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Future of Manufacturing 2019

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R A C O N T E U R . N E T 05 Digital transformation without the right culture is meaningless and companies that fail to appreciate its importance risk stumbling at the fi rst hurdle rom the very first days of the Industrial Revolution, British engineering and manufacturing industries were in the vanguard of change. These days, however, they may not always seem to be the earliest adopters. Data from ma na gement con- su lta ncy Russell Rey nolds A ssociates shows t hat on ly 4 8 per cent of indust r ia l ma nu- fact ur ing f ir ms have a dig ita l st rateg y, compa red w it h 62 per cent of automot ive f ir ms a nd 56 per cent of compa nies in con- sumer product s. " T hey seem to be a lit t le bit behind some of t he ot her sectors," says consu lta nt Cata r ina Abra ntes. But while engineering and man- ufacturing may not be leading the charge in terms of digital transfor- mation, there's a lot going on behind the scenes. "Many manufacturers have been embracing digital technologies and techniques for years, through gradual evolution, and many are actively taking steps to determine the ways in which they can incorpo- rate these steps," says the manufac- turers' association Make UK. Research carried out by Oxford Economics in 2016 revealed that rev- enue related to digital capacity in the manufacturing industry was grow- ing at 3.2 per cent a year, putting it behind only tech services, retail and construction. Manufacturers told the researchers that they expected more than 4 per cent of new jobs to relate to digital technologies over the following two years. "Robotics is such a promising area; it increases our speed, quality, and minimises errors," according to the chief information offi cer of a mid-sized manufacturer based in Yorkshire and the Humber. However, there's a great deal more to digital transformation than sim- ply buying new kit. It also involves a complete overhaul of an organisa- tion's processes and creating a cor- porate culture to suit. This, says Make UK, is harder for some engineering organisations than others. "Medium-sized companies have the highest instances of issues relating to a lack of culture in the busi- ness towards change and not under- standing how the technologies can help their business," Make UK says. Last year Boston Consulting Group (BCG) assessed around 40 digital transformations and found that the proportion of companies reporting "breakthrough or strong fi nancial performance" was fi ve times greater – 90 per cent – among those focus- ing on culture. "A healthy culture provides the guidelines – the tacit code of con- duct – that steer individuals to act appropriately and make choices which advance the organisation's goals and strategy," says BCG's Jim Hemerling. Mark Enzer, chief technical offi cer at Mott McDonald, who leads the digital transformation workstream within the Institution of Civil Engineers. The key to this is likely to be com- munication and a focus on how a digital transformation mindset can improve the working practices of all employees. "For businesses that have a top-down process in initiating projects, some may fi nd there can be a lack of buy-in from employees, and those not at sen- ior management or board level may feel left out of the process, or a lack of com- munication of these transformations means employees do not see the value of the changes," and Make UK warns. "There are also many compa- nies using these technologies that do so because of suggestions and initiatives of those on the shop f loor, who often have first-hand knowledge of what can be stream- lined, improved or adapted within the manufacturing process, as well as what products could help them to improve these aspects." The key, of course, is communi- cation, with the most successful transformations involving regular input from employees at all levels of the organisation. According to Russell Reynolds consultant Sarah Galloway, this means paying special attention to middle management. "As the senior management lead the change and the younger popu- lation are de facto 'digital natives', middle management needs the most help to trigger the change," she says. Many organisations approach digital transformation as a project to be completed, but it's a process, not an end-goal. Failing to acknowledge this will simply mean the organisation eventually ends up just as rigid as before. It's important to set up internal systems that allow a culture of continuous improvement, involving both management and staff, with each successful transformation acting as a stimulus for the next. Gartner has concluded that skills shortages represent a serious threat to organisations' transformation efforts. Indeed, it says that only 20 per cent of employees have the skills needed for their current and future roles. Organisations wanting to make a success of transformation need to invest in staff training and be prepared to recruit from outside. Key areas to focus on are data analytics, machine-learning, cloud computing and security. Industrial sector respondents say the availability of third-party or customer proprietary data and the skills to use and analyse it are posing challenges, according to Catarina Abrantes at Russell Reynolds Associates. More than a third of industrial organisations told Russell Reynolds they don't have suffi cient third-party data. Establishing a digital ecosystem encompassing suppliers, customers and other partners can increase the effectiveness of a transformation programme exponentially. Three common failings in manufacturing transformation Thinking the job's done Skills gap Poor supply chain integration Emma Woollacott F T R A N S F O R M A T I O N Why fi rms need to rethink how they digitise 1 2 3 90% 17% Boston Consulting Group 2018 of companies undergoing digital transformation that focused on culture reported strong or breakthrough fi nancial performance, compared with... of those who neglected it However, businesses need to be sure this culture permeates right the way through the organisation. "I think there are some things that need to be top down as without the right leadership, nothing will change. But there also needs to be empowerment at the bottom," says The key is communication, with the most successful transformations involving regular input from employees at all levels

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