investments, whereas Digital Innovators are a step behind and will probably reap these benefits over the next few years if they adopt Digital Champion strategies soon.
One company that has made its technology ecosystem a centerpiece of its business model is Austria’s Magna Steyr, which manufactures vehicles for other automakers, often when sales fluctuate and flexible manufacturing is needed. Its portfolio has included Mercedes G-Class, BMW 5 series, and the Jaguar E-PACE and I-PACE. With this product mix, Magna Steyr is the only vehicle contract manufacturer to produce the whole band of powertrain technologies — from the internal combustion engine to plug-in hybrids to pure electric vehicles. Because Magna essentially operates a dozen or so assembly schemes for different vehicles on a single line — an approach that many automakers are still struggling to perfect — the company has had to develop factories that are completely agile. Otherwise, profitability would be impossible, as some original OEMs have discovered with their low-volume models.
Magna has overcome this agility hurdle by introducing a steady stream of Industry 4.0 digital innovations, combining them to continuously upgrade the performance of its plants. Among the technologies is a digital cockpit that produces a digital twin simulation and monitors assembly-line performance for each vehicle. Adaptable robots with AI that can recognize each vehicle and determine assembly steps instantaneously guide the cars through the manufacturing lines. An in-line quality control function checks the assembly operations against real-world expectations in each step of the process so that quality isn’t weighed only at completion, when a great deal of time tends to be wasted in the auto manufacturing process. And manufacturing data analytics are adjudged by learning machines that can alter the assembly process on the basis of new conclusions culled from prior vehicle builds.
People: Culture of Competence
As the latest industrial renaissance unfolds, there will be an increasing need for skilled workers. Some will need to configure and operate complex equipment and others to program it. All will need to make quick decisions in response to shifts in product lines, designs, and input from a range of partners. Digital Champions thus invest heavily in training and on-the-job skill development. They have also succeeded in (or at least are moving toward) building a digital culture in which people throughout the hierarchy have a high level of competence. They have mastered not just the tools of Industry 4.0, but the judgment needed to deploy those tools effectively in the service of strategic business goals. They understand the ways in which their own efforts fit into the overarching goals of the customer solutions and operations ecosystems, and thus into the organization’s rapidly evolving strategy.
These facets of the business, involving recruitment, training, workplace design, incentives, and a context for collaborative effort, represent the core of the people ecosystem, which is essential to making sure that the other three ecosystems operate at peak levels. Organizations that employ their people ecosystem to the greatest benefit have traits in common in four key categories.
• Skills: Workers can handle diverse challenges. They can turn rapidly to new tasks, learning on the job. The organization has strong capabilities in data analytics, human–machine interaction, and technology-supported decision making. There are formal pathways for increasing the workforce’s digital IQ.
• Mind-set and behavior: The organization has a digital mind-set and vision; it welcomes entrepreneurship and new leadership styles; it is open to new technology; it learns from failure; it is creative, innovative, and generally curious; it embraces a nonhierarchical, “best idea counts” mentality; and it puts a premium on rapid decision making.
• Talent sources: The company relies on cross-functional teams to drive digitization and eliminate silos. These teams are highly integrated, made up of people who work for the company mixed with employees at partnering companies; with freelancers from hackathons and accelerators; and with people from digital agencies, research institutes, and universities.
• Career development: The organization supports its people ecosystem with a variety of unorthodox appraisal, incentive, and compensation schemes that reward innovative and smart digital ideas; flexible work arrangements and telecommuting when appropriate; free time to support continuous improvement of company operations; career models that reflect the value of digital expertise; and real-time employee feedback.
As the need for skilled labor increases, it will be crucial to develop new ways of acquiring talent — often individuals educated in science, technology, engineering, and math — as well as tailored training programs in digital concepts and capabilities. To some degree, this will result in higher salaries for people with the right skills; high pay provides an incentive for employees to continually refine and improve their skills throughout their career, taking advantage of Digital Champions’ strong support for lifelong learning.
Companies with effective people ecosystems embed the IT workforce into the customer solutions and operations ecosystems. This is a sharp departure from the traditional approach, in which IT is made up of a group of isolated specialists, separately owning all technology assets and delivering services, often inefficiently, to line businesses. The people ecosystem model enables the technology ecosystem to deliver IT solutions that address precisely what the business needs when it needs it. It also fosters data-driven decision making on all levels, because people understand how to incorporate sophisticated tools into their work practices.
In our survey, Digital Champions excelled at developing digital culture. Of the Champion respondents, 59 percent have invested heavily in training to upgrade staff for digital transformation; 52 percent regard failures as an accepted part of the development process (an attitude that encourages experimentation with new ideas); and 52 percent have flat hierarchies and quick decision-making processes.
Becoming a Digital Champion
The relatively small number of Digital Champions suggests how difficult it can be to master the four ecosystems, especially for an incumbent company without a digitally oriented culture. Start by moving in several directions at once: developing ecosystem-specific capabilities while driving integration across all four ecosystems. Here are six proven steps to accelerate your efforts.
1.Conduct an ecosystem assessment.
This should look closely at the state of the company’s products and services, its customer satisfaction levels, its operational capabilities, the relative value of its technology, and the skills of its people. Assess each as if you were studying a competitor, which can help shine a light on your organization’s shortcomings. Consider your external challenges. How equipped are you to meet new market developments, competitors’ moves, shifting customer expectations, regulatory changes, and technological advances? Think about the art of the possible: digital strategies based not on past constraints but on new capabilities. What can you offer now that you couldn’t before, thanks to changes in technology, better understanding of consumer behavior, and opportunities for collaboration with external partners?

