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Five Steps to Get Out of Pilot Purgatory

McKinsey & Co. expert partner Enno de Boer discusses the ways to get manufacturers' IoT projects out of limbo and onto the factory floor.

The Roman Catholic church defines purgatory as a place where suffering souls work out their sins before going to heaven. During this Fourth Industrial Revolution, purgatory is where pilot projects in the Internet of Things -- sensors and actuators connected by networks to computing systems – languish before being taken to scale. Sometimes, it becomes their eternal resting place.

More than four in 10 companies are stuck in the endless churn of an idea that has a long and sometimes unfulfilled journey. Three out of 10 have yet to start. Eighty-four percent of companies were stuck in pilot mode for more than a year and 28% for more than two years.

Too few resources, too little knowledge, and hard-to-justify investments for scale-up are reasons 400 respondents to a McKinsey survey gave for being stuck.

My advice is to stop tip-toeing. You are wasting precious time and resources. If you still believe you can wait out the Fourth Industrial Revolution or offset it by hiding behind proof-of- concept technological experiments, you are part of the digital laggard club. The answer is pilots that solve core business issues and deliver impact to justify taking to scale.

Digital disruptors across business sectors are building muscle. Digital transformation is a full company effort that changes the people and the culture of a company along with its IT, data and analytics model. The competitive advantage digital leaders build will be hard to counter.

Three of 10 companies are scaling up today. It is scary that 92% of respondents to a McKinsey survey believe they are at par or ahead of the competition.

In my time as leader of McKinsey’s global efforts in digital manufacturing and its network of Digital Capability Centers, I have come up with these five approaches to help get IoT projects moving with potentially heavenly results:

1. Drive a top-down business transformation instead of delegating it to mid-level managers

In July, we brought together the supply chain leaders, the chief information officer and the chief operating officer of a highly innovative pharmaceutical manufacturer. The company’s IT department had invested for more than three years in the latest technologies to advance manufacturing–without any knowledge of the supply chain. The executives struggled for hours and finally accepted that resources had been wasted on shiny technology pilots Some were operating in different business units without IT involvement while IT was pushing a different agenda. They realized the hard way they needed a cross business unit and cross-functional effort.

2. Develop a clear vision of the “Plant of the Future” and how it can drive strategic advantage rather than pursuing a number of discrete tactical initiatives

An industrial company proud of its three Industry 4.0 lead plants wanted to know how to scale to their hundreds of manufacturing sites. The manufacturing leader had several interesting proofs of concept and installations. But the IT system lacked the capabilities to support the more than 35 use cases identified as strategically relevant. It was a good start, but a strong overhaul was needed to redirect resources. Fortunately, the company took a strategic step back. 

3. Prioritize the highest-value business opportunities and finding the right technology mix rather than choosing an exciting technology and looking for problems to solve with it

An oil company impressed me with its approach to allow work to be done only on projects that had a minimum value of $100 million. That’s very different from companies that have invested several years and millions of dollars into a single technology only to later realize that to get value, they needed to innovate their business process and bring several technologies together rather than master a single technology.

4. Leverage an ecosystem of technology partners instead of building too much in-house

A multibillion-dollar consumer health company with aspirations of becoming a technology company realized it had to go beyond partnerships and create an ecosystem that allowed it to bring in best-of-breed technology. Their starting point was our ecosystem, which allowed them to select and build their own. This fall, supply chain leaders will visit Silicon Valley, Israel and Shanghai to scout for future technology leaders. In spite of its size, this company understood that to succeed, it needed the right “make vs. buy” strategy in technology.

5. Consider people, mindsets, and change management along with implementing new technology

It reminds me of the early days when we got called in to review a client’s non-functioning predictive maintenance system. The system was working fine, but we found the maintenance crew could not get past the point of replacing a part with a 10% probability that the system could run for another few months. The technology was working fine, but nobody had worked on the winning hearts and minds of the people in charge.

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