Fourth Industrial Revolution

114 down, 10 million to go: The Global Lighthouse Network’s mission

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Global Lighthouse have become beacons of light showing the potential of digital transformation. Image: Pexels/ luis gomes

Enno de Boer
Senior Partner, McKinsey & Company
Daphne Luchtenberg
Director of Reach and Engagement, McKinsey & Company
Francisco Betti
Head, Global Industries Team; Member of the Executive Committee, World Economic Forum
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The Digital Transformation of Business

  • The Global Lighthouse Network is a World Economic Forum initiative connecting the world's manufacturers.
  • In 2019, it worked with McKinsey to produce a white paper exploring how Fourth Industrial Revolution technologies could be harnessed for a better future.
  • This episode of McKinsey Talks Operations explores the growth of the network from the first 16 sites to a community of the world’s leading production networks and the benefits of becoming a 'lighthouse'.

Members of the Global Lighthouse Network have become a source of inspiration. With more than 100 sites worldwide, they are beacons of light showing the potential of digital transformation to positively impact people and the planet. This episode of McKinsey Talks Operations explores the growth of the network from the first 16 sites to a community of the world’s leading production networks and examines the benefits of joining: better workforce engagement, improved environmental sustainability outcomes, and increased productivity. The second chapter of the Fourth Industrial Revolution has begun, and the time is now to scale the adoption of tech-enabled operations.

Join the conversation with Francisco Betti, head of the World Economic Forum’s shaping the future of advanced manufacturing and value chains platform, and McKinsey senior partner Enno de Boer, along with host Daphne Luchtenberg, McKinsey’s Operations Practice director of communications. Their conversation has been lightly edited for clarity.


Daphne Luchtenberg: Your company’s future success demands agile, flexible, and resilient operations. I’m your host Daphne Luchtenberg, and you’re listening to McKinsey Talks Operations, a podcast where the world’s C-suite leaders and McKinsey experts cut through the noise and uncover how to create a new operational reality. Each episode considers the challenges companies and economies are facing and the opportunities leaders can seize for competitive advantage. We’ll look at how to connect boardroom strategy to the front lines, ways to increase performance, where and when to infuse operations with technology, and why empowering the workforce with capabilities is key to success.

In January 2019, the Global Lighthouse Network, a World Economic Forum initiative in collaboration with McKinsey, kicked off an effort to explore how the Fourth Industrial Revolution could be harnessed to make global production operations more efficient and effective, both for the benefit of global economies and for the generations of workforces to come. The initial white paper was called Fourth Industrial Revolution: Beacons of technology and innovation in manufacturing, and it identified 16 “lighthouses.” These were sites that were world leading and successful in the adoption and integration of cutting-edge technologies of the Fourth Industrial Revolution. Since then, the Global Lighthouse Network has grown to more than 100 sites around the world.

I’m joined today by Francisco Betti, head of the World Economic Forum’s shaping the future of advanced manufacturing and value chains platform, and Enno De Boer, a senior partner at McKinsey. Welcome to you both.

Let’s kick off the discussion. What was the inception of the network five years ago? And why did the WEF [World Economic Forum] and McKinsey feel that it was so important to create this community of organizations? Francisco, I wanted to pitch that one to you first.

Francisco Betti: Well, a very good morning too to all of you first of all. And let me begin by saying that it all started back in 2018 when, by working together with another group of colleagues, we realized that most companies were stuck in what we defined at the time as “pilot purgatory,” which means that they were trying to sell different approaches and use new technologies to develop use cases and solutions and applications. But they were struggling to deploy them at scale to achieve real operational financial impact.

So we said, why don’t we use the amazing Forum convening power, combined with all the research capabilities that McKinsey provides, to come up with a global initiative that we can use to identify those who are ahead of this learning curve. Then the broader global manufacturing community can see and experience what being a lighthouse means, what it is like to have and attempted this digital transformation journey, so they can then learn from that.

What I should mention is that the Global Lighthouse Network is a World Economic Forum initiative that we’re running in collaboration with McKinsey, and it’s been a tremendous and amazing journey. We started with a few companies, a few lighthouses. And as of today, we count 114, either manufacturing or production sites or entire value chains that have managed to transform in an incredible way. And they have done that by delivering impact not just on efficiency and productivity but also by unlocking innovation to enable sustainability, and most important, empowering people and engaging their workforces in a very active way.

Daphne Luchtenberg: And Enno, can we talk about a revolution yet?

Enno de Boer: Yes, we can talk about the revolution. I think it goes back five years ago. We started this because we looked at it and saw MGI [McKinsey Global Institute] was projecting $3.7 trillion of impact through IoT [Internet of Things] in manufacturing. So a massive unlock of opportunities. Back then we looked at the internet revolution, and how all the value was concentrated on a few big players. And we thought, “No, this needs to be much more inclusive.” We wanted to make sure that everyone is participating—every sector, every company, every geography.

