Remaking Industry Podcast: Making Sense Of Your Investments In A Smart Factory

Dec. 14, 2021
We chat with pros from ServiceNow and Deloitte to unearth common sense advice to enable success with your digital transformation.

In this Remaking Industry Podcast episode, we chat with Tom Davasia, ServiceNow's director of partner solutions and strategy for the manufacturing industry, and Jason Bergstrom, principal with Deloitte's Smart Factory Division, to unearth  common sense advice to enable success with your digital transformation.

Chris: Welcome to the Smart Industry podcast, "Remaking Industry," where we dive deep into the tools, techniques, and technologies that are accelerating digital transformation. 

Thanks for joining us on the podcast today. My name is Chris McNamara, editor in chief with Smart Industry. We're excited to have you join us here today. We're looking at making sense of your investments in a smart factory—some common-sense advice from reps with Deloitte and ServiceNow to enable success. Today, we have Jason Bergstrom. Jason is a principal with Deloitte Consulting, particularly the smart factory go-to-market leader. And we have Tom Davasia, who is director with partner solutions and strategy focusing on the manufacturing industry with ServiceNow. Gentlemen, thanks for joining us here today.

Jason: Thanks, Chris.

Tom: Thanks, Chris.

Chris: Yeah. Let's get to know you a little bit. We'll let Jason go first and then we'll ask Tom. Jason, tell me your hobby. What do you do in your free time? What is passion of yours?

Jason: Yeah, Chris. Thanks for having us. Jason Bergstrom here. I'm a big skier. I love to get out and take the family out skiing. Unfortunately, I've moved the family to Atlanta, so it's not in our backyard anymore, but I do like to get out to Colorado and Utah when I get a chance.

Chris: Beautiful. Tom, how about you?

Tom: Yeah, Chris. It's interesting. So, I used to love Lego as a kid and building and making stuff, right, that maker mindset. And recently got back into it with Lego robotics with the kids. Right? So, it's a nice family activity as well. So, it's a lot of fun.

Chris: Very cool. Yeah. Those Legos are great. I enjoy jumping in with my kids as well. Let's jump right into talking about investments here. Gentlemen, how does investing in smart manufacturing initiatives differ from traditional manufacturing investing? All these new approaches with digital transformation and IoT and all these smart approaches, how does that affect the investing in campaigns?

Jason: Yeah, Chris. Jason here. And maybe I'll start, and Tom, you can add on. So, I think there's a couple things that come to mind. First and foremost, just the scale of the investment. I mean, typically, when you think of manufacturing operations, investment, it's an annual investment. It's typically smaller in scale. Whereas when you think of smart factory, it's really much more transformational. And so just the general scale of the investment is typically larger. So, that's something to consider. The other bit that I think is very unique is unlike traditional investments, which really are typically owned by the manufacturing part of the organization, smart factory is much broader. It really requires input support and investment from the IT side, the manufacturing side, if you encompass that with OT. You're also gonna have all kinds of changes in process and ways of working. In doing so, you're gonna have to tap into the much broader organization from a funding perspective. So, just a couple thoughts there make it a little bit different.

Chris: Interesting. We always talk about how, you know, successful digital transformations embody the entire enterprise. It takes everybody from the C-suite to the people on the plant floor from finance, to HR, to marketing, to, you know, every component there. And that kind of echoes what you were just talking about there, Jason. Tom, any thoughts on how investing in a smart approach differs from traditional manufacturing investment?

Tom: Yeah. I think Jason outlined it really well. I would add...I think, especially given the trends that we're seeing, right? The speed of innovation is so aggressive or it's accelerating nowadays. Right? So, I think when you think about factories today or manufacturing processes, the ability to be responsive to their customers within their companies, right, so the NPI teams, the product development teams, being able to be flexible about your manufacturing cells, your work processes, the employee training. It's just a new... And of course, further upstream to your suppliers. It's just a new lens of how we enable, you know, success for the manufacturer. So, it's just, as Jason said, a little broader and also more in line with how the innovators of those manufacturing companies are thinking about products and services for their customers.

Chris: Right. And what areas are we talking about for investment here?

Tom: Yeah. Jason, I think you were gonna start.

