Manufacturing has not typically been thought of as an industry driving digital transformation. In fact, just 12 percent are deemed to be Digerati — leading-edge innovators who have fused front and back-end processes together to enable seamless innovation and delivery.
Hit-hard by the economic downturn and consumers’ obsession with low-cost goods, many companies turned their sights inward to strip cost out of their production models.
That day is done. Squeezing supply chains, optimizing operations and streamlining distribution are no longer enough to boost revenues and race to the head of the class. A quick look at IndustryWeek’s top-performing public manufacturers of 2013 shows companies such as Apple Inc. (#1) and Monster Beverage Corp. (#4) surging ahead of traditional leaders Exxon Mobile Corp (#6), Hershey Co. (#12), and Microsoft Corp (#15).
With their laser-focus on innovation, these companies seem to be saying — why lead when you can rule?
Manufacturers must follow their example and turn their sights outwards. The newest imperative? Leverage big data, cloud, social and mobile capabilities to create third platform businesses that get them closer to their customers. The market’s message is clear: digitize — or else.
Get ready for mass customization
So how can companies harness the power of digitization? How can they drive radical transformation through the enterprise, preparing for a hyper-connected world where they will serve micro-markets with highly customized offerings?
Here are four key strategies to harness the full power of digitization:
1. Accelerate back-end system integration — Many manufacturers have poured untold sums into implementing ERP systems, stitching together operational systems, and integrating supply chains. But these efforts have occurred in silos: Just 38 percent of companies are currently coordinating digital initiatives across functions and regions.
True back-end integration should be table stakes for all companies who want to harness digital’s power to serve new markets cost-effectively and move swiftly to address consumers’ changing behaviors.
Companies need to accelerate these efforts. Here’s what’s next:
2. Move to continuous R&D — The cloud has transformed product innovation. Software providers that historically have released new versions of flagship offerings every 18 months are now doing so every 60 to 90 days. And some companies are moving even faster.
CAD modeling software and 3D printing enable virtual teams to design and refine new products swiftly and with ease. Meanwhile, crowdsourced networks can join internal teams, suppliers, and customers as idea generators. What’s key to making external innovation more than a gimmick: tightly focused R&D objectives, big data analytics, and automated support processes.
3. Deliver on the potential of mass-customization — Mass-customization is here — and gaining speed. Consumers are already customizing features of apparel, accessories, and personal care products they order from U.S retailers and sharing selections with their social networks.
Even more complex manufacturing is getting in on the act: Ford has reconfigured its high-tech production line for its F150 pickup truck to enable up to one million variations without adding costs for retooling and re-equipping lines.
By moving now, companies can gain the experience they need to profitably serve micro-segments, which will be essential as emerging markets increasingly flex their buying power. By 2025, another 1.8 billion individuals will join the consuming class.
These buyers will expect companies’ products and services to meet their unique needs and reflect their incredible diversity. Meeting this demand requires that companies rapidly evolve their customization capabilities — or be disintermediated by those who do.
4. Use war rooms and virtual centers of excellence to do daily battle — Serving customer segments as small as one will require incredible digital sophistication. Global teams will use predictive capabilities, flexible platform designs, and automated processes to configure products and services in real-time. They’ll also sift data on market and customer behavior and enterprise performance to make minute-by-minute decisions that boost profitability.
Collaborative decision environments with their rich multimedia tools provide all of these capabilities — and more — linking people, processes and data — in a virtuous loop of constant ideation and innovation. As companies move forward to become digital enterprises, tighten linkages between internal and external R&D teams — suppliers, and customers will become ever more important. It’s a moment-by-moment fight to win and keep the business of global customers, but the battle has never been more important. Billions of new customers — and untold revenues are at stake.
After all, why lead the market when you can transform it?