Digital Transformation • January 9, 2018

Investing in Digital Manufacturing Technology

Tom Hennessey Tom Hennessey

Manufacturing is in the midst of digital transformation. An article in Supply Chain Management Review by a trio of A.T. Kearney executives described the developing situation in and beyond the sector:

Digital manufacturing is drawing a lot of interest from manufacturers, universities, and governments alike. Leading global companies and universities have combined forces in a number of Internet of Things (IoT) consortia, and several governments have recently funded initiatives to encourage the next industrial revolution. But underneath the hype and noise, many manufacturers are struggling to figure out just what digital manufacturing means to their organizations. They aren’t sure where to start their digital transformation or how to engage their executive team and customers in developing a winning formula.  

A recent article by McKinsey underscores this perspective, noting that while “manufacturers see the potential of digital, few have a clear strategy to capture its value.”

How, then, should manufacturers approach investing in this important – and inevitable – technological transformation to their operations? While a number of approaches have been recommended, all of them point to the importance of active and educated support from the highest levels of the organization.

Strategies for Successful Digital Transformation: McKinsey’s Three Principles

In the McKinsey article, three principles are cited as essential for ensuring a successful digital manufacturing transformation, with success factors cited for each of the principles.

The first principal is diagnosis to design, which supports a focus on the company perspective to identify use cases to boost operations and design a target digital ecosystem. The success factors for this principle are having a clear perspective on how and where digital will create bottom-line value, and having a multi-horizon roadmap.

The second principle is data/technology to impact, which promotes capturing value from digital manufacturing use cases. There are three success factors here: have an ecosystem of technology partners that are sensitive to cybersecurity; take an agile approach to developing, piloting and refining digital solutions; and do rigorous change management.

The third principle is capabilities to transformation: create impact by transforming the entire organization and building institutional capabilities. The success factors here are; have an active C-suite sponsorship, adapt business processes for the digital world, and plan for how to access capabilities needed to develop and implement use cases.

Strategies for Successful Digital Transformation: AT Kearney’s Four-Step Approach

In their Supply Chain Management Review article, the AT Kearney executives posit a four-step approach to digital manufacturing transformation; the first step involves “going wide” while the final three are about “going deep.”

Step one is starting small. This means manufacturers must use several small ideas to test quickly in “digital sprints,” have inexpensive proof of concepts, and operate outside the existing IT structure.

Step two is failing fast. This calls for refining the set of ideas explored, engaging in distributed trials and sharing learning across all involved, and conducting exploration outside of existing IT infrastructure.

Step three is iterating and pivoting. Start by selecting pilot areas, then begin soft integration with existing IT.

Step four is scaling fast. Take the proven business case, have a detailed rollout plan, then perform full IT integration as necessary.

Strategies for Successful Digital Transformation: Ensono’s Five Aspects of Justification

Hybrid cloud provider Ensono looks at how to justify an investment like digital transformation where IT is an integral part of the project. They offer five key aspects of project justification:

  1. Ensure business leader buy-in.
  2. Work with the CFO and his or her team on financials.
  3. Create a credible business case by including key challenges and how they will be solved.
  4. Provide a concise summary of the evaluated options with pros and cons.
  5. Communicate the business challenges and goals with IT and work to ensure the recommended solution delivers.

Gartner’s Four Recommendations for ROI and Long-Term Value from MES

Since manufacturing execution systems (MES) play a critical role in linking IT and OT in creating the digital thread that spans the digitally transformed manufacturer, having a sound perspective on how MES delivers value for digital transformation is important. Gartner notes in an analyst report, “The shortest path to a solid, defensible ROI from a manufacturing execution system comes from cutting the costs of local production operations. But companies that stop here run the risk of not achieving significant benefits over time that result from cumulative effects of near real-time visibility into production processes, impacting customer and market-facing processes.” Their recommendations:

  • Don’t stop at local cost reductions and efficiency gains. Leverage the value of product and process information that MES provides to identify process risk, decrease cycle times, and increase cross-functional collaboration across the manufacturing network.
  • Use communication and education, not spreadsheets, to sell leadership on the larger benefits of an MES as a platform that supports standard manufacturing processes and enhances compliance, flexibility, and time to market.
  • Improved flexibility and responsiveness are difficult to qualify, but are often desirable to executives who control the budget and funding. Include both strategic and tangible benefits in your business case.
  • Partner with your vendor. MES vendors have decades of combined experience and bring sizeable domain knowledge to broaden the perspective on potential benefits.

Driving to Tangible Outcomes with Digital Manufacturing Technology

Taking a considered approach towards digital manufacturing transformation is essential to the realization of tangible outcomes. Yet, according to AT Kearney, this has been far from the path most taken:

We see two predominant approaches to digitization in the marketplace. Some manufacturers “boil the ocean.” They try to track and translate the most recent trends into potential opportunities. Still others are waiting on their IT departments to “connect everything” first before they take action. Neither of these approaches is very effective in successfully digitizing manufacturing operations or products.

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