Avoiding the Pitfalls of Digitalisation
How to Avoid the Pitfalls of Digitalisation
The Industry 4.0 Buzz
The buzz around Industry 4.0 and digitalisation is becoming incessant. The call for AI, VR, Digital Twins - it can all seem a bit daunting. But beneath the buzzwords and hype, behind the (what we like to call) ‘Icing technologies’ that are exciting and shiny and sit on top of an already well designed factory, you get to the real substance of how adopting more fundamental Industry 4.0 principles and technologies can generate real value for your business. So, we want to cut through the buzz to give you a roadmap to avoid the pitfalls of digitalisation, which we believe is an important missing piece of the Industry 4.0 conversation.
In fact, the Manufacturer’s Annual Manufacturing Report 2019 found that while 73% of manufacturers believe that digital technologies will produce ROI, 53% of manufacturers said they are yet to implement digital technologies. This highlights a clear gap that either companies are unsure of how to implement technologies, or that while they know it will deliver ROI, they are not sure to what extent.
And we believe the problem is that the message is so geared towards larger organisations that it is difficult for SMEs to follow. So, this roadmap is very geared towards SMEs. The challenges you’ll face, and the journey you might go on.
Jonathan’s Digital Journey
To start, I’m going to introduce you to Jonathan. Jonathan is an SME owner, that works in the aerospace sector looking to start his digital journey.
Jonathan runs a fairly stable business. It is operating in the aerospace sector, performing precision machining jobs and maintaining fairly happy customers.
And then one day, Jonathan wakes up to find the whole world is speaking about this “Industry 4.0 digitalisation”. Sound familiar?
And he didn’t understand what that means for him. But his suppliers demanded more from him. His customers were demanding better visibility and intelligence. And partners are demanding things that fall under the “industry 4.0 category”. So, he decides he needs to go out and buy some “Industry 4.0” for his business...
A Leap of Faith
And so, as anyone would, he tried to learn about it. He tried getting all this material, and after learning a bit, but realising he didn’t really have time to look at it in depth, he said, “Look, I’m just going to go for it!” and took a big leap of faith. Everyone around him was talking about it. How hard could it be?
However, during this process, he realised that he wasn’t quite ready for what he bought. He realised that the gap between himself and Industry 4.0 was bigger than he thought. And so, he falls short in his leap of faith and lands in the water beneath.
And despite his best efforts, all his ambition and the peer pressure from customers, suppliers and partners have led to taking a leap that he wasn’t ready for. Which has potentially cost Jonathan his business.
So, what can we learn from Jonathan? You learn about Industry 4.0. You learn about robots, additive manufacturing and artificial intelligence. And we try that, but the reality is, it’s a few steps away. And before we’re ready for that, we need to do some groundwork to get there, lay solid foundations, and if it’s not handled well it can have repercussions on your business.
So you really need to understand what works best for you. And this is where the message differs for SMEs compared to larger organisations.
The Challenges of SMEs
When Industry 4.0 is discussed generally, it is around being digitally ready. The guidance for going digital assumes that the business is stable and running optimally.
But the reality for SMEs is that you are are tight for time and money. Do you have positive cashflow? Are your jobs generating profit? Do your people have the right skills? Do you have visibility of these issues? And everybody is firefighting. You’re always reacting to things that fall on you.
When we look at the message of Industry 4.0, larger organisations might be concerned with similar issues, but is the level of risk equal? Will they go out of business if a new investment fails to deliver ROI in the first 3 months? Do they have the same limitations in people to start new projects and new initiatives?
These challenges make investing in Industry 4.0 a bigger risk for SMEs, and this is something that is so often neglected in the wider Industry 4.0 conversation.
How to Avoid the Pitfalls of Digitalisation
So, how can you avoid the pitfalls of digitalisation that Jonathan experienced? When you have all these challenges, restrictions of time and money, and the inherent risk that comes with any investment, how can you navigate the journey successfully?
If we return to Jonathan, he is about to look at the giant leap of faith to Industry 4.0, and he needs to look at bridging the gap between where his business is now and digitalisation.