Jason: Yeah, sure, Tom. Yeah. More on that in a moment. And maybe just to start with make the comment, Chris, that I think folks get enamored with the technology, and I'm not trying to minimize the tech. It's obviously been an important step change that enables a lot of our smart factory solutions. But we typically still think of smart factory transformation as encompassing the three building blocks that from a service's perspective we've talked about for years, which is people process and technology. And the tech being, obviously, as Tom pointed out with the acceleration in capabilities on the technical side, enabling so many things that we couldn't do in the past, but not losing sight of the fact that if you don't change the process and you don't change the way people work in the intersection between humans and machines. If you don't impact those components, you really don't unlock the value that you'd like to unlock with these transformations. So, keeping in mind that really all three dimensions are mission-critical to really change the business, fundamentally change the business. So, they're good.

Chris: And all three of those components demand various levels of investment, I assume, right?

Jason: That's exactly right. Again, you think of it as hardware and software and middleware. And those components are sort of hard costs, but then in order to enable the change, you mentioned at the beginning, you gotta change the way people work, right? And as I mentioned a moment ago that connection point between human and machine. And if you're not changing how folks do their work, and trading them differently, and arming them with more decision rights, and the ability to fundamentally change what's happening within the manufacturing environment, you're not gonna hit that utopia or you're not gonna get that value out of the transformation. And that piece is just really, really important.

Chris: Yeah.

Tom: Yeah, Chris. And Tom, here. I would add... So, spot on with Jason's, the framing of it, right, which is it's always people, process, and technology enables those best practices. I would say two domains. And I think the first one you've written about quite a bit, which is this intersection of IT and OT technology, right, with factories and production areas no longer being air-gapped. The ability for manufacturers to be able to manage and secure these most critical assets, now both across the IT lens, as well as the operational technology lens. I think that's critical. And for us at ServiceNow, when we determine where to prioritize our investments, that, you know, came to the top as a very critical area.

Chris: Yeah.

Tom: Yeah. And then the other area I would add is, you know, people process technology, let's focus on the people a little bit more because, you know, there is a lot of, you know, retiring and rescaling of the workforce. And I always joke back to my days of the manufacturing floor, we used to have these three, four-inch binders of instructions, right? And maybe for every seller, every machine. And I don't think we can do that with today's workforce, right? Everything has to be mobile and digital. And it's just a different way of thinking about it. So, I would say, investments in enabling the worker operator experience would be a very critical secondary, I would say.

Chris: Okay. Yeah. So, we're talking investing in hardware assets and human collateral, human assets, software, changing mindsets. Is there anything in your experience with overseeing these transformations that most surprises clients that you work with about areas that need investment? Or do you find that the enterprises that you're working with have a pretty good grasp on how and where and why they need to invest funds?

Jason: It's Jason here, Chris. Maybe I'll call one out because we often see clients miss this. And that is, as you digitize your operations, just the incredible importance to be thinking about things like cybersecurity, right? With all this new data and OT solutions throwing off information that is critical to production. Being able to protect that is something that's often overlooked and we're often there to help them think about casting a wide net to make sure they're protecting themselves.

Chris: Yeah, that makes sense. It's never going away. As we get smarter and smarter with securing our enterprises, it just seems to be getting more challenging and more challenging. The bad guys are getting smarter and smarter too. Another issue that continues to befuddle thought leaders in this space is proving the success of these campaigns, ROI. It's challenging to determine what your goals are, it's sometimes challenging to communicate that outside of your teams. How do you make sense of and how do you determine success with investing in smart factory programs? What are some benchmarks that you recommend and striving for and then communicating?

Jason: Yeah. Chris, I'll start and then, Tom, why don't you layer on? So, ironically enough, this is an area of smart factory where we've got some pretty good measures with our clients, right? So, we think of the levers we want to pull when we do smart factory transformation work. It's about improving quality. It's about improving OEE or your asset efficiency. And it's about improving throughput, right? How do you get more through the current asset base? And the nice part about those measures is they typically fall on the KPI or scorecard of almost all manufacturers. And so when we come through and do a transformation, you're able to then sort of baseline and measure against those three dimensions and more, but those three at the core to show what your ROI is.

