Digital transformation: the currency of industry 4.0

Posted on 15 Jun 2016 by The Manufacturer

Are manufacturers doing enough to prepare for this digital economy? OpenText weighs in on navigating industry’s digital journey.

Big Data Technology Cloud digital transformationThe fourth industrial revolution is driving massive change in the way manufacturers are doing business; and with any significant change comes a certain amount of disruption.

However, digital disruption has the potential to overturn incumbents and reshape markets.

Last year, former Cisco CEO, John Chambers said that up to 40% of the current Fortune 100 companies will be non-operational in 10 years; specifically, those that do not transform digitally.

According to Capgemini, 26% of firms executing a digital strategy are likely to be more profitable than their peers and competitors. By 2020, it’s estimated that 25% of the world’s GDP will be driven by digital and not touched by human hand.

Regardless, manufacturers are failing to acknowledge the potential risk digital disruption could have on the sector.

According to the Global Centre of Digital Business Transformation, which surveyed almost 1,000 global business leaders, 45% of companies didn’t consider it a board-level issue, with 43% of companies either not acknowledging the risk of digital disruption, or not having addressed it sufficiently.

Nearly a third reported taking a “wait and see” approach, in hopes of emulating successful competitors; and only 25% described their approach to digital disruption as proactive or willing to disrupt themselves to compete.

What factors are empowering this change?

  1. New technologies: such as wearables; 3D printing; cloud, and mobile platforms are expanding the source, collection and reach of digital information.
  2. The digital customer: with increased computing power, cloud and mobile engagement, the customer is constantly connected across markets and geographies, seeking bespoke products, fast.
  3. Security and governance: is an increasing focus with more information becoming available online.
  4. Changing workforce: millennials are becoming the majority of most workforces across the world, with many moving into leadership positions, they look at information as always available and instantaneous.
  5. Regulatory compliance: There is increasing regulatory pressure on companies, especially those that operate across borders, where different regulations must be adhered to; and cross-continent where data sovereignty laws must be respected.

Tom Leeson, industry and value marketing strategist, at OpenText commented on some real-life manufacturing case studies at a recent conference he attended, where firms were partially or wholly immersed in a digital transformation.

“Most notable was a few industrial equipment companies that shared their experiences. A common challenge was revisiting a site. Without visibility of the right information when attending a site often firm representatives had to return, which has cost implications. In this instance, having access to the right digital assets when attending a site can reduce the need to return.”

Leeson continued to discuss an example where the equipment manufacturer delved deeper into the digital transformation.

“There was a similar discussion where a crane manufacturer started its digital journey by asking the question: ‘What can be measured on a crane?’ Its conclusion was everything.

Digital transformation

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“The firm embarked on a journey of continuous data collection and processing from sensors on the equipment. Analysis of this data, over time, established insightful feedback.

Fault points were recognised from data patterns, which led to predictive maintenance where service engineers attended and maintained machines based on predictive outcomes before faults occurred.

“The result was less downtime of equipment and a better return on investment for the customer.  Minimised downtime of equipment allowed the end customer to run assets longer and more reliably.

“Next the crane manufacturer sold the hardware and predictive maintenance package ‘as a service’, which enhanced income from the installation year on year.”

However, Leeson is concerned that many manufacturers are not sure how to begin their digital transformation journey.

“A poll taken at a recent CBI conference I attended reported that many manufacturers are perplexed at how to get started. The poll showed two reasons for not pursuing digital strategy: firstly, lack of understanding of ROI; and secondly; lack of internal skills to deliver.”