Maximizing Value Realization from Smart Manufacturing

Introduction

This article title includes “Maximizing Value Realization”. I know that phrase is not a common one, but I believe it should be used more frequently. When many companies talk about value, they are discussing the theoretical value a project may achieve as part of the business case used when justifying the investment. But few companies maintain a focus on actually realizing the projected value over the course of their initiative.

Why Do Smart Manufacturing Initiatives Stall?

Smart Manufacturing solutions SHOULD be incredibly valuable to manufacturing companies. It seems obvious that improved visibility, quicker response times, and predictive capabilities (and more) should lead to reduced downtimes, increased quality, better throughput and reduced costs in manufacturing. The technologies themselves are generally not that hard to get up and running, either.

So why are so few companies achieving their goals when implementing these solutions?

As usual, there is more than a single root cause of failure. But many of these causes can be summarized as too much focus on the technology itself and not enough focus on how to take advantage of those new capabilities to realize actual monetary value through improved performance and reduced costs.

In this article, I will discuss what needs to be done to maximize value realization from Smart Manufacturing. The implication is that many of those tasks are not being done today, and that is why so many companies are failing to reach the goals for their initiatives.

The Tech Industry is Failing Manufacturers

As a quick aside, the tech industry is not helping the manufacturers realize value, either. There are many reasons why most tech companies solely focus on implementing their technology instead of making it their business to help the customer realize value.

First, as a product company, it is natural to focus on your technology. It’s literally the foundation of your business.

Second, software company valuations (in particular) are driven from licenses and subscriptions, not from services. Tech companies are actually rewarded for minimizing the percentage of revenue coming from helping customers utilize the solutions they provide.

Finally, manufacturers themselves often push back on vendors who propose something like this. The push is to get the solution at the lowest possible cost. “Optional” services such as those being discussed today are seen as something that can be done internally instead of something that should be paid for. Given reasons one through three, it’s easy for vendors to accede to customer demands and let them be the ones responsible for driving value.

Five Pillars of Value Realization

This article presents a different path. Whether these tasks are being performed internally by the manufacturer or if they are assisted by an external group, these activities should be performed as part of every Smart Manufacturing implementation.

The Five Pillars

At a high level, this is not rocket science. There is nothing in this list that is new to anyone in the audience today. And yet, as we go through the list, I don’t know of any Smart Manufacturing initiatives at any company where all these principles are followed.

1. Begin with the End in Mind: The probability of reaching your goals are much higher when those goals are actually defined! Multiple portions of the initiative will work better together, better decisions will be made along the way, and there will be much more alignment in different parts of your team if there is a common vision of what is the “true north” of the initiative.
2. Do the Basics Right: This may be a Smart Manufacturing or Industry 4.0 initiative that uses technology such as AI or machine learning, but success still depends on the basics such as change management, communication, and project management.
3. Drive Adoption: There are some technologies that are embedded into the manufacturing process itself and do not require much interaction with your people. For most of the solutions in this space, though, success depends on how well the solution is embraced and used by the people in the organization.
4. Adapt Existing Processes: If the same activities are being done the same way by the same people after implementing the solution, chances are the performance of the process is going to be the same as it is today, too. Fundamentally, something must be done differently tomorrow in order for there to be value driven from the solution.
5. Measure the Impact and Iterate: Lord Kelvin was the first to say that you can’t improve what you don’t measure. You should take a baseline at the start of the initiative, and then measure progress at every step along the way.

Begin with the End In Mind

Imagine you’re about to begin a journey, and you talk to a friend about the trip. They ask you where you’re going, but you don’t really have a destination in mind. They ask what you’re going to do once you get to wherever you end up, but you have no idea whether you’re going to swim in the ocean, hike in the mountains, or enjoy the nightlife in a new city. They ask why you’re going to take a journey when you don’t know where you’re going or what you’re going to do when you get there. Your only answer is that everyone is talking about the new generation of cars and you think you should get one and drive it for a while.

Now, that’s not a perfect analogy for most companies. Most organizations embarking on an Industry 4.0 journey aren’t just doing it because everyone else is talking about it. There is usually some particular problem they are trying to solve. They may be looking to do predictive maintenance on some particularly vexing equipment. Maybe they are looking to “improve quality”. A few have even developed a multi-year roadmap of different use cases or technologies they want to put in place.