At the same time, we saw that it was going too slow. We felt that there needed to be something people could learn from, to help them walk faster up the learning curve. And back in the days before this, we had the “Lean Revolution,” I would say. And in the Lean Revolution, everyone traveled to Japan and looked at the great lean examples and got inspired. And we felt we needed to create something similar, like what Japan was for lean. And we knew that this should not be in just one country, one organization, or one sector. So we set it up from the very get-go as something that was very global and very inclusive.

Daphne Luchtenberg: That’s great, Enno. And it strikes me that one of the things that is just so unique about this group is that yes, it’s about identifying great examples of best practices and codifying the insights, but it’s also about learning from one another and being part of a community, right?

Francisco Betti: Absolutely. I think, Daphne, you got it right. It’s a journey. And most of the value comes not only from recognition. Of course, everyone wants to become a lighthouse, right? Remember the times we just went through [with the COVID-19 pandemic and associated supply chain challenges]. You normally hear about people in operations and manufacturing supply chain when things go wrong, not when things go right. So the importance of rewarding those who are really driving transformation on the ground, through the shop floor, and across entire value chains is extremely important—recognizing the work of those who have been at the forefront of the transformation over the years.

But I think the real value beyond the recognition comes from the ability to engage with a broad set and very diverse community of companies, and asking, what are we trying to break through when it comes to enabling digital transformation and the transformation of operations at scale? And through that, I think that companies can really be part of a broad innovation ecosystem that allows them to test, calibrate, and understand where they are compared with competitors and people in different sectors

And why are companies sharing? Because it’s twofold. One is the realization that you know the advanced manufacturing industry for controlled digital transformation; it’s a continuous evolution journey, with no arrival point, right? It’s a continuous journey, continuously moving up the ladder and making progress and transforming successfully and taking that from pilots to scale. And second, because every time you open up and you share part of what you’re doing, you gain access to what others are doing as well.

Daphne Luchtenberg: Yes, fantastic. And Enno, what we’ve also found is that senior-management teams get a huge amount of kudos from the recognition of being part of the Global Lighthouse Network. And that actually helps to inspire as well.

Enno de Boer: Yes, totally. I think the lighthouses have become a real inspiration for the front line. And it’s not only about the hard work. It typically takes between nine to 18 months to create a lighthouse. It takes somewhat of a village. It sometimes takes 20, 30, 50, or 100 people working on it, and then it can have tremendous results. But having this recognition out there and saying, “OK, this site has really gone on to make an impact.” And then taking that and saying, “Look, could we have this across our entire network?” In our internal network, we have potentially 20, 50, 100 sites. But then we also want to have this impact across our suppliers, maybe 100, 200, or 300 suppliers.

So how do we inspire our entire supply network to reap the benefits? Again, I think we’re seeing a lot of the immediate impact, and we are seeing the next phase of impact by going into advanced analytics in the sites. But we will see the real impact out of this when the supply network gets fully digitized, when everyone in it is communicating, exchanging data, building on one another, and improving—then we will see a totally different way of productivity and growth than we have seen before. So I think the lighthouse has helped to give that recognition back to the people and inspire the entire organization to really go bold and go after it.

Daphne Luchtenberg: Now, we’ve talked about the 114 lighthouses that are now part of the community in our network and the learnings from them. Enno, can you talk a little bit about some of the success factors for these transformations?

Enno de Boer: Today, we have about 130 use cases that are used over and over again, and we have more than 1,500 benchmarks that prove that you really can change the performance level. So it starts with learning from those. At the moment, I tell every manufacturer to stop piloting. We don’t need more pilots. It’s piloted out, and it’s working. We don’t need a proof of concept anymore. That’s what the lighthouses and our pioneers have done for you. So learn from that.

Then select out of the 130 use cases what is really driving the value for you. So you need to come up with a good strategy because you need to be selective; you cannot do everything. So you will pick potentially two dozen use cases out of the 130 and say we want to really make them a standard for our production network. That’s step two: bringing it back to customer value. Then the next step is, you need to build in a couple of scalable enablers. We’re not talking about how do we get it done in one site on one line—we have done that. That’s part of chapter one. Chapter two is scaling: How do we get it across the network? And there are a couple of scale-up enablers that our lighthouses have shown.

Number one is you need to invest heavily into people, into capability building. That will become the limiting factor very quickly. You need to modernize your IoT stack; you need to have an IoT stack that is very horizontal, where data is just flowing. And you’re not building monolithic use cases that are not talking to one another. You will need to put in some value assurance and some governance with the transformation office, otherwise, you will not see the money trickling through.

