Berwick Partners held our latest Manufacturing Leadership Online Forum recently, discussing ‘Futureproofing your business through digital adoption’. The event was designed to offer insight into opportunities presented by accelerated digital transformation. This included current market trends, navigating the technology, productivity improvement prospects, and the current financing challenges of accelerated adoption.
The hour of discussion was led by Richard Hill, Head of the Automotive & Manufacturing sectors within the NatWest Group Corporate & Commercial Banking Division; Brian Holliday, Managing Director for Siemens Digital Industries and Ade McCormack, a digital specialist, author and founder of the Disruption Readiness Institute.
Ade’s opening remarks brought together many of the strands of the discussion:
“To understand the future, we have to look to the past. The exponential growth in human endeavour, from the wheel, to the printing press, car to the computer and then the smart phone, is a cause for celebration. Today is the fastest day we have ever experienced in terms of technology evolution, by the same token it is the slowest day we are ever going to experience again. We are witnessing a digital tsunami and huge biological, political and economic instability. The race for natural resources underpinned the business models of the industrial era and led to the rush to globalisation. We are now entering an era of hyper uncertainty; disruption is unshackled, and abnormal conditions have become normalised.
Factories are still important, but the industrial era factory model is now flawed. The traditional factory focused on process, centralised leadership and a belief that past success was an indicator of future success – these are the characteristics of an organisation that is not going to thrive as technology capability accelerates.
The new definition of talent will be being able to do something that an algorithm or a robot cannot. There is a race for automation, and digitalisation is only part of the solution. We must not get too obsessed with technology as a replacement for people, our appetite for risk is critical and we must remember that the first day we picked up a rock is the first day we augmented ourselves. Augmented people have augmented expectations for services and products. The focus should be on building assets to act as a buffer for the future, and the principles of share of wallet. Traditional organisations are starting to turn data into value as much as businesses like Uber. It is wise to nurture and exploit new assets, maximising the value of your human and digital capital.
The process of innovation can be automated but innovation itself comes from humans, therefore people are still your most important asset. Everything as a service is the future, and organisations need to embrace the connectivity between innovation, experimentation and failure. As an example, Facebook has ten thousand experiments on the go currently; you need a portfolio of bets to succeed.
Humans need to be seen less as cogs in the machine, more as talent super hubs. As an example, Google is exceptional at harvesting the cognitive capacity of its people. We need to remember, particularly at the moment, that our most productive and courageous moments often come from social interaction. Companies that create a ‘cognitive playground’ which allow humans to be humans will be the winners.
Building a business model that will thrive is based on trust with your people, the ability to harness the value of your assets, including data, and your situational awareness to external and internal risk factors. Leadership in the industrial era was about project management, in the digital age it is ‘like being a fighter pilot’. Strategic planning in its traditional sense is dead, the World is too disruptive. We can use technology to augment performance, but organisations will still need to attract and retain the best people and challenge them to think differently”.
Flexibility of business models, leadership mindset, collaboration and access to finance are critical to maintaining a prosperous manufacturing sector. The bounce back in manufacturing has been better than predicted at the start of this crisis, and it is anticipated that the sector could be back to the same output level of the fourth quarter of 2019 by the end of 2021. The latest PMI data indicated both optimism and resilience in UK manufacturing.
It is timely to talk about digital transformation as the pandemic has highlighted the importance of technology change. This could include investment in a range of areas, such as productivity tools, customer relationship management software, robotic process automation or remote working connectivity. Those most likely to succeed in manufacturing will be investing heavily in improvement activities as well as new technology and the capability to exploit it.
Industry4 is ten years old as a concept, offering the potential for individualised mass production and smarter systems to supplement human intellectual effort, and power the factories of the future. We are starting to see great examples of the benefit this could bring to people and organisations. The switch to remote working, need to build productivity, sustainability challenges and agility to respond to changes in demand have required rapid shifts in mindset and we have witnessed what is possible. The UK ‘Ventilator Challenge’ proved that agility and digital technology matters. Fifteen Thousand ventilators were delivered incredibly quickly to the NHS, backed by the convening power of Government but also by unprecedented collaboration between manufacturers to deliver capacity quickly. Remarkably, it took just three weeks to design and deliver one of the sub-assembly facilities, an activity that would ordinarily take at least twelve months.
Building assets rather than focus on profits is a proportion of the answer but there is a long tail of businesses at different levels of their evolution. Good infrastructure enables you to be agile and flexible, to pivot where required in terms of what you are making. Great leadership will also define the attractiveness of a business as an investment.
A digital strategy needs to be built on firm foundations, a lean and agile business is more likely to succeed. In a conventional manufacturing business, the drivers are often increasing revenues, reducing costs and getting more out of your assets. Sustainability needs to be built in - CRM systems, better designs, automation, energy efficiency, simulation, modelling and better use of data to drive decision making can all be a step forward.
The NatWest Future Fit Programme for Manufacturers is designed to support leaders with the challenges of driving more innovation and agility into their business models along with responding to the dynamics of technology change. NatWest work closely with the High Value Manufacturing Catapult (HVMC) providing a wide range of support, from general guidance through to actual production. Make UK also do a great job in supporting SME’s. You can start with a small pilot, whether your focus is improved design to stimulate sales, cost reduction, asset optimisation or sustainability, there is support out there to help you invest wisely.
UK Manufacturing is behind on automation and productivity compared to many International rivals, therefore there is much more to do. Our industrial strategy deserves active adoption support from Government, such as targeted capital allowances or skills instruments, which might help us address relatively poor digital take up.
There is a considerable amount of financial support available to manufacturers but navigating to the appropriate facilities and going through the application process is recognised as very challenging, especially for time pressed SME leaders. Innovate UK and LEP’s or Growth Hubs are a good place to start. Banks are increasingly supporting clients in identifying external support mechanisms following the demise of the Governments Manufacturing Advisory Service (MAS).
The recent Government Intervention Loans designed to support businesses during the COVID crisis were developed and implemented astonishingly quickly in collaboration with Banks – again demonstrating the important role they can play in responding to business needs. Agility and innovation are critical for all elements of the business model and cannot be confined to just one industry. As manufacturers business models change at pace, so will funding considerations at all levels of the investment cycle.
The current level of disruption could be to the advantage of UK manufacturers. There is an opportunity to be more agile and innovative. Leadership also has to evolve. The CIO and HRD are critical functions to include in your senior team, ensuring your technology and human dynamics are prioritised. Digital leadership needs to be a shared responsibility across the full leadership suite. Boards will need to trust inputs from a broader range of people, building meritocracies and welcoming diverse input into the strategy before it is cascaded through the organisation. Reverse mentoring for leaders will be critical to make sure we are embracing the most diverse thinking.
For manufacturing organisations data can increasingly be the catalyst to drive optimisation and product improvement. However, privacy risks with data are critical to consider. The cyber security threat landscape is not just for individuals but also for assets which can be scarily open. The ‘Charter of Trust’ is a multi-organisational and Government partnership designed to recognise the threat and provide support.
Industry4 has prompted useful conversations, and a useful set of ideas. We are going to continue to see increasing collaboration between humans and technology with the augmentation of human intellectual effort enabling better decision making. This is about how we work with and benefit from technology whatever badge we give it. It is worth remembering that the pace of change will never be as slow as it was today, agility and sustainability are going to be vital as we face the future.
David Thomas is a Partner at Berwick Partners, focused on supporting organisations with key leadership appointments within the manufacturing space.