- The Fourth Industrial Revolution is set to transform manufacturing operations, and leading manufacturers are revising their operations in ways that can serve as beacons for others.
- The grand challenges of the coming decades require deep, responsible industry transformation along entire value chains.
- By putting system failure at the centre of their transformation journey, leaders in manufacturing can unlock responsible and transformational growth.
The Fourth Industrial Revolution is set to transform manufacturing operations, and leading manufacturers are revising their operations in ways that can serve as beacons for others. The grand challenges of the coming decades require deep, responsible industry transformation along entire value chains, however, including the creation of quality jobs, and environmental sustainability.
“Manufacturing companies are uniquely positioned to drive responsible growth while addressing the increasingly complex challenges posed by consumers, climate change and digital transformation," says Eric Enselme, Founder & Principal at XP2XL Consulting and retired Global Vice President at Procter & Gamble. "But that requires their leaders to leverage technology, not only to optimize their operations, but also – and importantly – to unlock new business models.”
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The need for transformation in and beyond factory operations is clear and easily exemplified: 20% of global emissions come from the manufacturing sector and many other challenges, including waste, must be tackled through circular business models.
These ambitions can only be achieved through broad collaboration of all stakeholders along the value chain. New business models must redefine growth so that it can benefit companies, workers, society and the environment. Unlocking these new business models at scale can lead to transformational growth beyond manufacturing operations – if done right.
As the case for business model innovation emerges across manufacturing companies, however, most are still struggling to deploy technology at scale and lack clear strategies to get there. The Global Future Council on Advanced Manufacturing and Value Chains has cooperated with over 50 industry leaders to study early strategies and success factors that could help move the industry beyond the reshaping of manufacturing operations to unlock transformational growth.
Strategies to scale manufacturing industry
We uncovered three strategies and one fundamental challenge for manufacturers.
Strategy 1: Start with leadership and culture shifts
"To capitalize on the convergence of advanced manufacturing and ESG goals, industry leaders must design new business models that are sustainable and inclusive by design, practicing lifecycle thinking, promoting supply chain transparency and enabling operational efficiency," says Philipp Jung, Chief Strategy Officer, General Manager and Global Head, Customer Success, 3D Printing and Digital Manufacturing at HP Inc.
Transforming innovation pilots into industry-shaping new business models requires the right set of skills, workforce engagement, culture and alignment across entire companies – and at times beyond.
Hence, leading companies heavily invest in strategies that ensure the right skills and mindset. This could involve, for example, leveraging a blend of centres of expertise to develop new digital skills and digital academies to upskill all employees. This ensures key competences are not isolated within one division but are present on all teams within the organization. Companies would need to invest to align the whole organization and to accelerate learning and reapplication across business units and functions.
But transformation and alignment strategies must also extend beyond company boundaries to scale transformative business models. An inspiring example of this is Hyperloop Transportation Technologies an American transportation technology company, that is fully enabled by an open consortium and is rethinking the business model of developing infrastructure technologies. All Hyperloop organizations and team members have direct access to leadership at all times, enabling real-time guidance and strategy pivots across organizational boundaries.
Strategy 2: Forge system-wide collaborations
The Global Future Council also observed that new business models that provide transformative growth are inherently open. A great example is DXM, a consortium of five large players from the apparel industry that have collaborated to form a local on-demand manufacturing ecosystem.
Internal and external collaborations are essential at all stages of the transformation journey. And as these business models move from incubation to scale, the number of partners and the depth of the collaborations also need to scale accordingly. Companies must bring new sets of partners and players together to create a common value proposition, build trust, overcome “not-invented-here” biases, break old paradigms and shape win-win situations.
Building intelligence to forge system-wide collaborations and managing numerous and often fluid relationships simultaneously is another key strategy for responsible industry transformation at scale.
Strategy 3: Relentlessly pursue the broader purpose.
To unlock real transformational growth, leaders ultimately need to envision impact beyond maximising profit at an early stage and see it through to the end. Identifying the ultimate goal behind the transformation should not be an afterthought.
This comes with a double benefit: externally, the chances of success increase as innovation solves a real problem; and internally, the whole organization is inspired to take an active part in a broader purpose-driven transformation journey. This could significantly boost results and impact.
And one fundamental challenge in scaling the manufacturing industry
Next to the encouraging transformation strategies, companies face a core challenge on the path to scale in relation to investment in infrastructure. As detailed in our report, Unlocking Business Model Innovation through Advanced Manufacturing, companies go through three prototypical stages when transforming into new business models at scale.
They typically start by incubating and experimenting around new value through pilots and point solutions. To be successful, this must be followed by fundamental investments in the technological infrastructure and capabilities required to roll out new business models at scale.
Many organisations get stuck in the infrastructure investment phase, where it is essential to have leadership and culture onside, as well as the collaboration intelligence and laser-focus on the larger purpose of the transformation.
Thirdly, further intelligence is required at all stages of the transformation, across all organizational levels and, importantly, across organizational boundaries. Companies that have the potential to unlock transformational value adapt to the changing needs of each of these stages and can build trusted relationships across the value chain to take their entire ecosystem on the journey of transformation.
What the community needs to do
The biggest rewards await those who can leverage the transformation of operating and business models to help solve system failures such as resilient supply or climate change. By collaborating across the ecosystem, while transforming their own business models and those of others – competitors, suppliers or customers – the most successful companies create and deliver new value to all stakeholders. This includes the companies themselves, workers, society and the environment.
What is the World Economic Forum doing to help the manufacturing industry rebound from COVID-19?
The COVID-19 global pandemic continues to disrupt manufacturing and supply chains, with severe consequences for society, businesses, consumers and the global economy.
As the effects of coronavirus unfold, companies are asking what short-term actions they need to take to ensure business continuity and protect their employees. How should they be preparing for the rebound and increasing their manufacturing and supply systems’ resilience?
The World Economic Forum, in collaboration with Kearney, brought together senior-level executives from various industry sectors to identify the best response to the COVID-19 crisis. Their recommendations have been published in a new white paper: How to rebound stronger from COVID-19: Resilience in manufacturing and supply systems.
Read the full white paper, and more information in our Impact Story.
Companies are invited to join the Forum’s Platform for Shaping the Future of Advanced Manufacturing and Production. Through the Platform’s work, companies can join with other leaders to help find solutions that support the reconfiguration of global value chains post-COVID-19.
Many leaders in manufacturing have already put system failure at the centre of their transformation journeys and started to explore new types of transformative business models. We hope more companies can join in a shared journey to unlock responsible transformational growth in the manufacturing industry.