Hyper customization, smaller batch runs, a shrinking labor pool, energy availability, and global competition are factors that are increasing in importance and are also pointing to a much-needed new direction that companies will need to take in order to remain relevant ...
Top Article of 2019 - Digital Transformation in the Industrial Sphere
Stuart Carlaw | ABI Research
Why is digital transformation in the industrial sphere so important right now?
We are in a perfect storm situation. We have a set of external pressures from macro-economic conditions that create a challenging financial backdrop. We have a manufacturing industry that is faced by very specific market-driven forces (as outlined in the next question). We are also experiencing a time of technological revolution that means that technology can now play a fuller role in alleviating the pressures felt from the previous two items. This is especially salient given the fact that traditional manufacturing responses to challenges such as labor force expansion or capital equipment investment are not likely to be possible or yield the results of yesteryear.
What are the major challenges that companies are faced with?
The option of adding lines, adding shifts or dropping prices to remain competitive is fast becoming obsolete. Hyper customization, smaller batch runs, a shrinking labor pool, energy availability, and global competition are factors that are increasing in importance and are also pointing to a much-needed new direction that companies will need to take in order to remain relevant and profitable. Probably the most profound challenges for anyone looking to implement a technology-driven transformation process: clearly understanding where you are currently in terms of solution maturity as well as what the end vision should be.
What are the technologies that companies should be keeping watch of, embracing and avoiding in their transformation process?
ABI Research has identified 18 key technology areas that look set to play important roles in the industrial digital transformation and are interleaved into the maturity model. These include:
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Are these technologies going to help solve the problems industry is having in finding qualified workers?
It is definitely the case that in many developed markets, workforce availability and skill-set shortage are two of the most pressing issues. These issues are at the core of what some of the technologies outlined in the previous section will look to solve. As an example, Autonomous material handling will remove the human OPEX expenditure needed to move items. AR will be critical in enabling a workforce to carry out tasks that would normally require 2nd or 3rd tier support functions. AI will take a lot of the complexity out of operational decision making in order to aid managers to make better more informed decisions. It is also important to consider how the technologies will combine to have a compound effect on the workforce. An example of this would be how data management, simulation, AI, and AR can combine to pre-optimize solutions and process changes prior to physical implementation.
What are some best practices for companies to follow in order to optimize their digital transformation process?
When approaching an industrial digital transformation project, there are several key takeaways that will significantly increase the possibility of a successful implementation:
- Look for the technology implementations that will be quick wins. Find operational areas where a technology solution can be quickly implemented and will show material business benefit in a short time. This will aid in building institutional alignment for future projects and will provide huge learning opportunities.
- Get the all the right people on the same page. The projects should include key influencers from both operational and IT roles. The early involvement of digital executives will allow for a more integrated and frictionless project.
- Don’t view technology projects is isolation. One technology project will have profound impacts on others both good and bad depending on how it is managed. View the projects through the lens of a continual macro process that needs active management and oversight. If done correctly 1 + 1 can = 3.
- Sequence the technology projects effectively. Poor transformational planning, unrealistic timelines, and unbalanced plans will lead to friction and eventual project failures.
- Pick partners carefully. The need for partners in technology transformation projects is growing and the number of partners per project is also increasing. Don’t get dragged into technological dead ends based upon partner agenda.
- Base all technology decisions in business reality. Without a definable business benefit that can be measured, there will be no prospect of demonstrating concrete value and driving alignment for future projects.
What key activities can ABI Research’s Industrial Solution help companies optimize and accelerate in their digital transformation journey?
ABI Research’s Industrial Solution is really designed to provide companies engaged in the industrial sector with the tools to successfully implement technology transformation projects. For each of the 18 technology sectors covered in the previous sections we provide a number of products that look to inform key strategic discussions.
- Research Analysis reports: Provide a thematic understanding of the market and a solid grounding within a specific technological development. This allows for companies to have a solid collective understanding of the technological landscape and to clearly identify what the technology means for them. They provide a solid common ground to align their organization on.
- Market Data spreadsheets: Deep quantitative research that incorporates detailed, evidence based market forecasts. This provides companies with the ammunition to be able to build some understanding of the available market these technologies will provide and also create meaningful business models. These provide the evidence to justify further investment.
- Competitive Assessment reports: Rate individual supplier capabilities against their competitors and help answer strategic partnership questions: Whom should a company partner with? Whom should a company be aware of? Whom should a company avoid?
- Total Lifetime Value Calculator spreadsheets: Allow companies to personalize their own perspectives and make business cases clearly understand how digital transformation initiatives can impact a business in a real-world setting. They also provide valuable guidance on how different initiatives can fit together to provide long term uplift; it’s not just about efficiency in the short term.
In combination, these products allow a company to speed their time to innovation and create meaningful technology transformations through a more aligned perspective of the technology, deep market metrics, personalized impact assessments, and a comprehensive understanding of the partner landscape.
Is the transformation expensive in terms of capital and increased operating costs?
When done correctly it is wise to expect a moderate level of expenditure for capital equipment and services but the ultimate outcome will most likely lead to more profitable business processes. This can either come in the form of reduced OPEX but may also relate to the ability to service more profitable sectors of the market through improved workflow and capabilities. When looking at the cost aspect of the transformational process it is really worth thinking about how to really implement the best practices we outlined earlier. Picking the low hanging fruit, choosing the correct partners and sequence of technology projects alongside the reality-based business model can really help to reduce the risk of expensive capital over reach.
Why is the ABI Research Industry 4.0 Maturity Model and important tool for companies to use and how should they view it?
The Industry 4.0 Maturity Model by ABI Research is designed to provide companies with a quick snapshot of their maturity level and where they can realistically look to target for advancement. It should be viewed as a tool to help align corporations objectively about where they stand in the spectrum of industrial development but also where their vision should be aligned regarding future projects. As outlined previously in the best practices, in order to sequence technology investment, pick the right partners, knock off the easy wins and ground projects in sound business process, it is imperative that an organization not only has some vision of the future but also knows where it is right now.
About Stuart Carlaw
As Chief Research Officer, Stuart Carlaw leads ABI Research’s analyst teams covering global transformative technology markets. Stuart’s primary responsibility is the management of industry research content, technology and market focus, subject matter guidance, product portfolio mix, custom and consulting as well as client engagements and strategic advisory provisioning.
The content & opinions in this article are the author’s and do not necessarily represent the views of ManufacturingTomorrow
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