The world is changing more unpredictably than ever. Disruptions are intensifying, occurring faster and with greater impact and no event is the same as the one preceding it. Welcome to the ‘next’ reality, where riding megatrends could mean make or break for your organization.
A few weeks ago at the IFS Connect event in Stuttgart, my colleague Maggie Slowik and I looked into the future of two key industries/functions which we interact with daily: manufacturing and service. It is no surprise that technology solutions in these areas are advancing at an incredible pace.
We believe there are a few megatrends that will drive change and challenge traditional ways of working/operating models.
Overcoming pilot purgatories
Digital maturity has been having a positive impact on profits and growth in uncertain times, as so highlighted in a recent ‘Future of Manufacturing Survey’ that IFS conducted with IDC highlights. The survey shows that manufacturers reporting an optimized level of digital transformation saw profits increase, while those with less advanced digital maturity suffered bigger reductions in profit in the last fiscal year. This is a reminder of how digital maturity not only drives positive company performance but also creates resilience in volatile times. Hence, companies need to get over their pilot purgatories and move to the next digital stage.
Digital transformation is an evolution: it comes in phases or waves, with each passing surge increasing digital maturity. The Technology and Services Industry Association (TISA) describes digital transformation as coming in two such waves.
Wave one focuses more on new business models, connectivity of products and use of technology. Many companies are still working on Wave one projects. Wave two of digital transformation rather concentrates on the value realization by the customer and on simplification of the whole digital customer journey and experience. TSIA is very clear that this requires a cross-functional and more holistic approach.
In today’s digital economy, the ability to create business value from data makes it one of the most valued assets of any organization. With the right data, businesses can advance and accelerate their decision making, improve their operations and gain a competitive advantage.
McKinsey describes pointedly how data analytics are changing the way business is done, as well as the nature of competition. Differentiators are data analytics strategy, organization structures and leadership. Attention to this strategic topic includes talent management for technical and domain expertise.
However, one of the key challenges we (still) see is the inability to deal with the large volumes of data our digital investments have created. There’s a lack of integration capability with operational and business systems, and poor data quality. Having a single source of truth has become a game-changer for those companies who want to make the most of their digital investments, empowering data-driven decision-making across the organization.
A comprehensive data monetization strategy also leads to new business models and, conveniently, our next megatrend. For example, electronic goods powerhouse, Philips, attributes four different types: data-as-a-service, insights-as-a-service, ecosystems-as-a-service and analytics-as-a-service.
Servitization and new business models
Services play an increasingly important role of companies’ successes. On one hand, the full and ‘early’ integration of service innovation in the development process of a new solution, product, system, software is essential with the ‘later’ delivery to the customer. The tight teamwork between research and development, services, product marketing and other functions is essential. Once every factor is working in tandem, it’s easier to determine what new capabilities (process, tool, content), roles/skills and E2E systems approaches are needed to finally succeed with a great moment of service for the customer.
On the other hand, we see a significant increase in outcome-based services and new business model innovation: a majority of products will no longer be owned but rather accessed and consumed. There is demand on both the B2C and B2B side, driven by a mindset shift. Organizations don’t want to own products any longer, preferring the freedom to access the latest version of the product as-a-service based on needs at any given point in time.
For the user or consumer, it will become a service which could be used, bought or terminated at almost any time. For a company this is not something a services function can determine alone. It rather requires a horizontal approach across all functions – a siloed approach is no longer feasible.
There has certainly been a lot of hype about the circular economy lately, and those who think it’s not relevant or too far away should start investigating the topic with their stakeholders and ecosystem. A showed approximately 33 percent of executives expect their industry to be disrupted by circularity start-ups that put products or materials back into the supply chain.
Circularity – finding ways to put products, components and materials back into the supply chain – is not only a way towards decarbonization and reducing the dependence on finite raw materials, but also a tremendous opportunity for business growth, innovation and the creation of new jobs and business opportunity. We must also consider that 80 percent of all product-related environmental impacts are determined during the design phase of a product.
MHP describes an assessment approach to evaluate the circularity of products. From our perspective, it is important that circularity needs to cover the full lifecycle of the products, including both the services and aspects of new business models.
Grow your own talent
Manufacturing and services have been suffering a chronic, worldwide talent problem. One thing is for sure: without the right talent, companies cannot succeed in driving their business transformations.
According to our study with IDC, 80 percent of manufacturing organizations are lacking digital skills, preventing companies from advancing their digital initiatives and driving business transformation. This realization leads us to a simple conclusion: companies need to become more involved in solving the talent issue.
Technology is advancing at a phenomenal rate so, naturally, the diversity of skillsets companies need will evolve. Talent strategies and job profiles need an overhaul.
Remember: one of the most key aspects of talent management is the identification and development of talent that is sufficiently cross-functional flexibly holistic. Once the right talent has been recognized and acquired, their efforts should enable and work with the manufacturing and service megatrends.
Cross-functionality is the golden ticket for megatrends
Rather than every megatrend being separate qualities, they are all bound together and connected in some way. For example, talent could be seen as the glue to enable all these trends. The industry needs talent that thinks, acts and works cross-functionally in the organization.
From our perspective, these highly skilled talents are rare in most companies. Therefore identification, development and support are particularly important.
Transformations that leverage these megatrends take time, so it’s important to determine small, iterative steps for customer value to enable a great moment of service. Cross-functionality is paramount for tapping into the manufacturing and service megatrends. Pair this with the right change management and everyone in the organization is sure to ride the business transformation journey in comfy, well-adjusted seats.