But I have yet to engage with any company that has a complete vision of what the future state looks like that is driven by a detailed business case of how they will drive value. None have detailed out the cultural and process changes that will be required in order to take full advantage of new technology capabilities. Nobody has been able to express the “true north” that guides their initiative towards a clearly defined purpose. Without any of these things, any roadmap that they have put together is bound to be incomplete at best, and may lead them down the wrong path at worst.

If you come out of this article with one concrete action to take, it should be to create clear definition of those items I just listed, even if it is only done at a high level. At Visual Decisions, we have worked with CESMII on their Smart Manufacturing Assessment Framework. This is an industry-standard approach to documenting where your organization is today, where you want to be, what that would be worth to the organization, and what are the steps to get there. It is a high-level, quick engagement that provides a framework your company can then build upon to continue fleshing out the details.

This is only one approach to getting started. There are other ways to create the vision – at VDI we also offer a more bespoke, detailed process to help you map out the vision. You may choose to do it all internally, as well. But my strongest recommendation today is to create this vision prior to making large investments in any solutions.

Do the Basics Right

This may seem basic, but one of the keys to success with these initiatives is to address the fundamentals. Far too often, Smart Manufacturing initiatives are started within a small team and treated like a group research project instead of a business transformation program.

Here is a partial list that we believe need to be a part of the planning for every implementation:

Change Management

• At VDI, we are a fan of John Kotter’s work from Harvard, but there are many different frameworks out there to lead and manage change within the organization. All the frameworks have common core elements such as involving a broad base of people as early and as often as possible, having clear and frequent communication throughout the process, developing a clear vision and sharing that vision thoughout the company, empowering employees, finding the wins for each of the stakeholders, generating quick wins to build momentum and more.

Project Management

• I’ll talk in more detail about our own project management methods later in the presentation, but the key for now is to utilize any thorough project management methodology for your program. These implementations are complex and can involve many different technologies and touch many organizations within the company. Using a well-defined project management approach will help keep things on time and on budget. Having clear roles and ownership is one of the critical contributions of these approaches.

Improved Collaboration

• Because these initiatives can (and should!) involve so many people within the company, it is important to have a strategy around collaboration. For many projects, the stakeholders could also include suppliers, customers or other partners. Having a framework for how to bring all those groups together and align everyone’s efforts is important. We have based our approach on “Strategic Doing”, which was created by Ed Morrison out of Purdue University. You don’t have to use that same framework, but it is critical to have an approach.

Technology Basics

• As someone with a lean manufacturing background, I detest rework. Understanding the larger picture of what your company wants to put in place over the next 3-5 years is important so that you don’t choose short-term solutions that won’t fit into a long-term picture. Just as a post or other immovable object on the shop floor can be referred to as a “monument” that has to be worked around, these “dead-end” technologies become monuments within your company.
• Using a set of guidelines for technology attributes that any individual solution should follow can also be very helpful. CESMII has published a set of seven principals that are a good start here.

There are other basics to consider, but this list is a good start to make sure you are setting your company up for long-term success.

Drive Adoption

As I mentioned earlier, most Smart Manufacturing solutions are still reliant on people to some extent. The people in your company still have to use the new solutions for them to provide value. Many of the companies that never progress beyond the pilot phase have failed because they never got the backing and participation from the people in the organization.

Here are a few steps to help ensure your program gets the adoption it requires:

Focus on Behaviors and Habits

• What is it that you actually want people in various roles doing with your system? What are the specific behaviors you’re trying to drive on the shop floor or within the support staff? BJ Fogg’s model for behavior is very helpful here: Behavior = Motivation + Ability + Prompt. What are the motivations of your people? How can you increase their ability to perform the tasks in question? How do you reduce any friction standing in the way? How can you prompt when those actions should be taken? The last element of his framework is important, too – celebrate when those tasks are performed to build that positive association in peoples’ minds.

Standard Work

• A related topic is that of standard work. There can be a VERY powerful synergy between standard work and driving adoption. This isn’t just for operators, either. Standard work concepts apply to leadership and support staff, as well. For example, your company may want to implement standardized problem solving methods as part of your rollout. The Smart Manufacturing solutions can be embedded within each step of that standardized approach. This benefits the organization by having a common approach to problem solving across the entire staff, but it also helps to ensure that people are utilizing the solution on a regular basis.

