How do I stack up in terms of digital maturity against my manufacturing peers?

This is a question that I have been asked many times. The fear of missing out creates unbearable pain. 

Trade wars and the COVID-19 pandemic exposed some of the manufacturing wounds: tight margins, supply chain risks, changes in consumer preferences, lack of flexibility in niche positions and volatility in commodity prices, among many others. As manufacturing companies are trying to heal from those wounds, they face the prospect of either winning or losing the pandemic recovery and the transition to the new stationary state that will follow in the next several years.

In this process, digital transformation is at the core of corporate programs to navigate and recover from the pandemic. Corporate campaigns and visions around this topic – such as "transitioning into a digital business," "embracing the fourth industrial revolution" and "building a smart manufacturing company" – have become mantras.

The grass is not always greener

Whenever businesses are embracing new ideas such as digital transformation, the first act usually involves looking for references from successful peers. And that goes back to my original question. Once I heard an automaker convey how great oil and gas companies were doing with their digital oilfield. There is a common sentiment that other companies and segments are faring better than your own.

In reality, the key to becoming a successful digital business resides in how a manufacturer answers their own challenges. If a manufacturer responds with digital solutions, that will eventually lead them to be a digitally mature manufacturing company.

As a manufacturer, how you stack up against your peers digitally is now impacting how you compare as a business. Digitalization is driving shareholder value. 

In manufacturing, certain traits seem to have a significant correlation to the success that leading businesses achieve in their digital journey. I narrowed them down to three aspects that have a strong correlation with digital maturity: investment, lead by sharing and strategy.

Investment

Manufacturers will be nearly as good as the investment they make in their digital manufacturing programs relative to the size of their company. I have noticed that a common trait between laggards is deprioritizing investments in digital technologies and digitally savvy staff. For those companies, CapEx requests with proven return on investment would usually wait for one, two or more budget cycles to make the cut. This fact alone puts a strain on the road ahead to create a more mature organization. Those years will not come back.

Lead by sharing

Confidentiality and regulatory requirements aside, leading manufacturing companies are proud to share their successes (and sometimes failures) in their digital transformation programs. These companies often sponsor and present in third-party conferences; organize their own conferences; talk about digital transformation successes in their annual financial reports; publish posts about digital transformation in their social media channels; and are part of a digital ecosystem. This desire to lead by example builds confidence which can make them stand out in the industry. Not being fearful to share successes and failures also reshapes the company culture and mindset to accept the digital transformation and organizational change.

Strategy

Digital technologies represent a new paradigm for manufacturers. For laggards, breaking those chains is not easy and comes with the cost of endless proofs-of-concept and anxiety. Leading manufacturing companies plan for what their desired end digital game will be. Additionally, I have witnessed a higher risk appetite and the ability to translate their end game into operational goals for people, processes and technologies. These companies are also quick to adapt the company organizational chart and pick the right partners. Lastly, they hire leaders to own this type of strategy (e.g., chief digital officers). 

Final thoughts

Are you a manufacturer concerned about your digital maturity? Think about the above three aspects and if they are helping or hurting your progress. Make the decisions that are right for your business. Digital transformation is more like a marathon than a 40-yard dash. Just ensure that you know where the finish line is (near-/mid-/long-term) and continue at a consistent pace. Investors, employees and your customers will thank you.

If you are interested to hear how manufacturers can reduce non-conformance quality costs with data analytics and artificial intelligence of things, watch this webinar where David Petrucci, Strategy Leader, Manufacturing Industry @ Microsoft and me discuss the topic.
On-Demand Webinar: Improve Manufacturing Throughput with Predictive Quality

Find more content about digital transformation and Industry 4.0 here.