Digitalization is the current hot word describing the latest manufacturing strategies. The concept has morphed from Industrie 4.0, Industrial Internet of Things, and smart manufacturing. The word was all over Hannover Messe this year, and one of the more fervent advocates was Siemens.
How important is this, really?
“What’s at stake with digitalization is the future of manufacturing competitiveness,” says Dean Bartles, Founding Executive Director of the Digital Manufacturing and Design Innovation Institute. “Germany is ahead, and China is making a big move in this area. More and more countries are adopting these technologies. To remain competitive, US manufacturers are going to have to master digital technologies.”
Bartles was quoted in a report commissioned by Siemens, The race to a digital future: Assessing digital intensity in US manufacturing.
On behalf of Siemens, Longitude Research surveyed 209 senior executives and directors of large US manufacturing organizations to understand the progress of digitalization among discrete and process manufacturers. Topics include trends in digitalization, examples of successful adaptation and suggestions to overcome barriers to moving forward in the digital age.
The Webpage includes a benchmarking tool so that you can compare your efforts to those in the study.
Based upon my own conversations with a variety of suppliers and implementers, I am not surprised that the researchers show two types of adopters: the ‘Efficiency Experts’ and the ‘Revenue Re-inventors’. Both groups are deploying digital technologies to improve productivity and efficiency, but the latter is leading the way in exploring how digital can be progressed even further – to transform their business model and unlock new markets.
Firms in the Revenue Re-inventors group are more likely than Efficiency Experts to say that their financial performance is ahead of their peers. In particular, Revenue Re-inventors are more likely to create new revenue streams from the provision of digital services – as Rolls-Royce has done through its Engine Health Management service, which uses onboard sensors and live satellite feeds to track the health of thousands of engines operating worldwide.
Once again, we should not be surprised. When did anyone cut their way to prosperity? On the other hand, I’d have expected the efficiency people to show more gains than they did. Wonder what their overall programs were?
The research evaluates manufacturers’ digital capabilities across the following core dimensions, using their relative progress in each to provide an overall score out of 100.
• Data intensity: data strategy, data collection, storage and analysis, and data-driven decision-making.
• Connectivity: sensor usage in production and output, and networking of production equipment and plants.
• Adaptability: customization capability, design and modeling, and robotics.
• Integration: enterprise and supply-chain data integration.
• Security: strategy and systems implementation.
• People: leadership, skills and training.
Does implementing a strategy show results, or is it more important as to how you implement a strategy? Research reveals that increased adoption rates do not necessarily translate into better results. Rather, the most successful manufacturers are those which take a bold and strategic approach to deploying the digital technologies they do invest in, and use this to predict trends and identify new opportunities to delight customers.
Here is a finding that is surprising—while 69% of the Revenue Re-inventers use predictive analytics, only 44% of the Efficiency Experts do. I’d figure that predictive analytics for such things as predictive maintenance would be enticing for the efficiency people.
Another finding that seems a little weird—the study sorted out the top five digital technologies. First off, this is definitely a Power Law curve, and secondly these don’t seem to fit together.
Cloud computing is almost universally adopted, a fact which should be no longer surprising. Drop some and then you have connected sensors—but we’ve been connecting sensors for years. Then a considerable drop off to 3D printing. The last is advanced data analytics—the one of all of these that seems to get the most media coverage.
This entire area has received at least four years of intense media coverage. Analyst firms have begun reformatting practices to specifically call out these strategies. Are we beyond the hype curve, yet? Or is it still in the smoke and mirrors stage?