While some manufacturers have made progress on the digital journey, how manufacturers become digital companies is unclear to many, despite the opportunity that some leaders know is there. If a $20 billion manufacturing firm that digitises can expect a profit upside of 12.8% over the next three years, and 19% over 10 years (according to Cisco research), surely more manufacturing leaders will be wanting a taste of this digital carrot.
As is often the case with transformation, the capability to transform does not meet the aspirations to transform. Until leaders are equipped to operationalise digital business transformation inside their companies, the results from service-led innovations, including those that depend upon connected products and connected machines, will continue to disappoint.
In a Cisco survey of more than 600 senior executives in 13 countries from both industrial machine builders and end-user manufacturers, 86% said the transition from product-centric to service-oriented revenue models is a core part of their growth strategy. Despite their aspirations, only 29% indicated that their services would grow faster than products.
How Manufacturers Become Digital
To resolve this service dilemma, a manufacturer's services and digital journeys must converge, and leaders must digitally transform their enterprises. This begins with top-down leadership, followed by changes in people, process, and technology and things.
Only when this is done successfully, will manufacturers have the ability to leapfrog competitors, win new customers, secure better partners and thrive in the digital decade ahead.
Manufacturers will need to go further in converging services with digitisation. They need to undertake holistic organisational and technological change – aka: digital business transformation, and leaders need to ensure the right transformation management and leadership capabilities are engaged to do that successfully. But expecting operational experts to become overnight transformation experts, is a sure-fire way to transformation heart-ache.
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GE Case Study
GE executives believe software, data, and analytics will be central to the company’s ability to differentiate itself. In September 2015, GE announced the creation of GE Digital, merging the digital capabilities from across the company into one organisation.
GE's goal is to identify ways to improve machine productivity and reliability. The company has placed big bets on the Industrial Internet, involving the convergence of industrial machines, data, and the Internet. They are putting sensors on gas turbines, jet engines, and other machines; connecting them to the cloud; and analysing the data they produce.
An MIT Sloan Management Review case study looks at how this traditional manufacturer is remaking itself into a modern digital business. It is based, in part, on interviews with 12 GE executives.