IFS Vice President of Global Industry Solutions Antony Bourne believes the future is bright for manufacturing and tells us why companies need to keep pace with change.
Managing change can be one of the biggest challenges for manufacturing companies and according to recent research, just accepting the need to change to keep pace with technological innovation and market changes, is the biggest factor for many businesses.
In fact, 42% of respondents quoted in a recent Digital Change Survey commissioned by global enterprise software vendor IFS admitted that ‘aversion to change’ was the biggest barrier to digital transformation.
“The people don't want to change,” claims IFS’s VP Global Industry Solutions Antony Bourne. “And the reason is because they feel threatened, and that's the wrong approach to take.
“When people think digital change, they think robotics and they think, ‘okay, if I do this, I'm going to put myself out of a job.’ And that's not the right approach to take, because you should be thinking ‘okay, if I do this digital change, I can then do more value-added tasks, or more things that actually add value to the product or the company’, rather than just thinking it's going to put jobs at risk.
“People need to program robotics, they need to manage them, they need to ensure that they're doing what they're meant to be doing, and that fills up jobs. So, if I was a manufacturer on the shop floor, I'd be thinking ‘what can I do? What skills can I learn and add to my CV to make myself more marketable and earn more money?’”
In fact, research released by Gartner last year appears to demonstrate that any doom and gloom about technological advancements killing jobs is no more than scaremongering. The research showed in fact, that there will be a net increase in jobs in the long run, thanks to the proliferation of robotics. So, what is the key to managing change effectively for a manufacturing organisation?
“The most successful change projects I've seen in companies – where they've gone to the lengths of having round-hall meetings, where they've stapled newsletters to people's pay slips – it's all about the information flow, and allowing the employees to question you,” says Bourne.
“It shouldn't be like a dictatorship, it should be about getting their input in it, because they're the ones on the shop floor who see it day-in and day-out.
“I've also seen customers where they've gone at it more from an IT project perspective, and there has been resistance in there and therefore they haven't got all of the benefits they thought they were going to get. That's the key. It is about driving it through, but in a good way, with communication.
“And you have to have a top-down approach. Again, I've spoken to many customers where they've said their old boss did not accept that things were changing, and he or she's no longer in the company. And when a new person comes in, who has appreciated that the world has changed and continues to change, and how to adopt that, that's when they've been successful as well.
“So, it is that top-down approach, with buy-in from the board, from the CEO, through the company, straight down into the people where it's gonna impact the most.”
Perhaps the need for communication and understanding is one of the reasons we’ve seen such a move towards servitisation, with companies often keener to develop the capabilities they need to provide services and solutions that supplement their traditional product offerings in-house.
In fact, in the same IFS survey referenced earlier, 68% of respondents say servitisation is either “well-established and is already paying dividends”, or that it is “in progress and is receiving appropriate executive attention and support” within their company. As well as that, nearly four-fifths (79%) claim that servitisation “provides a competitive advantage” or “keeps their company abreast of competitors”.
The combination of these factors leads Bourne to conclude that it should be “of little surprise” then, that manufacturers are bracing themselves for digital transformation.
One of the early examples of servitisation was launched by Rolls Royce back in the 1990s with its TotalCare programme, which bundled aircraft engines with optimisation and maintenance services in a pay-per-use type of offering where customers essentially paid by the hour for what they used.
Now, more and more companies are trying to adopt a similar approach within their own operational parameters, but how can that be properly defined?
“It comes back to not offering products,” says Bourne. “Why is it important now? You don't want to be offering products for the market, you want to be offering capabilities for the market. What problems are you trying to solve for your customers?
“I put it into three different levels. On a base level most organisations sell spare parts and consumables. Tick that box.
“Then, from an intermediate level, is when you start saying ‘okay, we can now offer you scheduled maintenance, we can do repair, or we can do condition monitoring, or we can give you a help desk for the products that we sell you as a service.’
“And the advanced level is when you start doing risk and revenue sharing. That's when you're really getting under the skin and deep into your customer, because then you're saying, ‘okay, what problem are you trying to solve?’ The customers say, ‘well, we need to increase this or reduce that.’”
“‘Okay, we will help you reduce your costs, for example, by 10%, but if we do that with our products, we want 20% of those savings.’ So, think about it, if you were the customer – you’re getting the supplier coming up and saying, ‘I don't want you to pay me for any of this equipment or service that I'm going to give you. You'll only pay me if it saves you the money.’
“So, it's a win-win situation. As a customer, I don't care, I'm covered by the contract. And as a manufacturer, it's my incentive to ensure that the equipment I put in place, the products and the services I use, do actually meet the customer's requirements.”
The Welshman recognises though, that many companies, regardless of industry or specialism, have suffered at the hands of the major internet players eating into their customer base and profits. Moving with the times is paramount for any company to ensure a secure future, and that is doubly true in the manufacturing sector.
“When we think about manufacturing, you have to try and get some differentiation in the market,” says Bourne. “You can't just be a warehouse on the high street and think ‘I can beat anybody on the internet’, it's just not realistic.
“So, the world is changing. If you look at property, purely internet-based estate agents like Purple Bricks are coming on the market and some have been on the market a while now. In the automotive industry, you have Drive Now.
“It's that pay-as-you-go service mentality that people are adopting now. Many manufacturers are reacting to this and embracing it and using it to their advantage, but some aren't. It is in that acceptance and that mentality that they have to do this to survive.”