How CEOs are Reshaping Industrial and Manufacturing Organisations through Digitisation

We all read on a daily basis about the opportunities and impact of digitisation across multiple industries. Let’s hone in on the manufacturing industry, where digitisation is disrupting the complete logic of manufacturing. In our new report, “Defining the new DNA of industrial digital organisations: the CEO’s agenda,” we relied on 8 case studies around the world, our past 5 years of Industry 4.0 surveys, and our diverse experiences and subject matter experts to identify four significant changes CEOs must implement to maximise the benefits of digitisation:

1. Drive organisational changes that address new digital capabilities and digitalised processes - e.g.,  product and process design and engineering, end-to-end procurement, supply chain/distribution and after-sales - right from the top. 
2. Hire more software and Internet of Things (IoT) engineers and data scientists, while training the wider workforce in digital skills.
3. Learn from software businesses, which have the ability to develop use cases rapidly and turn them into software products.
4. Extend digitisation beyond IT to include significant operational technologies (OT) such as track and trace solutions and digital twinning.

Beyond theory, let me explain what this means.

In addition to the usual pressures on costs, manufacturers are seeing increasing demands from customers for lower cost products and services that deliver a “return on experience” (see Global Consumer Insights Survey 2019). They want to have a product that is custom to their needs, delivered on time, comes with full service, and costs less than in the past. And, manufacturers are dueling to win these customers!

Our 2018 Global Digital Operations Study highlighted that “digital champions” are using end-to-end integration - across internal functions and with external partners and suppliers - to outperform their competition and deliver many of these emerging customer expectations. One of the eight organisations we studied was a chemicals conglomerate (Case Study 1 in the report), that was working with innovative start-up data and IOT companies to help it with AI-driven analytics and sensor tracking tools to deliver a smarter supply chain, a transparent shipping-tracking platform, a paper-free shop floor, and a cost-cutting predictive maintenance system.

Several well known examples, and some of our case study interviews also highlighted that digital features are getting more embedded in products and services. Whether it is the possibility of remote diagnostics and predictive maintenance which is now an integral part of the offerings, of the site maintenance and manufacturing services company (Case Study 6 in the report), or the use of the process mining tool by the European oil and gas company (Case Study 4), digital processes and tools are enabling a vast range of digitised products and services, some of which lead to new business models as well.

For a manufacturing organisation to conceive, develop and sell such digitised products and services is a huge change. For one, since these are typically not software organisations, the digital skills often reside in the IT function. Yet, aside from the back office, much of the digital operations innovations are the realm of operational technologies (OT), which will either live within the operations function (which in the past has dealt with point solutions for manufacturing execution systems, warehousing, or others), or a bone of contention between IT and operations. 

Our practical experiences with several manufacturing organisations suggest that having a tight link between the IT and OT areas is key and strengthened with the proper governance. The example of the Middle East packaging supplier (Case Study 5) working with GE to achieve this is instructive, as are the examples of the site maintenance and manufacturing services provider (Case Study 6) or the Tier 2 aerospace parts supplier (Case Study 3).

The creation of these OT skills in the traditional operations functions of industrial companies is new news. Such organisations - such as the European oil and gas company  (Case Study 4) or the Japanese auto supplier (Case Study 2) being classic examples - are not software companies, nor have traditionally hired such skills in any meaningful numbers and caliber. These are big and challenging shifts - hiring software engineers, sharing knowhow between the classical electromechanical engineers on the shop floor and these newly hired software engineers, having old school managers learn these new skills, organising reporting structures to be effective in such settings, and others. But, these need to be achieved, through hiring and training, or through acquisitions, or other means. 

Industrial companies also need to be able to move with speed, whether it is to implement use cases quickly or to conceptualise and develop successful software products. The European maintenance company  (Case Study 6) and the Middle East packaging supplier (Case Study 5) have both successfully accomplished this transition. 

In summary, with the speed digitisation is revolutionising the way we work, these suggested changes form an indispensable agenda for CEOs hoping to take advantage of the disruption of digitization. 

Learn more about our findings here: pwc.to/NewDNA

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