While manufacturers move to embrace digital strategies, they could be wasting millions on initiatives that produce little return or organizational benefit.
The key to successful adoption is a clear strategic vision from the C-suite and incremental experimentation with digital investments that offer high end-to-end value.
While there are dozens of reports and articles, Chief Executive’s included, that tout the benefits of digital transformation, a recent report by Genpact, a global professional services firm originally founded as a division at General Electric, warns of the problems if companies don’t get it right. The report says the surge of digital transformation will result in many misguided efforts and says that if the right strategies aren’t adopted, organizations could waste up to $400 billion per year on initiatives that produce weak returns on investment. In addition, these mistakes could induce dangerous delays that would result in missed opportunities from finding effective digital business and operating models.
Tiger Tyagarajan, CEO of Genpact, told Chief Executive it’s especially important that manufacturers find the right digital initiatives before moving forward. As the fastest mover of digital technology and the largest generator of data in the economy, manufacturers have a lot of variables and factors in their digitization efforts. Connected supply chain networks and automated assembly lines will continue to grow in the coming years, fueled by the explosion of data and new computing technologies. Artificial intelligence, machine learning and the automation of manual processes also will drive productivity, create safer work environments and reduce human error.
“manufacturers should engage in short sprints of experiments and investments that offer end-to-end value across the organization.”
What’s the solution?
Manufacturers will need to carefully evaluate and implement digitization initiatives to ensure they’re maximizing value and reducing waste. Tyagarajan said one of the biggest challenges is ensuring these systems communicate with each other and are properly integrated with legacy systems and processes already in place. He said that manufacturers should engage in “short sprints” of experiments and investments that offer “end-to-end” value across the organization.
One of the primary reasons many digital initiatives fail is because companies focus too much on the front office and not enough “on the middle and back,” said Tyagarajan. Instead, a successful digital thread must run through every aspect of the company’s operations, from product development and manufacturing to customer service. Although failure is not considered as such if it results in lessons learned, the real failure, Tyagarajan says, is when a digital strategy is not integrated from end-to-end.
Gordon Benzie, board member at Manufacturing Enterprise Solutions Association, agrees that digitization in manufacturing should span the entire spectrum of the organization. He said it starts with equipment design and goes through product design and production process improvement to monitoring and the end-user experience. Benzie said the establishment of a “digital thread” can offer new approaches for how manufacturers operate, revealing new business models that previously may never have been considered. “When managed from an enterprise perspective, what could result are new levels of collaboration, operational excellence and agility,” Benzie said.
To produce a meaningful ROI, manufacturers also need to move beyond simply investing in digital technology. While things like data analytics and IoT can provide tremendous value, it is less about the technology itself and more about how it is applied. Manufacturers must change their corporate DNA and think about what deep, unrecognized problems are affecting their operations, customers and employees. Tyagarajan said this calls for new ways of thinking with the need to build a culture that empowers employees from all departments with a variety of talents. And because digital transformation can require such profound changes, there must be a C-suite level understanding of digital.
“While this doesn’t always have to be a designated position, we need to see CEOs and other top leaders prioritize digital transformation strategies. A number of companies have chief transformation officers that prioritize digital,” Tyagarajan said.