So there are a couple of other enablers. I’ll leave it with the last one that I think is very important: you need to work and adopt a real agile methodology that we have seen in the software industry. We have brought it into digital transformation because technology is changing so fast. You cannot plan now for the next ten years and then say, “What’s happening?” You need to have a very agile model. How you build minimum viable products, then start with releases, bringing in new features, and improving and driving the value.

Daphne Luchtenberg: Yes, thanks, Enno. And Francisco, what’s the role of leadership—CEOs and boards must be critical, no?

Francisco Betti: Well, I would say that there are two things that all lighthouses have in common—building on what Enno just mentioned. The first one is that the journey toward becoming a lighthouse is a priority for the CEO, for the top leadership, and for the board. And there are discussions on the board in which companies decide how to prioritize the right investments, mobilize organizations, and break internal barriers in between IoT teams to make this transformation happen at speed.

The second thing that all of us have in common, and Enno mentioned that before, is that [leadership] is invested in their people. There are companies that we’ve seen in which every single shop-floor operator has become a digital expert, in which people in every single shop floor, whatever the factory is, are able to talk about AI IoT [Advanced Industries Internet of Things], understand the use case, understand the value they can get, and have contributed to the design and delivery and development of those use cases. And that requires, of course, that vision from the leadership team to translate into the right investment in the people.

Daphne Luchtenberg: And Enno, when we talk about scale, we don’t just mean production sites, scaled, and a number of them around the world. We also mean across the value chain, don’t we?

Enno de Boer: Yes, totally. And I think it goes back to your question about “Why do CEOs need to be involved?” This is a company transformation. It potentially starts in a site, and it’s manufacturing related. But what we have seen is that we started initially with manufacturing lighthouses. But then very quickly, we saw really exciting examples of end-to-end lighthouses that go across the functions, that are connecting all the way to the order information from the customer, propagating it through all the way into the manufacturing sites, and then allowing them to deliver products faster, more customized, and at a more affordable price point to the customer.

So we saw these end-to-end lighthouses. Today, roughly half of our lighthouses are end-to-end lighthouses. And we have lighthouses in procurement, we have lighthouses in R&D, and it’s expanding further. So this is nothing that is just staying in manufacturing. Now I would say manufacturing is a great area to get started if you’re really at the beginning because you have a little bit of a playground within the four walls of a company where you can experiment. But then very quickly, the value is to connect it end-to-end. I think that’s a very important part.

Francisco Betti: And maybe, just building on what Enno just mentioned, I think that’s exactly another reason why this has to be a leadership and top board-level conversation. Once companies are able to transform end-to-end and create a digital thread, they don’t just start to find, let’s say efficiencies and productivity gains; they set the foundations to enable the transformation of the business models. And we have centralized houses, as the result of this transformation, that are coming up with better products, topping up products with services, becoming a service provider with their suppliers or some peers in the markets, or even transforming an entire customer-mix experience. So I think that’s another idea of transforming the backbone of your organization to enable the transformation of the company more broadly, and it’s an extremely relevant and timely one.

Daphne Luchtenberg: And of course, one of the exciting dimensions as the network has matured is the sustainability lighthouses that we’ve added to the fold. Francisco, can you say a little bit more about those lighthouses and what they’ve been able to demonstrate?

Francisco Betti: Absolutely, Daphne. I think that’s one of the most exciting findings of this journey with the lighthouses. More than 60 percent of them, I think it’s almost 65 percent right now, have the broad use cases that are delivering sustainability impact or gains. And that’s extremely impressive, right? By transforming digitally, you have noticed driving efficiencies in terms of productivity, as I was saying before. But you are enabling the transition toward net zero simply by reducing energy consumption, water consumption, material consumption, creating a digital trend that then allows companies to think about recycling, reuse, remanufacturing.

I think the message here is that we are clearly beyond the hype. What we see through these use cases is that this is real. The Fourth Industrial Revolution is delivering impact, and it’s helping companies transform, and you can learn from them. And the realization that you can learn from them, not just on the productivity front, but also the sustainability, is extremely important because for the first time we have seen sustainability not coming at the expense of efficiency. Actually, you can drive value and create impact on both fronts simultaneously. But that requires, once again, alignment from the top, and that has to cascade without intervention, right? Both agendas—the digital-transformation agenda and sustainability agenda—need to move hand in hand and in the same direction.

Enno de Boer: I will take a little bit more sobering view on this than Francisco. I think it’s exciting that we have 60 percent of the lighthouses driving sustainability. And we now have ten designated sustainability lighthouses. But here’s the big part. In 2020, we came together in Davos with our community, together with Al Gore in the room, and we made a commitment. And we said, look, we want to make a substantial push on sustainability, and make a substantial contribution. And here we are in 2022, with ten lighthouses. Now, in between, there was a pandemic and there was a lot going on in the world, and that’s all fine. But I think from the pressure that we’re having in terms of the climate change agenda, ten lighthouses is not enough.

