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Taking the Next Step on Digital Transformation

For me, the most significant message that emerged from the recently-concluded 14th Annual Manufacturing Leadership Summit was this: More manufacturing leaders are moving beyond the early stages of Manufacturing 4.0 digital transformation—characterized by technology research and one-off proof-of-concept projects—and are ready to approach M4.0 strategically, as a core philosophy that can bring agility and new levels of efficiency to all parts of the enterprise and serve as an enabler of business model innovation.
Sure, there are still plenty of manufacturing organizations that are just now getting their M4.0 bearings, assessing the technologies and asking the “How do we get started?” questions.
But, at least at the ML Summit, these companies were outnumbered by those that are ready to take the next step. As my colleague David Brousell recently wrote in the Manufacturing Leadership Journal, for these companies the M4.0 journey is not at the beginning of the end, but it is at the end of the beginning.
At the ML Summit, this maturation of the approach to M4.0 was evident in requests for digitization roadmaps, benchmarking, and maturity models. Manufacturers want to understand all of the elements of digital transformation, not just how individual technologies work, but the longer-term opportunities and challenges involved in rolling them out at scale. They want to make sure they’re not missing anything important.
They need to understand the real world returns they can expect on their investments in things like intelligent sensors, IoT infrastructure, and artificial intelligence.
And they want to understand where they stand compared to their peers and their competitors. In that respect, digital transformation is increasingly seen as a competitive and strategic issue going forward, not just a cool collection of technologies.
This shift to a more strategic way of thinking about M4.0 was also born out in recent research published in the February issue of the Manufacturing Leadership Journal. There, 29% of manufacturing leaders said their companies are only now becoming aware of or conducting research into M4.0, but 38% said they are implementing what they called Manufacturing 4.0 projects, many of them companywide.
Another data point suggesting this shift in thinking about M4.0 among manufacturers was buried in a recent restructuring announcement by M4.0 pioneer General Electric. While most reporting on the announcement focused on financially-challenged GE’s decision to sell off its healthcare business unit and its stake in oil field equipment maker Baker Hughes, GE also signaled its intent to give greater power over deciding where, when, and how to invest in advanced manufacturing and digital technologies to business unit leaders such as those running its remaining electric power and jet engine manufacturing sectors.
While stressing that M4.0 will remain vital it its future, GE CEO John Flannery was quoted as saying that the company’s business unit heads will decide whether to buy expertise from the company’s research labors and digital units.
It’s possible to view this as strictly a cost-cutting move by GE. The company’s digital unit, into which GE has invested billions beginning in 2011, has already been shrinking, and Flannery encouraged the cost-cutting emphasis by stating, “There will be no cost drag from digital by 2020.”
But if, as it says, GE remains committed to a digital manufacturing future, handing over more control over digital investments to business unit leaders may also be a recognition that the technology is ready for prime time and that it’s time to get serious about measuring the real benefits of the technology and, where justified, driving real-world digital transformation of the business. This, of course, can only happen if it is sponsored and paid for by the business units and their leaders.
To the extent that GE and other manufacturers are, in fact, shifting to a more strategic phase of the M4.0 journey, it is a very positive sign. Yes, it means that digitization will be expected to demonstrate its scalability and value, and it means that manufacturing leaders will need to become more collaborative and better at envisioning how technology can enable changes in the business. But it also means that M4.0 is one step closer to delivering on its promise.

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