In the second part of the Q&A series, addressing executive challenges on leading the Factory of the Future, Frank Piller addresses the questions of degree of change required with digitalisation, the skillset required of managers these days and how to allow room for experimentation to encourage growth. Please click here to read the first part of Frank’s Q&A. You can watch the full Q&A here.
How much organisational change is actually needed when it comes to digitalisation?
It depends on your status quo, the starting point of your digital journey, the context, the company culture. From my experience, you always need more change than you think. However, you should not be afraid of the change and it should not be a hurdle that stops you from making any change at all. What I very often see in terms of change on the technological side, with regard to skills and competences, it's very manageable. I saw very few companies failing digital pilots because of skills and competences.
We still have a lot of more of the informal cultural hurdles, resistance to the new technologies. Very often it's actually not the people, it’s the conditions we provide them with, such as pay and space for experimentation. For example, we complain about the middle management. What we forget is that those are the people that hold the most responsibility for the current objectives. They are the ones that are the trouble-shooters. Very often, we have to give them more freedom to experiment and really have time to think about the change process, which is not always the case.
You can also look at consultancies or universities who provide audit tools that can help you answer this question. They walk you through how much change and where the change is needed. For example, at Aachen University, we have Industry 4.0 maturity index. It's a very complex audit which takes approximately one week to answer. If you go to this kind of assessment, you will get a very clear indicator where you need change and to what degree and in which direction. To summarise, on one hand there are tools available out there for you to understand your starting position, but on the other, change can often happen very easily if you just provide a little bit of space and select people to experiment.
Is there any strategies that you've seen on experimenting or that allow room for experimentation?
I was really impressed with BMW, how they went so enthusiastically on their digital journey. Of course, if you're a big organization like BMW, you have a huge top-down strategy somewhere in the headquarters in Munich where people spend a lot of time thinking about the factory of the future and the digital factory. BMW, as a group, identified eight different technology fields such as data analytics, smart maintenance, the next generation of quality standards and so on. Then, within the network of plants, they have a way to distribute this work. For example, one plant like the one we visited as part of Leading the Factory of the Future Masterclass in Leipzig, had a global responsibility for advanced robotics co-operator. As another part of their top-down strategy, they also realised they need more bottom-up experimentation, even after four years into the journey, as well as be able to share the knowledge from that experimentation. They merged Lean and continuous improvement team from existing brownfield and digital teams and created different structures across the plant, such as tech days, where people from different stations across the company can share practices, or create tech exibitions where all the workers can see the example of new technology in use e.g. cobots and smart devices. They created BMW innovation garage for the workers at the shop floor level to experiment as well as creativity spaces in the form of innovation labs, usually only seen in headquarters, to encourage workers to think creatively about utilising available technology in their daily tasks. BMW have found a great way to create a bottom-up digitalisation experience as well as share the knowledge regarding what has been achieved within the community of practice.
What are the skills that a manager needs to successfully implement the digital strategy?
Very often, the skills needed to lead the strategizing and implementation are not digital skills, but good people management and change management skills. Incentivising the workers and instilling the inspiration to change, transforming the industry and scaling up are some of the key tasks for a plant going through digital transformation. However, you also need basic knowledge of technologies as a leader, to make sense of what’s coming and make informed decisions. Traditionally, if you are a manufacturing executive you studied mechanical engineering, process engineering and so on, so you normally have some good profound knowledge of the traditional manufacturing technologies. You also need to acquire some basic skills across AI and machine learning. Of course, you will never program the algorithm, you will never be the one to make lots of decisions in the end. But you should be able to make an informed decision which starts with a better understanding of the technology. We need this magic person who combines good people management skills, then process management skills, change management skills as well as good technological background knowledge. Perhaps you need a good team to win.
One of the challenges to Industry 4.0 is lack of business cases in Aerospace industry. Kindly share your thoughts on this.
