The manufacturing industry as we know it is fundamentally changing, with advanced technologies increasingly underpinning global competitiveness and economic prosperity. Many leading 21st-century manufacturers are converging digital and physical worlds in which sophisticated hardware combined with innovative software, sensors, and massive amounts of data and analytics is expected to produce smarter products, more efficient processes, and more closely connected customers, suppliers, and manufacturers.
As growing numbers of manufacturing companies look to embark on this transformative journey and navigate through a maze of challenges and opportunities, business leaders—understandably—have questions: What exponential technologies show the most promise? What is the magnitude of impact that can be expected from adopting and deploying these exponential technologies? How is the manufacturing industry leveraging these technologies in new and distinctive ways to solve current business issues and/or transform our future? What does it really mean to become a Digital Manufacturing Enterprise (DME) of the future, and how might our business model evolve? How do we move toward our future vision without fundamentally disrupting what we do today? What challenges do we face and what incentives will we need to drive change throughout our organization and broader ecosystem?
To better qualify such challenges, provide a reality check in separating substance from hype, and highlight opportunities for manufacturers to embrace exponentials to drive future competitive advantage, Deloitte recently collaborated with the Council on Competitiveness and Singularity University to conduct the “Exponential Technologies in Manufacturing” study, highlights of which are presented in this article. (To download the full report, visit Deloitte.com and search “exponential technologies manufacturing”.)
Disruptive and nonlinear
Why is Industry 4.0 different from previous industrial revolutions, especially for manufacturers? First and foremost, the pace of change we are experiencing is substantially faster than ever before. It is no longer incremental; it is disruptive and nonlinear. This is a departure from historical manufacturing practices, which have been linear and based on incremental change and continuous improvement. Players historically were subject to the same relative constraints on assets; winners were those that could optimize within those constraints. Business models assumed a linear, one-way connection between supplier and customer. In contrast, DMEs transforming via Industry 4.0 are beginning to operate much more in ecosystems characterized by multidirectional relationships and “goods” being exchanged inclusive of data, insights, and services.
DME organizations that use exponential technologies (Figure 1) to transform via Industry 4.0 enable opportunities to create an efficient, real-time automated feedback loop—data flows from the physical space to digital; capabilities enrich that data and deliver information and insights back to the physical world—that can unlock step-change value and provide insights and visibility to solve for incredibly complex problems and/or previously unknown opportunities. This smart and integrated loop between the digital and physical worlds is where many manufacturers find much of the unrealized value and opportunity is created.
But manufacturers have built their successes and legacies on repeatable and predictable processes, creating a culture that embraces an incremental versus a transformational approach. This culture often leads to inertia, which, in turn, creates blind spots for traditional manufacturers to adjust quickly enough in an exponentially changing world. Adapting to this new reality requires transformation that puts technology and digitalization at the core.
Executives interviewed say that many established manufacturers—especially historically successful ones lacking a strong-enough sense of urgency—may have difficulty becoming flexible and agile enough to shepherd this transformation from concept to realization at the pace this industrial revolution requires. Meanwhile, barriers to entry are lowering, allowing small, agile new entrants to potentially disrupt the global manufacturing landscape. Therefore, nearly universally, executives interviewed indicate that digital transformation is a critically important issue for all manufacturers and state that there needs to be a clear and compelling sense of urgency within the entire industry to adapt, flourish, and thrive.
Exponential technologies are indispensable tools to help manufacturers address the bigger concerns and challenges that are part and parcel of transformation ushered in by Industry 4.0. These technologies grow and enable change at an accelerating pace, and are often used in conjunction with each other to fundamentally disrupt processes and industries—and create opportunities. Exponential technologies can be used in core operations and markets to move an organization beyond the realm of incremental change, and at the edge to enable true transformational growth and new business models.
Three phases of maturation
Executives agree the pace of change in manufacturing and the broader ecosystem is getting faster and faster. It’s critical, therefore, that manufacturers understand and harness the power of new disruptive technologies and business models to transform into agile and adaptable organizations, and take the exponential leap to achieve exponential results.