One of my recent articles, “Why is Industrial Transformation so Difficult?” points out the sharp differences that exist between business and industrial transformation. It covered how complex discrete manufacturers and Maintenance, Repair and Overhaul (MRO) providers are implementing a digitalization strategy to transform their business. But, change is slow in coming. It is far more difficult to bring about this transformation in the industrial sector compared to the consumer marketplace. This article will take a closer look at what is Industrial Transformation, and how is manufacturing changing as a result?
Characteristics of Industrial Transformation
According to LNS Research, industrial transformation (IX) is a proactive and coordinated approach to leverage digital technologies to create step-change improvement in industrial operations. IX can be a subset of the overall trend towards a digital transformation that is sweeping the business world. Its characteristics include taking a new perspective on how to operate digitalized processes versus the previous approach of incremental and continuous process improvement
IX involves a unique set of challenges. These relate to the coordination, management, and implementation of a new technology and business framework across the extended and distributed operations networks that typify the complex discrete manufacturing space. When coupled with a labyrinth of disparate IT and operational technology (OT) systems, it is clear to see that IX in this sector is no simple matter.
Moving Out of Pilot Purgatory
This is not to say that most are failing with the transformation process. LNS Research defines the top 20 percent of the manufacturers operating in the aerospace and defense industry as leaders. These organizations are already seeing significant value from their digital technology implementations. An additional 20 percent are achieving some success as measured in tangible business benefits and speed of operations.
The chasing pack, on the other hand, is either stuck in pilot purgatory, achieving unclear results, are failing to generate a significant return on investment (ROI), or are being overly conservative in a time of severe market disruption. For instance, about a quarter of the respondents indicated they have no plans related to IX. Another 3 percent intend to begin the process within three years, and 10 percent plan to begin within a year. That’s close to half of all organizations in the sector that are already lagging far behind.
IX Implementation Involves a Business Transformation
The need for action is highlighted by the fact that most A&D executives believe IX to be a three-to-five-year endeavor. Those being most successful also consider that it consists of about ten separate elements.
Those that are leading the way have a laser focus on using digitalization and industrial transformation to eliminate operational efficiencies and re-architect their most inefficient business processes. They seek to align new technology to deliver greater customer value and competitive advantage.
This shows up sharply in their concentration on value and business benefits over technology implementation. They work backward from how best to improve business performance and then implement those technologies most closely align with these objectives. This differs sharply from lagging competitors who hope that one technology project will wield miraculous transformational progress.
Taking A Wider View
What most clearly marks the A&D leaders is the scope of their IX programs. Those who fall outside of the leadership group often attempt to reap immediate rewards by targeting low hanging fruit. Smart connected assets and smart connected products are a couple of examples. While these are valid targets, they can sometimes tie up too much industrial transformation attention due to the lure of rich and relatively fast rewards.
Market leaders, on the other hand, take a much broader view. They look at IX to attain comprehensive and smart connected operations that range from one end of the organization to the other and throughout the supply chain. As such, they are instituting technology platforms that help them integrate MES, ERP, PLM, manufacturing and IT systems as a means of becoming a truly digital enterprise with a digital thread. They see this as the surest route to changing the face of Aerospace and Defense manufacturing and achieving a lasting industrial transformation that carries them forward into the coming decade.
