Professor Andy Neely takes a look at the five key issues manufacturing industry leaders should focus on if they want to survive in the age of digital disruption.
As we stand on the brink of a new manufacturing revolution, manufacturers are facing both a huge challenge and an opportunity. Digital technology and underlying data infrastructures are growing in maturity and opening up new opportunities for manufacturers.
We see new business models being adopted on the back of advances in data connectivity, while government and policy makers are also keen to drive digitalisation forward across all sectors.
As with all revolutions, there are major implications for manufacturing executives who need to safely and successfully steer their firms through the rough and rapidly changing waters of the digital age. Manufacturing technology is evolving faster than ever, and many of the technologies being introduced today will be commonplace within five years.
Manufacturing leaders need to be able to evaluate the operational and organisational implications of evolving digital technologies and how they align with their company’s vision. To do this, there are five things that manufacturing leaders need to do.
Get a new perspective
The first critical capability is being able to reimagine the future and your own organisation’s business model – in particular, its role in the wider ecosystem.
The ecosystem, which includes the wider network of firms and organisations that can or could influence the way the focal firm creates and captures value, is important because increasingly competition is being played out not at the level of individual firms but at the level of ecosystems.
Manufacturing leaders across all sectors now have to think much more broadly about the role of different organisations and in which domains they are competitors and in which they are collaborators.
Beyond broader strategic thinking, the second leadership implication of the digitalisation of manufacturing is the need for manufacturing leaders to understand and keep track of the development of digital processes and technologies.
It is clear that the rate of digital development is rapid. It is not just the speed of technological development, but also the range of capabilities that leaders need to be across. Manufacturing leaders have to consider carefully how they build the capability to track and monitor the pace of technological development. And to do that, they need to understand its trajectory and potential.
The third implication of digitalisation is the need to innovate constantly. Unless your firm keeps pace with the technological innovations made by others you will fall by the wayside. A particular challenge here is that digital disruption in the business-to-consumer (B2C) world is shaping and changing consumer expectations and attitudes. We are now used to seamless customer experiences and keeping pace with this level of innovation is crucial for manufacturing firms in the 21st century.
A fourth implication arises from the increased emphasis on collaboration and communication. Particularly with digital technologies and processes, it is rare that a single firm has all of the capabilities needed to deliver them successfully. Hence, firms need to partner much more directly with a diverse range of different companies and organisations. The intention is to pool capability across traditional organisational boundaries.
A fifth and final implication is the need to evolve constantly. Clearly this links back to the issue of innovation, but the point about constant evolution is that we do not live in a world of ‘punctuated equilibrium’, periods of stability that are occasionally shocked through innovation.
Instead, the process is continuous – organisations are constantly striving to look for new and better ways of helping deliver the outcomes their customers want and nobody can afford to stand still.
Auditing your organisation’s leadership capabilities
Manufacturing leaders now need to ask themselves and their leadership teams some tough questions. To audit your own organisation’s manufacturing leadership capabilities, I would recommend asking yourself the following questions:
- Do we have the balance right in our strategic discussions – are we thinking about our strategy in parallel with the broader ecosystem strategy?
- How good are we at keeping pace with technological developments, understanding changes in both manufacturing processes and enabling technologies that might help us innovate our business model?
- How clearly have we defined our digitalisation strategy? Consider how manufacturing technologies and processes will allow us and our ecosystem partners to innovate our business models so we are better able to deliver the outcomes our customers want.
- How good are we at partnering with others, capitalising on their strengths and defining win-win collaborations for all involved in the ecosystem?
- Do we constantly question our existing approach, incrementally innovating and improving it so that we are forever pushing back the boundaries of the possible?
If you can answer these five questions positively, then you have many of the manufacturing leadership capabilities in place that will be needed to survive and thrive in an age of digital disruption.