It’s fine. It’s a good start and we know we can triple it after we have the first ten, but this is a call for action for any manufacturer. I think if you don’t have a sustainability lighthouse in your network today, something that can light the way for your own manufacturing sites, for your own processes, but also for your suppliers, then how do you want to achieve your net-zero targets by 2030? 2030 is only eight years away. Building a lighthouse takes you a year. So add this all up. I think we’re a little bit behind here, to be frank, and there’s a lot to be done.

Francisco Betti: And Enno, we may even reach the point where you will not be able to become a lighthouse if you have not delivered significant gains and made progress on sustainability. I could not agree more with you. I think we need to do much more on this front, and there is a way for the industrial community to take the leading role when it comes to global net-zero targets.

Daphne Luchtenberg: And I was going to just summarize to say the good news is, actually, that there is a playbook. There are use cases now. This network has taken the risk out of it in some ways, for people who are getting on the ladder now for the first time. So there should be no excuse for not getting it going.

Francisco Betti: Definitely no excuse.

Enno de Boer: There is no excuse, and I also think there’s no excuse because we debunked the myth that it’s sustainability, or competitiveness, or growth. No, it’s not. The fun part of this is you put the digital stack in place, you put your digital capabilities in place, and then you run circles around the problems. You can solve your problems, and you always use similar data, you always use similar connection points. And you’re building use cases, if you have done it in the right way for sustainability, at no incremental additional costs.

Daphne Luchtenberg: Fantastic. Now, both of you, as we start to conclude this conversation [about the] 114 lighthouses and the many, many data points and conversations with organizations that have already started the journey, I’d love to hear what’s your aspiration. What’s next? Francisco, what’s next for the network?

Francisco Betti: I think there is an immediate chapter that we are launching with speed, which is about how do we go from achieving speed in transforming successfully within the four walls of a facility or across an individual value chain into really taking the lighthouse concept to scale—a single company transforming order simultaneously and raising that lighthouse standard or transforming other value chains, or as I mentioned before, transforming beyond manufacturing and procurement. I think that the real opportunity to grow for lighthouses, for companies, is massive and huge, as is the opportunity for the network, the learning journey, and this added exchange that we have developed and designed.

Something I should mention that I didn’t say before is that it is not the WEF, or McKinsey, or any individual entity that decides who becomes a lighthouse. There is an independent expert panel in place that has been carefully put together that reviews the applications that come in from the prospective lighthouses on a regular basis.

But if you are not a lighthouse, and if you are in manufacturing operations, I think this is the time to move. We are entering chapter two. If you haven’t started, you are late. Now is the time to transform. I can see over ten million factories out there on this planet and how this network can continue to grow and can continue to be this point of light from which every single manufacturing company in the world can learn.

Daphne Luchtenberg: Well said, Francisco. Enno?

Enno de Boer: I think [there are] three dimensions. And Francisco said it well: the first dimension is, we need more lighthouses. We now have 114 lighthouses. I think to get inspired with all the different stuff that we need, be it procurement, be it sustainability, be it resiliency, be it agility, we need many more lighthouses. So I could see that there’s a path to something like 500 lighthouses, maybe at some point 1,000 lighthouses—that’s one dimension. So we need to add to that to get more inspiration out there. I think then there’s a second dimension: we really need to get more at-scale lighthouses where we’re seeing that entire company getting transformed. It started with one, two lighthouses, but then it permeated through the entire production network, then it went into other functions and really changed the way the company was working. So really more scale-up cases. That’s number two. I want to see many more of those in the next few years.

And then number three, I think is even maybe more important than one and two are. We have ten million factories out in the field, ten million manufacturers. So how do we get the spin wheel going from the few, the 114, to the ten million? There’s so much work to be done. And how do we get everyone on the journey? Everyone at the moment says that they are on a journey. When I pressure-test it, I’m sometimes still getting the feeling that a lot of companies are dabbling with pilots and they’re not taking it serious enough. So moving ahead would be very important.

Daphne Luchtenberg: Fantastic. Enno, that’s a great way to conclude today. So for all of our listeners, a call to action: if you are not on the ladder, it’s time to get on that ladder. And there is this network that can show you the way, and the lighthouses can show you the way. Fantastic message and very positive.

You’ve been listening to McKinsey Talks Operations with me, Daphne Luchtenberg. If you like what you’ve heard, subscribe to our show on Apple Podcasts, Spotify, or wherever you listen. We’ll be back with a brand-new episode in a couple of weeks.


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