In systems theory, there is a specific moment called the bifurcation point. It describes the exact point in time when a system is stressed, pushed and pulled to its absolute limit. This is when one of two things happens: it either breaks down or evolves.
Manufacturers face a similar fork in the road. Rising energy prices, worker shortages, complex and fragile supply chains, raw material and parts shortages, geopolitics, re-localizing supply and talent, sustainability commitments and environment, social and governance (ESG) legislation, and increased security risks have placed manufacturers under intense pressure. For manufacturers that choose the right success levers, this “perfect storm” of challenges is a trigger to evolve and thrive.
In this blog, I share key insights from the 2023 Voice of Our Clients (VOC) research gathered from one-on-one conversations with 173 manufacturing executives across sectors, including what digital leaders are doing differently to accelerate results.
Macro trends test manufacturers’ resilience
In this year’s VOC findings, manufacturers cite the high impact of key macro trends, including climate change, a shift in world economic order and supply chain reconfiguration.
Manufacturers rate these trends as having a high impact on their business at 25 points higher than all other industries covered in the VOC research, which includes interviews with 1,764 leaders across 21 global economic sectors.
Data is the compass of the future
Becoming a data-driven organization will be key to executing the strategies required to increase agility and resilience in overcoming the impacts of these macro trends. Data will enable manufacturers to navigate, anticipate and respond in uncertain times. However, there is work to be done as just 1 in 3 manufacturing executives we spoke with rate their data strategy as mature enough to achieve business model resiliency. Additionally, robust data strategies are needed to satisfy customer needs as classical manufacturer products transform into services. Notably, manufacturers cite data management, governance and quality as their top investment areas.
Artificial intelligence progresses slowly but surely
AI goes hand-in-hand with the focus on data. As our 2023 findings demonstrate, manufacturers are taking small but sure steps toward AI and enhanced process automation, with executives who say they are in the “implementation” and “done” stages up 4 and 8 percentage points, respectively, from last year.
AI has the power to elevate manufacturing processes to new heights. For instance, generative AI can explore thousands of possible product and business designs in a matter of seconds; machine learning can ensure high levels of production accuracy to minimize waste; and digital twins can enable a real-time digital continuum. However, these significant benefits can only be gained with a holistic approach to data and with responsible guardrails in place.
What digital leaders do to accelerate results
In manufacturing overall, producing expected results from digital strategies is progressing slowly, with only 20% achieving such results in 2023, a slight increase from 17% in 2022.
In examining the insights from this 20%, we find that these digital leaders have several common attributes compared to digital aspirants (those building or launching digital strategies).
|Have highly aligned business and IT organizations to support strategy
|Are more likely to have highly agile business models
|Cite fewer challenges from legacy systems to digital implementation
|Have more advanced cyber strategies (operational and seeing results)
|Feel the impact of technology and digital acceleration more keenly
Our analysis confirms that digital leaders in manufacturing are focused on optimized and protected operations underpinned by data-driven decisions.
Prepare for change
In the next two decades, manufacturing organizations will look very different from today. For discreet manufacturers, the biggest competition may not be a manufacturer but an Amazon-style platform that brings together an ecosystem of family-run “resource and materials” suppliers. The next big automotive players could be high-tech manufacturers who have partnered with local second-hand car dealerships.
Manufacturing organizations have outgrown what they were traditionally designed to do. To thrive in a new world, manufacturers need to become masters of energy and information usage. Fluid and flexible connections across the value chain will be crucial. This will require building solid partnerships built on trust, shared data and mutual benefits. Systems must be designed to understand what resources are available, how they can be used to satisfy current demand, and how to pivot production, supply and delivery based on current needs and opportunities.
What does success look like?
For manufacturing leaders, success lies in optimized operations, secure business processes enabled by the latest technologies, integrated and agile processes, and frameworks that allow for flexibility in a changing world and streamlined IT systems.
Achieving success amid the varied challenges doesn’t call for drastic steps. Quite the contrary. It calls for getting back to the basics and reinforcing solid foundations. Here are some aspects manufacturers can keep in mind while mapping their transformation journeys.
- Use proven technologies supported by robust business frameworks and processes to identify the areas in your organization that are leaking energy and money, along with potential vulnerabilities either to cyberattacks or stagnating operations.
- Prioritize your IT transformation by making it a boardroom topic. Spend time reviewing your current strategy and building one that allows for business continuity as you evolve.
- Integrate IT and business systems and processes to ensure seamless data flow across the entire production lifecycle for real-time insights and informed decision-making.
- Focus on organizational and cultural management. Through our research, 57% of manufacturing executives cite this as a top constraint to achieving their business priorities.
Those manufacturers that lay a solid foundation for transformation by integrating technology strategically and remaining flexible to adapt to ever-changing market dynamics will thrive and lead the way to a sustainable future.
Do get in touch with me to learn more about our VOC findings and recommendations for successfully navigating the challenges ahead.