Now, there's always a little bit of a challenge of is all the causality associated with the transformation? And you can play that game a little bit. But in general, you're able to really do a good job of benchmarking and then looking at the lift that you get from the effort. And you asked about what we typically see. And it's typically sizable, right? Looking at 10% to 20% improvements across those different levers is pretty common as we transform towards smart factories within analogue manufacturing companies. And so it's sizable, it's meaningful, and it's something that's very measurable.

Tom: This is Tom. I would add, you know, when there is a clear understanding of what success means, and one would work with a partner such as Deloitte to help the client keep track of that and measure and monitor it. I think the results are quite stunning. And I was at a discussion with one of Jason's Deloitte clients and, you know, their own internal team was talking about the success they were having with the customer. And they couldn't believe it, right? And the leader couldn't believe it because, you know, when it's set up right, when you use the right technology, the ROI is very, very, very obvious, right? And I think that's where we value the collaboration with partners such as Deloitte and influence such as you because there is an opportunity here to help our manufacturers invest in the right areas and succeed, right? There's intense competition, not just from different geos or different, you know, their peers, it's just, you know, as we move to the servitization of products. You have these new competitors. You have manufacturers becoming more software companies. So, just change is coming in from every direction. And being able to take a very stepwise and iterative approach to transforming yourself as a manufacturer, I think is very critical in today's brand.

Chris: Yeah. Well, let's talk about that. Let's talk about the scope of these projects and taking a stepwise path toward that. Oftentimes, people that we speak with note trepidation or hesitancy to engage with, you know, these digital transformation projects because they seem too daunting. It's like, "Oh, my gosh. How am I even gonna get started with this?" Does a smart factory campaign, does a true digital transformation demand that big investment, or can you start small? Can you start cheap and scale early wins up?

Tom: Yeah. Chris, I'm a manufacturer at heart, so I always say start small, start cheap, right? Learn as you go. There's one persona of a client who may say, "Show me the big picture." Right? So, yes, Deloitte walked me through a smart factory vision, right, so that I know what the end goal is, back to our earlier topic. But then let's take it piece by piece, right? Let's identify... Again, somebody like Deloitte has the expertise to do this. Let's identify where I can get the most returns with that first wave of investments. Let me create, I guess we can call it, an MVP that I can then create some internal advocates, right, so it's not, you know, somebody coming in and imposing something, but I have a plant manager or Industry 4.0 either internally evangelizing based on some success that we've seen. So, for us, I think our philosophy is very iterative and bring along the champions and advocates from within the manufacturing firm.

Chris: Yeah. Tom, thoughts? Oh, I'm sorry. Jason, thoughts?

Jason: Yeah. Just maybe to pile on. We have a saying at Deloitte, we say, "Think big, start small, and scale fast." And I think, you know, Chris, what you and Tom were just talking about a bit there is exactly that, which is you think about how all the pieces come together, formulate your strategy at the macro level, but then pick your spots where you're gonna go show ROI that connected back to the prior question you asked. And once you start to show that ROI, use that to then scale across your network. So, that's exactly how we think about it and it's really worked very, very well for a lot of our clients.

Chris: Okay. Let's talk about that cadence of investing or that business strategy component. Upfront investment versus ongoing investment or subscription-based models is, as Tom mentioned a minute ago, with digitalization campaigns. And Software as a Service coming into play there or manufacturers. Let's talk about that. Let's talk about the actual kind of scheduling of costs there. Is there still a lot of flexibility in how enterprises want to approach this or is it a little bit more rigid in terms of how to fund these things?

Tom: I can start. This is Tom. I would say it's the latter, right? There's definitely flexibility, right? And this is kind of our ServiceNow's background. We kind of came up to the ranks working with the IT organization, and it's about speed, it's about flexibility. And we wanna bring that same approach to manufacturing line of business within the factory with suppliers, and so on, so forth. So, it's... I liked how Jason framed it, right? And we wanna keep those investments in line with the results that they're seeing. Yeah.

Chris: Okay. A two-part question here. And let's start kind of on the negative side. What's a common unwise investment you see with enterprises adopting these digital transformation campaigns? What's a common misstep that people propose to your teams that you've seen people do on their own and then come to you to kind of fix it? What's an unwise investment in this space?

Jason: Hey, Chris, Jason here. I'll start. So, not to pick on a specific tech, but a behavior. We do see a lot of clients that they don't know where to start. Digitizing operations is a daunting task.

