Building agile digital enterprises
By TA News Bureau:
Lommel (Belgium)-based industry research powerhouse Flanders Make is a centre of collaborative research between universities and industry translating concepts and research into products and processes. Heading the industrial research centre is Dr. Ir. Dirk Torfs, a specialist in management, applied science and engineering. Under his watch the organisation has gained global reputation as a strategic research centre for the manufacturing industry. Through tie-ups with five Flemish universities it is doing top-level innovation developing new products and processes for the manufacturing sector. In this interview Dr. Ir. Torfs, who is also pushing for international cooperation in innovation and product development, speaks of the emerging industrial revolution and comments on how management should provide the leadership to take on technological and manufacturing challenges of tomorrow
There is a view that no industry can ignore the fundamental changes that Industry 4.0 will generate to build digital enterprises. What are your views on this?
I agree. Industry 4.0 or the digitalization will have an impact on all enterprises in all sectors. Enterprises need a digital transformation plan to cope with the new technologies and methodologies in order to strengthen their business offer and create added value.
Transparency and proximity are becoming increasingly important as end customers interact more and more directly with companies. Social media makes it necessary for companies to be agile and to increase the speed of response. Anticipation and proactive behaviour is paramount as negative impact on a brand is hard to swipe away.
I strongly believe that Industry 4.0 will fundamentally change the business as it creates enormous opportunities for agile companies. However, there are four main pre-requisites for companies to generate a positive return out of Industry 4.0:
1. Strong companies have innovation, agility, acceptance to change and a collaborative mindset in their DNA.
2. Companies need to ensure a change-mentality with all employees at all levels to secure the adoption of new ways of doing business (new business models) and integrating new technology across the entire organization.
3. Intensified collaboration is critical for success. That’s why companies need to develop a collaborative environment, both internally (between employees and between departments) and externally (with other small and large companies).
4. Companies should realize that speed of innovation creates the biggest competitive advantage. Intellectual property rights become negotiating power rather than protection.
What are the strategic priorities that CEOs should take to link business requirements and market trends by melding disruptive technologies?
I see three priorities.
1. A CEO is to be very open minded, well connected to the business and concerned about scenario planning. Making budgets is out of date. Today, as part of the strategic agenda, companies should analyze the scene, look for the main market drivers and create ‘possible future’ scenarios for their business. These scenarios need to be monitored with a proper early warning system to anticipate the future and to detect when a certain scenario is more likely to impact the business. That’s how companies create a competitive advantage (e.g. Shell suffered the least from the oil crises in the 1970s because the company had foreseen a scenario for such a crisis).
2. A CEO should spend time on both technology innovation and changes to the business model as new, disruptive technologies will create new opportunities which will not only be technology related but also business related. Companies will have to evolve from selling assets (products) to providing services (maintenance services on products) or to productivity or output services (guaranteed output of production assets). In reality this is a revolution based on an AND-AND-AND scenario rather than an OR-OR-OR scenario. Customers will choose one of more products out of the portfolio depending on their needs. This will significantly impact the company’s revenue generation. Timing of revenues is different, balance and outcome statements can no longer be compared and investors need to analyze these companies in a different way. Companies will need to focus on long-term revenues and a sustainable revenue/profit stream rather than a yearly revenue/profit stream.
3. A CEO needs to make a digital transition plan for the implementation of Industry 4.0 such that people can be prepared for coping with the required change and can accept the different changes that are needed. Building up market intelligence is crucial, trends need to be analyzed and consequences on the business need to be determined. The plan involves technology (R&D, engineering and production, need for human interaction), sales (market approach and communication), people (training on communication, interaction skills, technology, adoption of change, etc.), change of labour relations, type of employment, type of investments, etc. The purpose of the digital transition plan is to create agile companies with people that are ready for change, ready to learn to execute new tasks and to take responsibility and accountability in their new roles and functions. The most agile companies will
be the best in not only adopting new technologies and new business models, but also in transforming the workforce.
Many business leaders fear that as Industry 4.0 progresses, there will be an acute shortage of talent to run digital enterprises. How should CEOs plan and prepare to take up this challenge?
The fear for a shortage of (skilled) talent is correct. The reason for this is two fold: 1) business leaders are in search for profiles for a part of their business which is still very new, so the profile is not yet clearly defined, 2) education and training systems are mainly adapted to the previous and current needs but not always tuned to future needs. For example, we can be sure that there will be a need for data analysts. However, how companies will use data and the required input for their business models is not yet or only partially known, which means that their exact job role is not yet fully defined.
That’s why it is important that business leaders prepare on different fronts.
1. They need to bring in people with basic knowledge of disruptive technologies (e.g. 3D printing, cloud applications, deep learning, artificial intelligence, etc) and data analytics (basic data analytics treatment, security of data, data privacy and integrity, storage of large data sets, etc). This ensures that the company houses basic skills and can properly address questions from external service providers for assessing strategic directions, assessing potential company risks and creating alerts.
2. Companies need to train their employees to take up new roles. Employees should transfer company and application related knowledge to digital natives. The latter should bring in digital expertise. This reciprocity helps companies grow as business needs are addressed more efficiently.
3. Companies should interact with training providers and educational institutes to better coordinate academic and industry needs. This is likely to be done via sector organizations as a group of companies have more power than an individual company.
4. Companies need to create awareness amongst their employees about change. Changes will happen and employees should be prepared, and have an open mind. This ensures that they’ll support the company in its digital endeavour and transformation. You need people driving the change.
5. HR departments need to recruit new people based on skills, attitude, ambition and future potential rather than a single competence (e.g. technological skills, service or sales). This requires different functional descriptions and additional supporting staff.
6. Enterprises need to link technology, business and application closer to each other as solutions are created simultaneously rather than consequentially.
Changes are happening fast but not overnight, therefore companies should start the transition to keep the momentum going rather than aiming for a radical change overnight. In that view, it should be considered that there is natural outflow of people in every company (e.g. retirement), which creates opportunities to bring in new people and adapt the workforce.
Finally, networking is very important as developing people and talent jointly is more effective. Therefore companies should actively seek for partners within their ecosystem to embark on the digital journey. Organizations such as Flanders Make assemble companies, research institutions and educational bodies in networks, stimulating a collaborative mindset and helping the entire sector progress.