Nevertheless, when Klaus Schwab, Founder and Executive Chairman, World Economic Forum, starts talking about revolution, it is worth paying attention. His focus was not political turmoil, however, but what he calls the “Fourth Industrial Revolution”.
According to Schwab, the first industrial revolution used water and steam power to mechanise production. The second employed electric power to create mass production. Many of us have built our careers on the third industrial revolution where electronics and IT automated production. Now the fourth industrial revolution, the digital revolution, is upon us.
No historical precedent
Digital is much more than a continuation of the IT-driven revolution because of its velocity, scope and systems impact, he argues.
“The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management and governance.”
It is, however, one thing to recognise what is happening, and quite another to do something about it. Many organisations, faced with relentless, unpredictable change, simply freeze and head to inevitable decline. Others set out to put the systems, people and partnerships in place to lead change, to disrupt, even as they are being disrupted.
It is not as if we haven’t seen it coming. Forrester Research analyst John C. McCarthy is clear about the origins of the revolution and the changes businesses must make to survive and thrive.
“The digital-led wave of change that has swept over the B2C markets for the past five years is now making its presence felt in the B2B sectors of the global economy,” he explains. “Rising client expectations are working their way through supply chains, and verticals like industrial products, manufacturing and logistics are becoming customer-obsessed. Just as mobile was the catalyst in the B2C shift, IoT and smart connected products will drive the B2B changes. CIOs and CTOs need to support mass customisation, from product design to manufacturing through to customer service. This will require new skills, organisations, and ways of working.”
Digital enables mass customisation
For large parts of the global economy these forces for change come together in what Hewlett Packard Enterprise calls Connected Manufacturing. At a massively oversubscribed World Economic Forum panel discussion in Davos, Meg Whitman, CEO of Hewlett Packard Enterprise, and Klaus Kleinfeld, CEO of Alcoa, were among industry leaders spelling out the challenges. These challenges were also a major theme of Hewlett Packard Enterprise’s Discover event in London at the start of the year.
There are many drivers for change in manufacturing today, most notably, the way supply chains have developed into complex and dynamic value chains. The ERP systems and supply chain management and optimisation systems were perhaps the high point of business technology in the third industrial revolution. They are, however, no longer sufficient for an era of mass customisation, of increased customer expectation, of unexpected sources of competition and, sometimes, of overly intrusive compliance regimes.
Other drivers for change include the enormous opportunities from Big Data, the emergence of a platform economy, flexible manufacturing and the convergence of technologies, and the way new technologies open up emerging markets to established enterprises.
One thing is certain – disruption is on the way. The auto industry, for example, has spent decades honing its supply chains and automating its manufacturing capability, but it now faces disruption on many fronts. It may be an exaggeration to say, “Your next car will be an extension of your smartphone”, a claim made after the 2015 Consumer Electronics Show. However, data from the electronics jammed into today’s cars offers everything from predictive maintenance calls to customers and refinements of manufacturing processes when potential weaknesses are discovered, to the opening of new markets through, for example, the sharing of telematics data with the insurance industry and broader Smart City initiatives.
These opportunities also make traditional auto manufacturers vulnerable to challenges from unexpected quarters. New manufacturing techniques can speed up traditional manufacturers’ move to mass personalisation. They have also allowed a premium brand such as Tesla to launch a high quality technologically innovative product in record time. If such techniques were applied to mass market products, traditional manufacturers could be wrong-footed.
Coming from another direction, Google is investing in self-driving cars. Uber is also about to jump on the self-driving car bandwagon, which could not only boost its taxi-brokering business, but potentially discourage car ownership among tech savvy, well-paid big city dwellers – a prime demographic for car manufacturers – as well.
Producing value in every way
Ownership models are, anyway, changing, partly because of the growth of the ‘sharing economy’, and partly because of the trend to subscription models, pioneered by the software industry through Software as a Service. Traditional automakers have responded – the massive growth in leasing is, in effect, a form of subscription pricing. In six US cities, Ford has been even more innovative and is testing a programme where customers who have bought specific vehicles through Ford Credit can, Airbnb- style, rent out their vehicles to other drivers.
For Hewlett Packard Enterprise, this is the world in which Connected Manufacturing is essential. Manufacturing and information systems and communications channels must be integrated, so that drive customer-derived insights can become actionable and allow the continuous innovation of products, markets and processes.
It is a world where the traditional, and still core, systems of record – your ERP, manufacturing and supply chain management – are augmented by web- and mobile-based systems of engagement. It is a world where customers and customer facing staff interact. These in turn are supported by insights gained from the Internet of Things and other sources of automated information:
Martin Rainer, Vice President of Manufacturing, Hewlett Packard Enterprise EMEA, in a blog for the Business Value Exchange, says Connected Manufacturing is about “producing value in every way”.
“By standardising global processes and complex supply chains, manufacturers can accelerate performance to reduce costs, improve back-office efficiencies, increase cash flow and reduce overhead costs. Encouraging collaboration between employees, by equipping them with cost-efficient digital tools and compute performance on demand, speeds up product development cycles and raises quality.
“Also, connecting suppliers, engineers, production teams and customers boosts innovation through better insight; thereby reduce engineering costs and time to market. And by simplifying operations, production is enhanced – decreasing downtime, while improving end-to-end quality. Gaining insights that drive product innovation also decreases aftersales costs and improves service quality; ultimately improving customer experience. And finally, in a world where compliance is becoming increasingly important, Connected Manufacturing is helping businesses to secure critical assets, like IP and to meet regulatory demands.”
Hewlett Packard Enterprise has put its Connected Manufacturing concept into practice with giant global manufacturers – P&G, the world’s largest consumer goods company, and pharma giant, Pfizer (find out more here). But you don’t have to be a giant manufacturer operating in 180 countries around the world, like P&G, to get on the Connected Manufacturing bandwagon. Embracing digital will allow you to advance your production capabilities, get closer to your customers, to innovate rather than be reactive and to survive and thrive in an era of ever faster disruption.
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Mike Simons is an award-winning IT and business journalist, Mike has a particularly focused on major IT projects and public sector IT. His fascination with the business and social impact of technology began at university, where he obtained an MSc at the Science Policy Research Unit of Sussex University.