Make it Visual

• At Visual Decisions, we are (obviously) big fans of making things as visual as possible. One of the customers we worked with years ago had a phrase that has stuck with me, “Make the ugly visible.” By that he meant that if you hide problems behind the curtain, they tend to get ignored. But if you put the “ugly” front and center, there is much more incentive to do something about it. That is absolutely one aspect of “visual” that I’m referring to here.
• But there is also the concept of Visual Controls within the facility. Lean has a big emphasis on making things visual and using those controls to influence the behaviors of people. We are strong believers of that concept, but we believe that having live information coming from the shop floor can be even more effective at guiding people to the behaviors you are seeking. Having that information out there and visible at all times also helps to drive additional adoption of the systems.

Process Improvement is a Participation Sport

• This is another favorite phrase from a different customer. This plant manager ensured that the IoT system put in place got adoption from everyone by putting a “TPM Tuesday” practice in place. Each week, the lines would stop production for an hour. The operators, supervisors, maintenance teams, engineering, etc. would all gather together at the line and look at the data from the previous week. They would then pick one of the top three reasons for downtime over the past seven days and brainstorm solutions to the issue. In that plant, EVERYONE used the IoT solution on a regular basis.

Avoid Big Brother Syndrome

• Many of these solutions can feel intrusive to the people on the shop floor. They can feel like they are being watched and monitored to document any behavior issues. This is particularly true for certain solutions such as Video Analytics. It is important to get ahead of these concerns and let people know that the solutions are not intended for those purposes, but are instead intended to help improve the business performance so that the whole plant will thrive. It also helps to involve the people in the process during the implementation and to do things to empower the workforce over the long run, such as the TPM Tuesday idea above.

This is just scratching the surface, but these ideas will help you ensure that the people in your organization use these systems on a daily basis to improve operations.

Adapt Existing Processes

I’ve been wearing a Fitbit for over 11 years now. In that time, I’ve probably put on about 20 pounds! It’s not the Fitbit’s fault – it’s a great IoT device. But wearing a Fitbit doesn’t automatically make you thinner. You still have to change your “process” each day with better diet and more exercise. It is the same thing on the shop floor. Putting Smart Manufacturing systems out there alone won’t make much progress towards your goal. Fundamentally, you have to do things differently tomorrow than they are done today in order to effect real improvements in performance.

This not only applies to the operators, but to all of the support teams, as well. Out of the five pillars, this is the one with the lengthiest list of potential actions to take. The thoughts here are just scratching the surface of how to adapt your processes to take full advantage of the new digital capabilities. Please feel free to use the QR code on the screen to access a library of free content with more details.

Adapt the Manufacturing Process Itself

• This is the most fundamental step to drive value. If you break down one of your manufacturing processes into its individual actions, where can you Enhance, Augment, Simplify, Automate, Expedite, Eliminate, or Standardize those steps using the technical capabilities your Smart Manufacturing system provides?

Digital Lean

• Whether you have a formal continuous improvement process today or not, a Digital Lean program should be part of your plans to get maximum value from your Smart Manufacturing investment. Creating a data-driven culture of improvement with high levels of automation between your systems and your lean practices will drive improvement much faster than traditional operational excellence practices alone.

Maintenance

• Many Smart Manufacturing implementations are focused on keeping machines up and running more effectively. There are ways to use the capabilities of your new solutions to increase the mean time between failures, such as predictive capabilities, condition-based maintenance, optimization of preventive maintenance tasks, augmenting the autonomous maintenance program, and much more. But there can also be integration to your maintenance management system in order to minimize the mean time to repair. This integration can help speed the reaction time, improve diagnostic capabilities using AI, and much more.

Leadership Practices

• Leadership practices should be among the first changes you implement once your solution is up and running. If management is using the data during standup meetings, gemba walks, and really throughout their own daily practices, it will set the tone for the rest of the staff to utilize the information in theirs. It will also drive better decision making!
• Consider setting up a complete digital management operating system as a long-term goal for your SM program.

Other processes to consider include:

• Quality
• Material Handling
• Inventory Management
• Manufacturing, Process and/or Industrial Engineering
• Product Development / Engineering (DfM / Digital Thread)
• IT / OT
• Finance
• HR

Measure the Impact

I don’t think I 100% agree with the Lord Kelvin quote from earlier. I do think it’s possible to improve what you don’t measure, but it is really hard to do so, highly uncertain that the things you are trying will lead to success, and you don’t even have a good idea of what success really means. So avoid those problems and measure the progress!

