What Manufacturing Leadership Looks Like in Industry 4.0

Innovation Strategy

The steam engine and mechanical loom, mass production and commercial electricity, the personal computer and digital technology—these advances powered three industrial revolutions.

Today, we’re in the midst of a fourth revolution. This one’s driven by cloud storage, increased processing power, AI, and IoT.

Like rail magnates who foresaw the power of the steam engine, manufacturers are in a position to create unprecedented prosperity for their shareholders.  Unlike those rail magnates, though, manufacturers face scrutiny from the public to lead a socially responsible operation.

Without bold leadership among production leaders, many established organizations will cede market share as the steady drum of progress beats on.

Unlocking Technology’s Potential with Human Skills

Even with tech investments increasing by 60% from 2016 to 2017, just 3% of leaders plan to significantly invest in workforce enablement. For production leaders who want to unlock the potential of technology, this needs to change.

Additive manufacturing (AM), which is the process of making objects using 3D models, provides a case in point.

According to McKinsey, the overall economic impact of AM will reach $100 billion to 250 billion by 2025. Of course, the tech landscape in manufacturing is much larger than AM. But as it relates to the workforce challenges presented by the changing nature of production, AM is a microcosm of Industry 4.0.

As is the case with technology in general, for AM to fully deliver on its promise, engineers need underlying knowledge of AM to effectively rethink traditional design principles.

Similarly, leaders need a holistic understanding of AM to accurately evaluate and communicate the business value of integrating additive manufacturing processes into their existing operations.

Similar scenarios are playing out as manufacturers look to take advantage of IoT, AI, and and robotic process automation (RPA)..

Regardless of the technology itself, though, successful implementations will rely on production leaders’ ability to make smart tech investments and enable workforce development.

A powerful example of this in action is AT&T’s Workforce 2020 initiative, which is aimed at re-training existing workers.

The initiative started when AT&T’s internal research showed that almost half of their workforce was employed in positions that wouldn’t exist at AT&T in ten years. By 2016, the billion-dollar initiative had already seen results—40 percent of AT&T’s open positions were filled with internal candidates.

Learning to Invest in (and Implement) Tech

This won’t be a quick fix, but the real leaders of industry are ready and willing to tolerate the inevitable growing pains. More importantly, those leaders also know how to attract internal support (and funding) by building a clear business case that demonstrates value beyond cost savings.

For example, at Harley Davidson’s manufacturing plant in York, Pennsylvania, general manager Mike Fisher was tasked with retrofitting the plant’s 10-year-old manufacturing equipment with IoT technology.

His plant eventually deployed a predictive maintenance system to collect data on their manufacturing equipment. But, from choosing the correct sensors, to installing and maintaining them and ensuring they collected the right data, simply getting the system to accurately collect data was rife with new obstacles for Fisher.

Despite all the difficulties, the project was a remarkable success.

By equipping their manufacturing plant with IoT technology, Harley Davidson successfully cut operating costs by $200 million through reduced downtime and improved production efficiency. The new technology also led to a 36X reduction in their build-to-order cycle and a 3 to 4 percent increase in overall profitability.

To be sure, the cost-savings are eye-popping, but savings alone won’t get people excited; revenue growth will. In Harley Davidson’s case, a 36X reduction in build-to-order could unlock entirely new business models, customer services, and other logistical improvements.

In other words, it could unlock new growth. And the promise of growth transforms technical issues that might’ve derailed a project into minor bumps in the road.

A Unique Opportunity: Workforce Out of Step with Tech

G20 economies—which account for almost 90% of global GDP—could lose “up to $11.5 trillion in cumulative GDP growth in the next 10 years if workforce enablement does not catch up with the rate of technological progress.”

For those who are ready and willing to act, the current lack of workforce enablement presents a golden opportunity for business leaders to create to create value for themselves by outpacing their competitors and for society by stemming the flow of workers displaced by technology.

In the AT&T example referenced earlier, the company saved hundreds of millions by filling positions with existing employees by helping to update the skills of thousands of people. The result was a net benefit for society and the business.

Similarly, with Harley Davidson’s IoT project, though workforce enablement was not the sole driving force, it was a valuable side effect of the project. The plant manager and all those involved gained skills and knowledge that Harley Davidson can now deploy elsewhere.

Social Responsibility—The New “License to Operate”

With a world of information at every citizen’s fingertips, the impact of corporations in everyday life is more visible than ever in Industry 4.0.. As a result, governments and citizens are demanding transparency, accountability, and environmental stewardship.

And corporations are responding: From 2011 to 2016, the number of companies in the S&P 500 who released reports detailing their environmental, social, and corporate governance, has quadrupled.  

But leading companies aren’t just responding—they’re acting.

The cosmetics company, L’Oreal, worked with the French government and international agencies to create a charter that required their suppliers to adhere to a strict set of standards which resulted in a companywide carbon emissions reduction of 67 percent.

Chairman and CEO Jean-Paul Agon said that ethics are becoming “a fundamental prerequisite to any organization’s license to operate. For companies that are leaders in this area, it will become a competitive advantage.”

A Transformation Underway

The transformation underway is complex. Blazing down new paths created by Industry 4.0 won’t be possible without significant investments in technology, workforce enablement, and social responsibility.

But as a key job, product, and wealth creator, the manufacturing industry’s role can’t be understated. Leaders in this industry influence local and global politics, job markets, worker’s interests, and a huge portion of the talent pipeline.

As we move from the early stages of Industry 4.0, the leaders who understand their place in today’s connected ecosystems, their role in the changing nature of production, and their responsibility to be global and local agents for change, will create sustainable prosperity for themselves and their communities.


Natalie Foley

Former CEO

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