Claudia Vecciolini examines the barriers and opportunities for SMEs as they face up to the challenge to become leaders, not laggards in the race towards digitalisation.
Announced in 2018, the Made Smarter programme presents a forward-looking vision of British manufacturing in a digital age, proposing a roadmap for the transition of manufacturing companies from a traditional to a digitally oriented business model.
In the Fourth Industrial Revolution, manufacturing companies should become increasingly confident in carrying out complex R&D activities with knowledge-intensive digital services; adopt cutting-edge monitoring systems connected to cloud-based platforms, and use collaborative and/or industrial robots for so-called ‘dull, dirty, dangerous and dear’ tasks.
This is easier said than done, though. Despite the transformative potential that this initiative could have on the sector, there is still a big hurdle to its effective implementation.
Companies often lack the competencies to adopt the necessary technology – even at the most basic managerial and technical level – which are necessary to upgrade the business.
Addressing this gap is crucial for both spreading the benefits of digitalisation beyond a small group of large, leading companies, and achieving the results of the Programme to the scale that we are hoping for.
As Made Smarter Review pointed out, manufacturers often ignore how digital technologies could be most profitably applied to their business.
We usually think of digital technologies in terms of the contribution they could give to efficiency and productivity, overlooking other invaluable opportunities that could come along with.
Indeed, the Fourth Industrial Revolution is not just about another way of making things. It is also about how companies interact, exchange information and collaborate with their internal and external environment to develop new ideas and solutions.
This article first appeared in the May issue of The Manufacturer magazine. Click here to subscribe
A major effect of this increased connectivity is the intensification of relationships between companies that would have hardly found common ground to interact before the outbreak of digital technologies.
The advent of the digital economy, with more and more children interested in gaming applications rather than in the iconic building blocks, hit LEGO hard, and pushed it into expanding its offering to include digital content for its more tech-savvy customers.
Following this trend, LEGO has recently announced a partnership with the Chinese internet company, Tencent, to co-develop a broad range of digital solutions and platforms for the Chinese market.
Evidence shows that digital transformation is causing a divide within the manufacturing sector, between those companies that have already set out a digitalisation strategy and adapted their organisation accordingly, and those companies that still lag behind: the leaders and the laggards.
The existence of a digital gap in the manufacturing sector has become a well-known concern for policy-makers. Compared with global competitors, such as Germany and France, the UK registers a slower uptake of information systems, business process transformations, enterprise digitisation, and robotics.
The uncertain political and economic scenario, the risk associated with the investment, and the lack of adequate human and financial resources are among the most frequent barriers to manufacturing digitalisation.
To compound the above, several studies, such as the McKinsey Global Institute’s paper Solving the United Kingdom’s productivity puzzle in a digital age, report the distance in terms of technological readiness between a fast-paced digital sector and a less-than- prepared manufacturing sector.
Further research on this topic will be presented in a forthcoming report from the Institute for Industrial Strategy at King’s College London, discussing how the implementation of a digital strategy can help address the gap between technology creation capacity and technology adoption capacity in the UK.
The real challenge for government is to adopt solutions that can raise the capacity level of ‘lagging’ companies to create and adopt new technology.
There are currently 165 funding schemes for the manufacturing sector on the government’s ‘business finance support finder’ directory, without counting a number of other initiatives, such as those offered by the Industrial Strategy Challenge Fund (Made Smarter is an example), and by a plethora of regional programmes.
Similar actions are of utmost importance to help businesses engage in typically risky investment in innovation. However, this ‘funding hysteria’ may result in a fragmented and confusing scenario for companies, if not encompassed within a cohesive and purposeful institutional structure.
Developing an overarching strategy would underpin a shared vision towards a more digitally enabled society, paving the way to out-of-the-box solutions that reflect the disruptive nature of the Fourth Industrial Revolution.
The infrastructure and education challenge
Part of the challenge is increasing the connectivity that will enable digital transformation. In this revolution, characterised by instant flows of data and information, and by increasing networking opportunities, infrastructure represents the foundations for a successful transition into the digital age.
Therefore, investing in more efficient and affordable infrastructure, especially in remote and rural areas, while reducing costs for users, is crucial in removing physical or digital barriers to the movement of people and goods, and ensuring a more equal distribution of the gains from digitalisation.
Similarly, we should not be afraid of imagining a different education system that prepares students for future jobs, demanding greater flexibility and capacity to handle a broader set of skills and competencies.
One of the possible answers to that could be interdisciplinary education, where different disciplines are integrated to create new knowledge (e.g., an activity, a research project, or even a new centre).
The Interdisciplinary Studies Centre at the University of Essex is a good, yet rare example of how rigid departmental divisions can be overcome, enabling students to engage with different departments and learn from various knowledge sources.
As in every past technological revolution, 4IR is not only affecting the way we do business, but even more, how we communicate, work and live our day-today lives.
The sooner we embrace the change and stop addressing emerging challenges with old solutions, the sooner we will be able to unleash the wealth-generating potential of the digital age.
Dr Claudia Vecciolini, Research Associate, Institute for Industrial Strategy, King’s College London