For small businesses, the most important thing is laying a solid foundation.
With any investment, there is a massive risk of failure. What if they don’t work? What if your employees don’t have the skills and don’t adopt it? What if I spend this money and implement these systems and technology but I don’t increase my customers to make back that outlay?
So you need to de-risk it and start by laying some solid foundations. And these foundations need to be a robust core of people, process and technology. This will give you the knowledge of what’s really going on throughout your business, and the tools to be flexible and adapt to changes when they occur.
Having these foundations in place will mean that if you take a leap of faith, you will land on solid ground, and not in shark infested waters, giving you the freedom to try things out.
We have identified 6 foundation steps to have in place before looking at implementing industry 4.0.
1. Create Capacity for Change
The first thing is to make time to focus on the direction of your business. If we return to Jonathan, every time there was an issue with production, on the shop floor or with suppliers, he was going to firefight those issues. Because these issues are important to the success of his business, he felt the need to get involved in every issue.
While you need to ensure your business runs effectively as a business owner or managing director, you also need to be able to step back and look at the whole business without being sucked into the fires on the shop floor (hopefully not actual fires!).
Avoid the machine that’s gone down, or the late delivery that’s going to disrupt production schedules, and leave it to your team to deal with. If they don’t know how to fix it this time, they sure will next time. And that gives you a lot more freedom to work on your business.
The key takeaway is don’t work IN your business, work ON your business.
It’s your business, and you want to live and breathe it, but take a step back and focus on the direction. This will give you the time to fully investigate potential options and understand the opportunities to improve.
As you create capacity to implement the next steps, you will begin to create further capacity for change, which will give you the headroom required to start your digital journey. It’s important to have this initially to set in the foundations, but also to drive real change in your organisation.
2.I mplement Your Vision
Once you have the capacity to work on your business, you can explore what’s available. You can look at the market, your competitors, and new opportunities or threats that might come into effect. And you can begin to strategize how you’re going to differentiate from your competitors and what your business is going to be known for. In many situations it will be a simple case of refocusing on those key differentiators. What are you the best at? And how can you use the new opportunities and technology to ensure you remain the leading company in your field.
With a clear strategy in place, it’s important that your team buys in to that vision. Get feedback from key individuals and those people that will be most important to delivering the vision. The journey to achieving that vision will be difficult. And there will be disruptions along the way. So it’s important that the key people involved in delivering the vision are as passionate about it as you are, and do not give up, or let others give up when the change gets difficult.
This vision will adapt slightly over time as you implement the other business foundations, but even implementing the foundations can cause severe disruptions to business operations and teams.
3. Control of Internal Operations
Once you have an idea of what to get to, you need to know where you currently are. Then you can create a pathway to start to get there. If we return to some of the key challenges for SMEs, in terms of cashflow, profitability, performance measurement, plant, process, partners and pipeline. These are important to have visibility and control of. Ultimately, you need to be able to answer the following questions:
- Is your business sustainable? (financially)
- Do you have processes to control your quality cost and delivery performance?
- Is your work culture one of continuous improvement and open to change?
You can look at any technologies you want, but if you aren’t profitable with steady cashflow, don’t have control over your QCD performance, and your people would be unwilling to adopt new systems, then implementing a new system is going to incur substantial amount of risk.
4. Basic Business Management Software
That gets some core principles of people and process in place, then you can start looking at a few basic business management systems. Introducing technology here can cement process to make your shop floor paperless, reduce inefficiencies and provide better visibility of your finances. For example, MRP, production control, or accounting software. This will give you the foundations to analyse your business performance, and be agile in adapting quickly to changes with reduced risk on product quality and business finances.
5. Plant Management
Now you have some fundamental business management systems in place, you want to think of your plant. Your overall equipment effectiveness (OEE). How can you get your factory running at maximum efficiency? Using sensors or monitoring systems on your machines can give you detailed information about how many hours your machines are running? Are there prolonged periods of downtime between operations? And if so, what’s causing them?
Understanding this can help to implement preventative maintenance and help you move towards “lights out automation”.
6. