By David R. Brousell
The recent history of the publishing industry may be a good example of what is about to happen to the manufacturing industry. The arrival of the Internet, the World Wide Web, Google, and the ensuing digital business model dramatically transformed the publishing industry from its head to its toes.
The shift from print to digital forms of finding and delivering information has resulted in the creation of many new data-driven job functions in publishing companies, radically different financial and business models, much larger potential audiences, and new, often global competition. Along the way, publishing executives who had been steeped in analog leadership disciplines had to change and adapt to the digital world. Those that could not or did not found that they and their companies could not survive.
In the manufacturing industry today, something similar is about to happen. The emergence of cyber-physical systems on the plant floor, the digitization of business processes from sales to service, and the mining and analysis of information from every facet of the business have combined to create a new vision of manufacturing. That new vision, which the Manufacturing Leadership Council calls Manufacturing 4.0, is characterized by technology-savvy leaders, flatter and more collaborative organizational structures, and empowered employees. It will also be defined by a global competitive environment whose table stakes include information-driven factories, real-time information, great speed and agility, and rapid adaptability.
But, for manufacturing leaders, the road to the new, digital world of Manufacturing 4.0 may not be any easier or faster than it was for the executives in the publishing industry. Manufacturing executives will have to devise different approaches to managing their businesses in the era of M4.0. They will have to develop new skills to manage the new, more collaborative organizational structures that underpin the new way of doing business. They will have to more fully integrate their organizations and learn how to manage the vast quantities of data that flow from pervasive connectivity. They will have to transform cultures and thinking within their companies. And they may very well have to re-tool their business models as well as their employee ranks to survive in the future.
The industry must now write a new leadership playbook for the world of Manufacturing 4.0.
Survey Tracks March to a Digital Future
These are just some of the top-line findings of the latest Manufacturing Leadership survey on Next-Generation Leadership. To get a handle on what Manufacturing 4.0 means for leadership, the Council’s Board of Governors authorized a research survey of Next-Generation Leadership in Manufacturing. Fielded in August, the survey offers insights into how manufacturing leaders are beginning to think about the leadership requirements of Manufacturing 4.0, where they are focusing their attention today as leaders and where they must focus in the years to come, how their businesses are structured now and how they must be realigned going forward, and where they need to develop knowledge and expertise in order to both survive and thrive in a time of M4.0. Specific questions this year on the subject of talent management were contributed by ML Council member Development Dimensions International, Inc., a talent management consultancy.
The survey, which has been conducted for the past several years, has over time been charting the often-uneven march toward a digital future. A key theme has emerged: the influence of digital technologies on loosening what had historically been hierarchical organizational structures in many manufacturing companies. This year, for example, 61 percent of survey respondents say that their companies have digitized their business processes to one extent or another. But this year’s survey for the first time looks specifically at a number of questions around the broader context of Manufacturing 4.0.
Chief among the findings is a near-universal acknowledgement that M4.0 is not going to be business as usual for leadership executives. When asked whether M4.0 will require a substantially different leadership approach and set of skills compared with what they have today, 90 percent of respondents were in either full or partial agreement that a new playbook is needed. And the chapters in that playbook, according to powerful majorities of survey respondents, need to align with a new set of leadership skills that will be required in the era of M4.0, including:
- Understanding a wide range of processes and functions and how they can be integrated, a fundamental requirement of M4.0
- The ability to manage accelerating market and technology change
- Collaborative skills to manage flatter organizations
- Using computer-based analytics to help make data-driven decisions
- The ability to accept and manage more open, virtual working cultures across multiple locations
A Plethora of M4.0 Challenges
As might be expected, many of the requirements of M4.0 have corresponding leadership challenges associated with them. But when asked what they think is the most important challenge before them, survey respondents cited a range of issues, with no one concern garnering anywhere even close to a majority.
For example, 28 percent of survey respondents said that changing culture and the attitudes of employees is the most important challenge they face with respect to M4.0. Understanding and anticipating the pace of change came in second, with 24 percent of respondents citing this factor. And 17 percent said that their top challenge with M4.0 is understanding the business cases and returns on investment involved in the new model. Organizational and cybersecurity issues, at 6 percent each, were perceived as having far less importance.
Perhaps related to some of these management challenges, the survey also reveals something potentially troubling with regard to perceptions of leadership ability within respondent companies. When asked how vulnerable they believe their companies’ overall success is as a direct result of current deficiencies in its leadership ranks, an astonishing 51 percent of respondents said their companies were either very vulnerable (12 percent) or moderately vulnerable (39 percent) to leadership shortcomings. Another 41 percent perceive that their companies’ success is “slightly” vulnerable to leadership rank weaknesses.
Reasons for Perceptions of Leadership Deficiencies
What’s driving these perceptions? It is no secret, for example, that the manufacturing industry is experiencing an historic demographic shift as baby boomers retire and as the industry struggles to find replacements at both line worker and managerial levels. Successfully managing this transition, particularly with an up-and-coming workforce that has different expectations about work and their role in what they expect will be far more collaboration-oriented organizations than today, is no easy task for executives.