I'm not really a core expert here, but it's a very interesting case. On the product side, Aerospace is one of the most famous industry 4.0 cases with regard to operating the turbines of Aerospace with value-based pricing models, strong predictive maintenance. Instead of selling you a turbine, they’re selling you the value of powering an airplane for the next mile. Also with regard to the booking process, air travel is one of the most advanced digital industries in the world. On the engineering side, we have simulation technologies and beautiful design capabilities. However, in the factory situation, I was rather disappointed with what I saw. Assembly plants in Aerospace industries follow the old practices. But when you have five years-worth of order books, it makes it more difficult to change.
There are definitely big opportunities in that space to become a disruptor and gain competitive advantage by using more digitalisation.
How to effectively implement the factory of the future in a continuous process industry? What is the hype and what is real?
Process industries, such as BMW as a discreet manufacturing industry, have two challenges. On the one hand side process industries are far ahead with regards to sensoring and visibility often of what is happening, unlike conventional discrete manufacturing factories, especially old brownfields, as you have higher safety requirements and downtime standards. Very often we’ll have a situation where there are many more potential data points, which you measure for factors such as safety, but don't really analyse for future gains. Very often, as we discuss during the Masterclass, we have so many data points that we really don't know where to start. We have a great speaker from FeroLabs, a small industrial data startup, that works mainly with process industries, such as steel production, but also in the chemical industry, to analyse this data and they have some amazing results from looking at the piles of around 2025 thousand sensors in a steel mill where traditionally seven to ten sensors are utilized for continuous improvement and the rest is just for condition monitoring. They have a good approach to finding out whether all 2025 sensors are relevant and, if so, applying machine learning algorithms accordingly.
The big challenge in this industry, of course, is that some of the experimentation which I referred to earlier with regard to the BMW example, cannot be done so easily. You can't interfere with the process so quickly compared to a big scale, industrial, high support situation. For that reason, Bayer for example, which we will be visiting as part of the Leading the Factory of the Future Masterclass, have a research factory that follows a modular approach, using a lot of robotics, where experimentation is allowed and, if successful, brought back to the line.
Is there a structure for prioritisation of projects and resources?
Audits I mentioned before could be a good place to start. Warwick University offers a good Industry 4.0 readiness audit framework which allows you to identify if you’re lagging behind against your competitors. This could be one way to address prioritization. However, my answer to that question would be start with your problems. Don't start with the technology prioritization but look at the challenges you have, which is really where you want to improve. Only talk to suppliers if there is an innovative way of addressing the issue. Your prioritization should really come from the challenges or the opportunities addressed to bring your company to the next level and then my invitation there would be to not just look for your operational challenges, but really integrate your sales team and the product management team to see whether the factory enables a different kind of business model for your organization. Normally someone else thinks about the business model and then you in manufacturing you have to implement the business model. With Industry 4.0, you have the opportunity to turn things around and look at opportunities available with all relevant functions across the company, including manufacturing. For example, with regard to higher degrees of efficient mass customisation, you might discover the ability to be able to address niche segments of your markets that you couldn't address efficiently before. Another example here from a process manufacturing industry, of a supplier of ingredients for the cosmetic industry, not the brand but the supplier making the basic chemicals for them. They’ve realised they have all the components and a pretty good understanding of the manufacturing process to be able to come up with the technology where they have a small scale mini-plant where they can do cosmetics in small batch sizes. And then why should we not enable every influencer on Instagram to have her own cosmetics line? Nowadays you get your own cosmetic line if you have 5 million followers, but perhaps you just have 10,000 followers. It's already a big market and we enable you to create your own cosmetic line and with our knowledge we can produce it with a small highly flexible factory.
This presents a very exciting opportunity to really change your business model, which might end up being a higher priority as a very ambitious project, compared to doing some more continuous improvement to find a quality errors.
I encourage you to explore my Masterclass Leading the Factory of the Future to see first hand how the true leaders from the likes of Porsche, Bayer and BMW, drive digitalization in their companies and to get your own blueprint for running a smart factory.