Manufacturing at the crossroads
Author : By Rafi Billurcu, Infosys Consulting
27 June 2019
If manufacturers want to be remembered as the pioneers of Industry 4.0, their most urgent priority is to design an operating model between IT and business that ensures faster time to market by enabling rapid deployment of innovative and experimental business models. Only then will the manufacturers of today be relevant in the new connected world.
Who remembers Alan Shepard? If you’re not familiar with the name, that’s probably because he was the second man to go into space.
It doesn’t matter that Shepard displayed the same courage and skill as his Soviet counterpart Yuri Gagarin. People only remember the pioneers – Christopher Columbus, Edmund Hillary, the Wright Brothers – not those who followed in their footsteps. It’s the same for manufacturers as it is for explorers: being the first to bring a new product to market gives a company a cachet that catapults it far ahead of its rivals, and forever associates that brand with innovation and ambition.
There are many factors that can cause fatal delays in the race to be first: legal and compliance, problems in the supply chain, unexpected complications in the test and development stage. However, by utilising technologies such as IoT, 3D printing, AI/simulation effectively, manufacturing companies can reduce the time to market significantly and gain competitive advantage.
Before delving into this further, we need to remind ourselves of the transformational changes that manufacturing has undergone in the last few years.
The transformation opportunity
The advent of Industry 4.0 has disrupted long-established business and organisational models, and placed IT (often unwillingly) right at the heart of product and go-to-market strategy. There are two major trends underlying this transformation: first, the move away from mass production to mass customisation/personalisation, where consumers can design their own unique products and bundled services, whether it’s a dishwasher or an automobile. The second is the fact that products themselves are changing, and now have a range of technologies embedded deep within them.
Take car manufacturing, for example. Not long ago, a car was a car. Now it’s a four-wheeled communications device, studded with sensors and bristling with Wi-Fi connectivity. Technology is not just a fundamental component of vehicles today; it’s also enabling manufacturers to create new business models based on that ugly neologism “servitisation”. Examples of these value-added services include provision of a car as a service that may include weekly fuel top-ups based on geo-location and car mileage, on-board entertainment with live streaming, grocery shopping delivery, real-time component monitoring and diagnostics and usage-based insurance.
It’s not just embedded technology that is changing long-entrenched business models: other technologies such as 3D printing can open up even more services and revenue opportunities. Think of the same car or a washing machine where the manufacturer that can remotely detect when a component is on the verge of failure, print a replacement, and ship it directly to a local dealership or plumber for installation – all before the end customer is aware that there’s a problem with their machine.
The revenue opportunities of Industry 4.0 are almost limitless, yet examples such as those above are, for the most part, still at the conceptual stage. The manufacturer that brings these new business models to market first will not only achieve a crucial lead over their competitors; they will establish the brand as visionary innovators in the minds of consumers. So valuable is this perception, it’s impossible to put a price on it.
Balancing risk and reward
And here we come to the challenge facing manufacturers in bringing new business models to market: the fact that we have barely reached the “pioneer stage” of Industry 4.0. To make that great leap into the unknown, manufacturers will have to reinvent the rules as they are progressing through this journey.
This need to reduce the time to market, embed technologies in the product, reshape core product offerings to include “IT” components requires the partnership between business and IT to be stronger than ever before. Traditionally, technology provided the underlying infrastructure that enabled project design and delivery; today it is part of the product being sold. Being first to market will require a re-alignment of business and IT KPIs now that IT will be playing an active role in the product development process.
Manufacturers cannot hope that this transition happens organically. Instead, executive management must find a better way to the operating model between businesses and IT departments co-opt their leaders into an aligned product strategy and work tirelessly to strike the right balance between risk and reward. Some organisations have started this transition by forming a Digital Transformation Organisation with its own Chief Digital Officer sitting alongside the CIO. Others have merged these roles and re-aligned the hierarchy as reporting into the CEO rather than CFO (as is often the case).
Alternatively, business may be given more autonomy and funding to develop innovative systems, enabling them to develop products faster and reducing time to market, which could see a small part of the IT department dissolving into the business functions to support the product development. However, in such a model, the governance and rules of engagement have to be defined in partnership with IT to ensure a smooth execution and alignment with the overall IT strategy.
If manufacturers want to be remembered as the pioneers of Industry 4.0, their most urgent priority is to design an operating model between IT and business that ensures faster time to market by enabling rapid deployment of innovative and experimental business models. Only then will the manufacturers of today be relevant in the new connected world.
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