Manufacturing has led the charge into the fourth industrial revolution, marked by the infusion of advanced technologies like data analytics and automation in the production process. Yet, implementing digital technologies across the broader enterprise has proved to be more challenging. Many manufacturers are still struggling to design and execute a strategy for digital transformation that could help them fill this gap and advance along the digital maturity curve.
A recent Deloitte study, Distinctive Traits of Digital Frontrunners in Manufacturing, has distilled insights from a cohort of the manufacturing industry’s digital frontrunners and explains how these frontrunners appear well-positioned to capture the benefits of digital technologies in various aspects of their business. Our research pulls insights from these organizations and presents three key lessons for manufacturers to consider when seeking to achieve successful digital transformation:
1. Leadership and talent are important enablers
2. Well-planned technology investments could yield greater returns
3. Deliberate actions are often key to moving the digital strategy forward
Enable Digital through Leadership and Talent
With the rise of the fourth industrial revolution—one that is marked by the infusion of digital throughout the factory, the office, and the supply network—work will likely involve humans intertwined with advanced technology. This will bring with it potentially far-reaching changes for the current manufacturing workforce. Deloitte’s study highlights that manufacturing frontrunners have shown higher confidence in their ability to address these talent-related changes than their peers.
Strong leadership: To foster a digital culture in an organization, leadership should be agile and capable of moving beyond traditional business operations to identify and act upon new opportunities that create business value. We found that over 60% of frontrunner manufacturing executives are highly confident that they can steward their organization through this disruption. Our study also highlighted that more than three fourths of frontrunners have support and buy-in from their key stakeholders. Such a vote of confidence can create a positive environment for organizations to experiment with and implement digital technologies and adapt to change.
Upskill the talent pool: The existing talent shortage in manufacturing, estimated by Deloitte and the Manufacturing Institute to grow to 2.4 million by 2028, along with digital transformation, poses a new challenge for manufacturers. Executives are looking to attract, retain, and upskill talent to create digital capabilities. Sixty-four percent of manufacturing digital frontrunner companies from Deloitte’s survey reported that they’re confident that while their workforce doesn’t yet possess the right skill sets, they can successfully train their talent in digital skills. Manufacturers should plan to address the effects that technology-driven changes could have on their employees, both through appropriate training and re-skilling programs as well as with a comprehensive talent management strategy.
Make Well-Planned Technology Investments
Industry 4.0 presents a wide array of digital technologies, each having its own value and delivering potential benefits like speeding production, expediting financial processes, and optimizing operations. Manufacturers should determine what is important for them and invest appropriately. Although one-third of survey respondents agreed that smart and autonomous technologies will have a significant impact on their organizations and business, 42% of these respondents think that their organization is not prepared to address this shift.
To address this challenge, manufacturers should:
Quantify their return: A business case that quantifies the expected return on investment can be effective in evaluating direct and indirect benefits drawn from the new technology and can help executives make the right digital investment decisions.
Invest in technology that links to business priorities: Before manufacturers determine which digital technologies to adopt, they should have a firm understanding of how it will impact their business and offerings. Deloitte’s survey highlighted that 65% of digital frontrunners stated they understood how technology will transform their way of doing business. This understanding level is significantly higher than the broader manufacturing industry. To succeed in digital transformation, it is important that manufacturers identify their organization’s greatest pain points or opportunities and prioritize investments in technologies that can address those first.
Pursue relationships to accelerate digital expertise: Organizations that are more experimental with digital technology are often better prepared to take advantage of the broader ecosystem of partners to advance their initiatives. These frontrunners, identified in our study, are five times more likely to adopt new business models and twice more likely to outsource tasks to jumpstart building digital expertise internally. Their openness to pursue technology alliances and relationships with partners that can provide needed expertise can help them create value for their stakeholders and build new capabilities more efficiently.
Take Deliberate Actions that Move the Digital Strategy Forward
Digital transformation is not about winning one long, cross-country race, but successfully completing a series of shorter races. Addressing one obstacle at a time, involving multiple stakeholders and implementing multiple digital projects simultaneously are all ways that can move the digital strategy forward.
But instead of launching multiple big initiatives at once, manufacturers can begin by implementing technologies that will produce rapid returns in terms of value creation and output optimization. They can then use this momentum to implement initiatives with longer timelines that help reach the overall company’s strategic vision.
To achieve this, companies should:
Develop a transformation roadmap: It goes without saying that manufacturers with different levels of maturity face different, and sometimes unique, challenges. The transformation roadmap should begin with an assessment of the current state of digital maturity. Once manufacturers have assessed their maturity, they can build a systematic approach for implementation, tackling the transformational challenges they have identified. The roadmap can also identify priorities in term of technologies, resource requirements, value creation, and how these changes align with company’s vision.
Integrate in-house capabilities: Manufacturers have made significant investments in building technology platforms and systems that optimize the business. Therefore, it comes as no surprise that the majority of companies in our study reported basing their investment decisions on the ability of the new technology to integrate with in-house capabilities. What often differentiates the frontrunners from others is their ability to also consider the long-term impact of these technologies on their business and customer satisfaction, and make investments from this perspective.
Invest in data security: Threats of cyber risk are one of the most significant obstacles in a successful digital transformation. Manufacturers should manage their information architecture robustly to protect the entire benefits of digital technologies. As new advanced technologies are added to the network and cyber-physical environment, the risk for vulnerabilities can increase substantially. Developing cyber resilience during integration and conducting programs like proof-of-concept and process-twinning (digitally) while rolling out new technology can help to shore up security.
In times of 'disrupt or be disrupted,' manufacturing companies will likely either emerge as digital frontrunners or risk being disrupted by other players within and outside the industry. As such, manufacturers will want to embrace new technologies and adapt to new models while the market is still fluid. Companies that lag will likely need to identify the necessary technologies in which to invest, create their roadmap, and start investing and implementing to move forward in digital maturity.
Paul Wellener is a vice chairman and U.S. industrial products & construction leader at Deloitte LLP. Stephan Laaper is a digital supply networks leader in Deloitte Consulting LLP’s strategy & operations practice.