Moreover, the ability to focus on the longer-term future, a space that M4.0 certainly occupies, is never an easy task for public companies, which are concerned with the next quarter’s financial results, or private companies, which may not have to report results externally with the same frequency as public companies but nonetheless have their own short- and long-term growth issues.
But this year’s Manufacturing Leadership survey may hold some other clues to as to what may be causing the perception of leadership vulnerability. When queried, for example, about their companies’ current strategic focus and activities, once again this year respondents ranked customer satisfaction, operational excellence and financial performance—all temporal issues, one could argue—at the top of their lists with commanding 91 percent, 85 percent, and 84 percent emphasis scores, respectively.
Vision and overall strategy formulation, while still very important strategic activities today, nonetheless scored decidedly lower, at 76 percent. And product and process innovation, at 74 percent, comes in at even a couple of points below that. But when asked about the degree of emphasis their companies will place on these activities over the next five years, vision and overall strategy formulation accelerates by five points, while customer satisfaction, finance, and operational excellence remain relatively flat.
A similar interpretation emerges from the survey’s results about respondent business initiative priorities today versus five years from now. Today, reducing costs, at 78 percent of the sample, clearly is the most important business initiative for respondent companies, nine points higher than the second runner up, new product innovation. But when thinking about the future, 84 percent of respondents elevate identifying new markets and customers, as well as new product innovation, at 82 percent, above the long-standard operating practice of cost reduction.
New Areas of Expertise Need to Be Developed
Another hint of what factors may be creating the perception of vulnerability within today’s leadership ranks can perhaps be found in the survey’s results on the state of knowledge and expertise in respondent companies.
Today, respondents assess their companies’ level of knowledge and expertise in such areas as financial management and understanding the competition at commendable, if not exemplary, levels. Sixty-three percent of survey respondents, for example, rate their companies’ expertise in financial management at the highest levels on a one-to-five scale. But when it comes to information technology, only 43 percent apply the same rating.
Looking ahead five years at what knowledge and expertise manufacturing companies need to develop in order to be successful in a M4.0 world reveals a very different agenda. Strong majorities say that greater collaboration with customers and partners (80 percent); better use of customer data (71 percent); new technologies such as cloud computing, mobile technologies, and Big Data (62 percent); and digital factory techniques to link design and production (60 percent) are the top areas where their companies need to develop expertise.
All of these signals point to one of the survey’s main findings—that M4.0 will require leaders to develop a substantially different approach to running the business and a different set of skills in order to lead effectively. But the survey also suggests that many manufacturing leadership teams may not be sufficiently focused on the future, a serious shortcoming in light of M4.0-enabled market changes looming.
Much like publishing industry executives have had to retool their thinking about the drivers of success in a digital world, manufacturing executives will now have to undertake a similar transformation if they and their companies are going to successfully migrate to the new M4.0 paradigm.
It’s time to start writing that new playbook.
Who Are Manufacturing 4.0 Role Models?
When it comes to Manufacturing 4.0, what do Steve Jobs, Peter Drucker, Warren Buffet and Elon Musk have in common?
They were all identified as role models for M4.0 by respondents to the new Next-Generation Leadership Survey.
Whenever a new way of doing things emerges, people find it useful to think in terms of role models—people whose behavior, example, or success can be emulated by others.
The new survey asks respondents to identify a pioneering role model for leadership as the industry moves forward on its journey to Manufacturing 4.0. Answers fell into two categories: individuals and companies.
Among the most often mentioned individuals were well-known and public figures such as the late Steve Jobs of Apple; Bill Gates of Microsoft; Jeff Immelt of GE, who was named the Manufacturing Leader of the Year by the ML Council in June; Jeff Bezos of Amazon; the management guru W. Edwards Deming, who died in 1993; Alan Mulally, the former CEO of Ford; and Lee Iacocca, the former head of Chrysler.
GE as well as executives from the company garnered the most responses. In addition to Immelt, survey respondents identified GE’s former Chairman and CEO Jack Welch as a M4.0 role model. GE was identified as a corporate role model by a handful of respondents.
Other corporate role models included ABB, Procter & Ga mble, Cisco, Bosch, Siemens, Rockwell Automation, Stratasys, and Lockheed Martin.
Manufacturing industry executives identified by survey takers included Drs. Dean Bartles, executive director of the Digital Manufacturing and Design Innovation Institute, and Detlef Zuhlke, Chairman of the Smart Factory Initiative in Germany, both members of the ML Council’s Board of Governors; Dow CEO Andrew Liveris; Ratan Tata of Tata Motors in India; and Anton Huber, the CEO of Siemens’ Digital Factory Division.
David R. Brousell is Global Vice President, General Manager, and Editorial Director of the Manufacturing Leadership Council.
Global Vice President, General Manager and Editorial Director of the Manufacturing Leadership Council- See more at: http://wew.ml100awards.com/blog/manufacturing-40-your-leadership-team-challenge/#sthash.opWc0ihr.dpuf