Chris: Sure.

Jason: And so what you'll see a lot of times is organizations that are out doing a bunch of spot solutions, what we call random acts of digital that don't connect back to some vision and goal at the macro level. And that can just spool up the organization and put them on a path that really has no end destination. And so one of the key learnings and I'll turn this into the positive thing to be thinking about as an organization that wants to adopt a smart factory set of solutions is to be thinking about what's the macro goal? What are you trying to achieve? And then ensuring that everything that you do under that is connected. We used to use the term cascading KPIs. Very similar here. Just make sure everything that you're doing in terms of rolling out solutions to the shop floor connects back to what you're trying to achieve at the macro level. And when you do that, it brings purpose, it allows you to handle the ROI question you asked earlier, it connects all the dots for the organization, and people don't feel like they're out on an island just implementing some random technical solution in a line somewhere within the organization.

Chris: Yeah. Avoiding doing digitalization for the sake of doing digitalization.

Jason: Exactly.

Chris: Tom, how would you address the flip side there? Either something in your mind that stands out as a particularly interesting, successful investment campaign in a digitalization program like this, or the most common kind of low-hanging fruit in terms of funding programs like this.

Tom: Yeah. And let me just pick up on Jason's comment. I would say, you know, even beyond technology, right, I mean, I think I always go back to the when we call it the five whys, right? Why are you doing something? And asked that question multiple layers. And why are you investing in Six Sigma? Why are you investing in TPM? Why are you investing in Industry 4.0? Right? And it's... I think what one has to keep away from is the fashion of the day, right? I think, to Jason's point, we really need to help our partners, our clients understand what is the benefit of this investment? Right? Don't just do it because everybody else is investing in this area. So, I think framing that is, you know, ever so important, right, because there's always new fashion, be it technology, be it process, be it, you know, procedures, what have you.

So, I think that's critical. And then in terms of best practices, you know, I was sharing with Jason the other day, and we had some clients who are working with both our firms. And, you know, in many cases, they actually were embarking on the journey even before ServiceNow had developed those services, those products. So, they knew where the puck was going, right? They knew what they needed and they actually worked with us as kind of design partners to get the capabilities that they wanted from ServiceNow and Deloitte as well.

Chris: Interesting. Last question for you, gentleman, kind of big picture. Main concepts to keep in mind when thinking about investing in smart factory efforts. What are some tentpole concepts to keep in mind?

Jason: We hit on it a little bit, but I'll just say it again. Don't underestimate the people component of this, that is, the critical component is going from digital back to the physical world and making changes to what you do. And the training, the upscaling, the opportunity that exists there for manufacturers around the world is really sizable and something that you just don't lose sight of that. And I'd be remiss if I didn't make the comment as we're in the process of opening up our new smart factory in Wichita, on Wichita State's campus. And we're excited about that. We're partnered with 21 ecosystem sponsors of which ServiceNow is a critical sponsor for the new facility. We're gonna be opening that up in January and we're excited to start bringing clients through to start to talk to them about some of the things we spoke about today, Chris, right? What's the art of the possible? Where do you wanna place your bets? And we're doing that in a live production setting that is a greenfield that we've built, like I said, jointly with our ecosystem sponsors and we're really excited about opening the doors and giving the world access to that great asset.

Chris: Interesting. Very cool. Tom, how about you?

Tom: Yeah. I would just add, you know, going back to understanding for the manufacturer, understanding what the customer values, right? So, smart factory is great, they might say, but how does it change how you work with me as a customer? Right? So, maybe thinking about their priorities, be it inquiry, you know, their processes, how they engage with the manufacturer, be it about service, about warranty, about inquiry to resolution process. Understanding... Looking at it from the lens of your customer and then designing those processes with the help of experts such as Deloitte and ServiceNow to meet and exceed those expectations. I'd say that would be a good kind of way to think about it.

Chris: Yeah. By clarifying why you're doing it and having that inform how you do it. Interesting stuff. Jason Bergstrom with Deloitte and Tom Davasia with ServiceNow, thank you for joining us on the "Remaking Industry" podcast today.

Tom: Thank you, Chris.

Chris: And our listeners, as always, we thank you for joining us. And we encourage you to go out and make it a smart day.