Use the Data

• Many of the implementations in Smart Manufacturing will be collecting data from the process. This data can and should be used over time to track how much of an impact is being made during the implementation.

KPI Impact

• Prior to starting the implementation, there should be agreement on which KPI (Key Performance Indicators) will be used to measure the impact of the program. These KPI should be baselined at the beginning of the implementation so that progress can be measured. Some thought and intention should go into the selection of the KPI. What are you trying to achieve overall? Which areas do you think will drive the financial impact for the project? What are the behaviors you are trying to instill in the organization? These factors and more should go into that decision.

Agreement on Functional / Financial Conversion

• It is generally easier to track the functional impact of these projects since that direct data exists on the shop floor. However, it should be a goal of your overall Smart Manufacturing program to document the translation between functional metrics and financial ones. Not only will this help measure the success of your initiative, but it can also help clarify the actions that need to be taken on a day to day basis on the shop floor.

Quarterly Audit / Health Check

• One tactic that we have found to be very helpful is to utilize a quarterly health check for the implementation. First and foremost, are the goals and targets laid out to justify the project being met? If so, great! If not, then start to dig into why that is the case. What is the status of the software/hardware – is it collecting accurate data that is being made easily available to the people that need it? How is adoption going? Can you track who is logging into the system and how often? How broad is the usage? How deep are people getting into the system to get the most out of it? What process changes have been implemented in order to take advantage of the new capabilities?
• Once you have this information, then you can make any necessary course corrections in your implementation plan. Perhaps you need to adopt a stronger focus on the cultural or process improvement aspects. Maybe the technology implementation needs to be modified. But putting these health checks in place will give you the information you need to stay on track to meet your objectives.

Use Value Sprints to Drive Desired Outcomes

Those were the five pillars of Value Realization.

At VDI, we have developed an implementation strategy that pulls those pillars together to drive success for our customers. We call it the Value Sprint Methodology. Let’s talk about that next.

Value Sprint Implementation Process

Here is the general flow for the process. Sprint Zero is the only one not focused on value. This is where the solution is initially commissioned and validated. Once that is in place, however, the real work of driving value begins in earnest. The overall Smart Manufacturing business case should identify many potential areas of value. In the roadmap we generate with the customer we break those different value buckets into agile sprints that are hyper-focused on generating valuable outcomes at the end of the sprint.

Each sprint should focus on one specific value goal. The activities during the sprint should be structured to realize that value. More on those activities in a minute. Also, there may be additional functionality within the solution that should be implemented as part of the sprint.

The sequence of the sprints is also important. There are going to be foundational solution capabilities that need to be implemented first. There will also be foundational cultural issues that need to be addressed early to demonstrate the direction the organization wants to take. Additional factors to consider are the total amount of value potential for the sprint, the likelihood of success, organizational readiness for change in that area, any dependencies that may exist, and others as well.

The Quarterly Audits (or Health Checks) should be used to make certain that the sprints are achieving their goals. If not, how should the sprints be adapted to improve the performance? Then iterate as necessary.

Value Sprints Utilize the Five Pillars to Achieve Results

Let’s look at the structure of a value sprint in more detail.

We begin with the overall Value Plan. This will be used to create the roadmap of sprints. Each sprint is going to have an outcome plan where we define the specific value we intend to achieve. It is critical that this outcome is defined in dollars (or other currency). This can be supported through functional KPI targets, as well, but the value being defined for the sprint should be actual dollar value to the organization. This is part of why we discussed the importance of understanding the translation between functional metrics and financial value earlier.

Given the outcome plan defined for the sprint, this needs to be translated into actions that need to be taken during the sprint. These actions can be broken down into Technology, Culture and Process categories, though this categorization isn’t necessary and is also flexible. For instance, we have also used a “Policy and Leadership” category with some customers. The key here is that there exists a checklist of actions to run through within each sprint that tie into the five pillars.

Summary

So that was a quick run through of how to maximize value realization from Smart Manufacturing. If you’d like more detail on the program or to discuss it with me directly, please follow up with me.

Thanks!

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