Combining heritage with innovation: how Europe’s manufacturing sector is casting a more competitive future

The manufacturing sector is critically important to Europe. According to the EU Commission, approximately two million businesses are part of the manufacturing industry. In total, the sector accounts for 15% of the region’s GDP (EU, value-added) and 22.8% of employment.

What’s really inspiring to me is that while so many of these businesses are steeped in history, they are also some of the best in terms of embracing new technology.

I wanted to share a couple examples of large-scale enterprises in relatively ‘low-tech’ manufacturing categories that were able to deploy new technology to achieve results in months, not years. From my point of view, the secret of their success is two-fold. One: A focus on prototyping before scaling. Two: Remembering transformation is about people as much as it is about technology. 

Finnish steel maker casts its future using data 

Finland’s Outokumpu is a global stainless steel manufacturer, with 10,000+ employees across operations in 30 countries worldwide. Although they’ve been around for more than 100 years, the company’s leadership recently saw an opportunity to re-invent how they use technology and data throughout their business. 

Their manufacturing process involves melting and forging steel at temperatures of 1600 °C. As you might imagine, this requires a lot of energy and it’s not easy to scale production while also maintaining quality. However, leadership recognized the potential of data to transform their operations. And they saw the opportunity to move quickly. 

The key for them was taking a focused approach as a first step, by trying new technology at one production site in Tornio, Finland. The company developed a cloud-based system to capture data from all aspects of the manufacturing process – including the amount of electricity balanced against variables like end output quality and machine maintenance. Outokumpu was then able to analyze the data to help ensure the best quality while also achieving greater efficiency. 

Throughout the trial, they never lost sight of the importance of creating a data-led workplace culture. The company used data from the facility to help close the digital skills gap – identifying areas where training would help both veteran and early-in-career employees work with data effectively as they make decisions.

“It’s the speed of the changes in digitalization that makes what we have done unique. And how it has impacted our aspirations as a company. It’s not just about improving efficiency; it’s about changing the entire business concept.”

- Jan Hofmann, Executive Vice President for Business Transformation and IT

This is such a great example of data and digital tools enhancing and augmenting workers. It not only bolsters people’s skills, it also supports a learning culture – which is so important for companies that want to innovate and then keep innovating. 

The metrics from this program really speak for themselves. Within 14 month, the Tornio facility saw increased output of 10-15%, and predictive technology has helped the company cut down on quality defects by up to 40%. 

The initiative also contributed to the company’s sustainability efforts, cutting down on their energy consumption, and ultimately lowering carbon emissions. (There are some terrific insights into how manufacturing players can effectively marry business and sustainability goals in this recent report we produced with EY, Sustainability. Good for Business.)

As you might expect, they are now using the learnings from Tornio and scaling their digital efforts to other locations. 

Dutch paint maker equips its employees to work with IoT data 

Netherlands-based AkzoNobel is a maker of paint and coatings, with a global footprint that spans 100 markets. Right up until late 2018 the performance of its factory machines was tracked by pen and paper, with people filling in tick boxes every 15 minutes.

The company saw the opportunity to deploy IoT technology throughout its manufacturing plants and track this data automatically and in real-time. Like Outokumpu, they took a focused approach, starting small with an eye to scale. They started the deployment in a limited number of more mature factories before rolling out. 

Now, the company can easily compare the performance of different operations and identify opportunities to optimize. 

And like Outokumpu, AkzoNobel recognized that transforming its culture was just as important as deploying the new technology. The company focused on retraining employees on how to work with data effectively as part of their daily roles. Now, the new system is accessible to all workers, regardless of background. As production manager Luca Ottolini, noted: “Of course, we wanted to challenge our workers, because we want them to work in new ways, but we wanted to make this transformation as smart and easy for them as possible…now everybody is able to use the system.”

AkzoNobel’s leaders remain focused on what’s ahead. Having integrated their data sources and trained up staff, the company is moving to apply AI to further optimize efficiencies and strengthen the resilience of its supply chain.

As these stories show, legacy enterprises in traditional sectors can successfully transform by embracing the best of their heritage and the best of the new. I hope they inspire you, regardless of what sector you’re in.