Digital transformation in manufacturing is creating a rift between digital transformation leaders and followers. Leaders in manufacturing are leveraging digital transformation to supply intelligent products, automate production, and leverage flexible value networks. As a result, they’re seeing nearly twice the revenue growth.
This article sets out how–with the right technology, leadership, and culture–digital transformation followers can up their game, start selling innovative products in innovative ways, and experience increased profitability, greater efficiency, and stronger partnerships as a result.
Want to learn more about digital transformation in manufacturing? Here are the key topics we cover in this article:
- What is Digital Transformation in Manufacturing?
- How to Become a Digital Transformation Leader
- Transform or Die
- Digital Transformation Leaders Use These Technologies
- Digital Transformation Leaders Adopt a Strong Digital Culture
- What Can Digital Transformation in Manufacturing Do For Your Company?
- The Product Lifecycle
- The Smart Factory
- Value Chain Management
What is Digital Transformation in Manufacturing?
Digital transformation in manufacturing is a broad term covering everything from IT modernization to digital optimization to the invention of new digital business models*. It’s about transforming how companies operate by leveraging a suite of new intelligent technologies that enable faster, better decision-making, turbocharge operational efficiency, and increase profitability.
Successful digital transformation in manufacturing requires more than investing in technology alone; it requires a cohesive digital strategy and a culture conducive to execution. Companies that focus on culture are five times more likely to succeed than companies that neglect it. We cover what a solid digital culture looks like in this article.
Are You a Digital Transformation Leader?
Transform or Die
In an age of ongoing complexity in manufacturing, a rift (or “innovation gap”) is forming between digital transformation leaders–companies successfully leveraging new digital technologies to respond fast to changing market conditions–and digital transformation followers–those investing too narrowly in digital or failing to make a transformation stick.
As time passes, this “innovation gap” widens exponentially. New technologies emerge, and digital transformation leaders gain compounding returns on their digital investments. In a desperate attempt to catch up, followers are forced to make larger, riskier investments, and those slow to act face digital obsolescence and bankruptcy.
Digital Transformation Leaders Are Introducing These Technologies
Digital transformation leaders use a networked cluster of new digital technologies to deliver innovative products in innovative ways. These technologies include:
- The Industrial Internet of Things (IIoT): The use of smart sensors embedded in production equipment that provide real-time feedback. IIoT facilitates predictive maintenance (sensors monitor asset performance and condition to eliminate downtime) and autonomous production (machinery that operates without human assistance.)
- Cloud Computing: On-demand access to computing resources via the internet. Saves manufacturing teams money on software, hardware, and infrastructure. Provides agility and instant access to data from anywhere.
- Big Data: The ability to analyze and extract actionable information from vast, complex data sets. It helps businesses predict outcomes and make fast, data-driven decisions.
- AI (Artificial Intelligence): The algorithms that computers use to carry out “intelligent” tasks with superhuman levels of efficiency.
- Machine Learning: The science of getting computers to act without being explicitly programmed. Computers carry out tasks, learn, and get dramatically better over time.
- Industrial AR (Augmented Reality): The ability to overlay digital imagery onto the real-world captured through the screen of a device. Use cases include assembly guidance, shop-floor safety, quality control, and training.
- Additive Manufacturing (3D Printing): The ability to produce 3D products by printing them layer-by-layer. It makes “batch-of-one” production profitable. Rapid prototyping is hugely beneficial to product development. Equipment is relatively inexpensive and has a small physical footprint, which lowers barriers to entry and supports localized production.
Digital Transformation Leaders Adopt a Strong Digital Culture
According to a Boston Consulting Group study of 40 digital transformations, companies that focus on culture are five times more likely to achieve their digital transformation goals. Culture, as it turns out, has an even greater impact on digital transformation success than the scale of digital investment and the recruitment of digital talent.
So, how can companies build a digital culture? Research from Heidrick & Struggles suggests the key lies in strong leadership, saying: “The CEO and senior leaders must own and lead the culture-shaping process. Since leaders cast a powerful shadow of their own behavior on the organization, they should explicitly define the culture the organization needs and demonstrate the corresponding values and behaviors.”
Put simply, when supported by resources and a systematic execution plan, employees tend to follow the lead of the senior team.
Common Cultural and Behavioral Traits of Digital Transformation Leaders
Have a clear vision of digital transformation “success” and a map for how to get there.
- Take a futuristic view of technology, business models, customers, and the workforce.
- Encourage “failure”–support people to take bold risks at speed and learn from their mistakes.
- Monitor and measure transformation progress, update processes and improve their technology solutions.
What Can Digital Transformation in Manufacturing Do For Your Company?
Digital transformation in manufacturing future-proofs your business. It makes you more flexible and responsive to rapidly evolving markets and customer needs. It supercharges efficiency by automating non-value-added activities and gives employees the tools they need to achieve their potential.
The benefits of digital transformation are far-reaching but can be divided into three main categories:
1. The Product Lifecycle
Digital transformation in manufacturing connects the entire product lifecycle via a seamless stream of data often called the “digital thread.” It serves as a powerful single source of truth that users at all levels and in every department can tap into, accessing information and collaborating with others in real-time. Senior management gets total visibility over every stage from a single dashboard–engineering to design, sales, marketing, manufacturing, distribution, and service.
The benefits of adopting a digital thread include:
- Instant access to data
- An integrated view across departments and divisions
- Simplified compliance
- Enhanced communication and collaboration
- Less scope for human error
- Greater accountability
2. The Smart Factory
The smart factory is a concept that describes the application of modern (smart) technologies to create a self-monitoring, self-adapting manufacturing facility. The long-term vision for many is lights-out manufacturing–fully automated factories that require no human input or presence (and hence can be operated with the lights out.)
Central to the concept of the smart factory is flexibility. Autonomous manufacturing cells, driven by AI, can manufacture various product types and volumes from one day to the next. This flexibility enables manufacturers to provide product customization at scale.
3. Value Chain Management
Digital transformation lets manufacturers create and be a part of global digital value chains. They can integrate with their partners’ systems, work with the best suppliers, gain instant access to new markets, and share data selectively and securely with collaborators and customers.
Digital transformation provides manufacturers with the flexibility and responsiveness they need to thrive in a time of ongoing complexity and rapid change. Technologies such as the IIot, AI, and machine learning promise increased productivity, reduced costs, and improved product quality.
But achieving these goals requires more than simply automating existing paper-based processes and moving from on-prem to the cloud.
Digital transformation requires dedicated digital leadership that empowers people to work in new and creative ways. And iterative deployment because digital transformation in manufacturing is not a “one and done”; it’s an ongoing process of strategic renewal.