2. Define a vision of what the organization can become in this new world of Industry 4.0. 
Using the results of the first step, decide where to position your business, which value propositions to present to customers, and how to deliver your individualized products and services. What can you offer that can be tailored to individuals, or that competitors can’t match?

3. Develop an integrated operations model. It should span all four ecosystems and enable you to work effectively with external strategic partners. 
Focus first on the customer solutions ecosystem, identifying the best potential partners and the capabilities you will need (for example, in marketing analytics or product research and development). Determine which are already available internally, which to develop through partnerships, and whether to make or buy the rest. With these choices made, design the operations ecosystem. Then, build out your technology and people ecosystems to enable the first two ecosystems. In your design, specify the interfaces, interdependencies, connections, technology, and data links that will ensure seamless interaction among all the ecosystems.

4. Establish an ecosystem governance, investment, and decision board. 
This board should set priorities and key milestones, review and approve design and implementation outcomes, make investment decisions, and oversee results.

5. Continue to build out the ecosystems, starting with the strengths you already have. 
Design and implement ecosystem capabilities through rapid, fluid, project-based team efforts — similar to those used in agile software development. This step should include creating collaboration models for connecting and sharing operations among partners; vendors; organizations such as factories, logistics providers, or contract manufacturers; advisors; ad hoc workforces; permanent employees; and short-term and long-term relationships. These models can be implemented as prototypes and pilots, then adjusted before subsequent ecosystem elements are rolled out. After each successful rollout, link the element to relevant aspects of the other ecosystems.

6. Take full advantage of the new value chain. 
After the four ecosystems are in place, implement practices to make the most of the changes. These include close monitoring of the new approaches, focusing on the levels of growth, performance, productivity, and continuous improvement. As the ecosystems evolve, reinvest in the continued growth of the four ecosystems model.
These steps can represent a few years’ worth of activity in some companies. Even a Digital Champion typically has a lot of distance left to travel before the company can claim to be an Industry 4.0 leader. Indeed, only about half of the Digital Champions we surveyed said they had effective strategies for the full range of fundamental Industry 4.0–related activity. The depth of commitment required to become a Digital Champion can be daunting. But the consequent improvements in efficiency, speed, product development, creativity, customer response, and revenue show that achieving higher levels of digital maturity is worth it.

No comments: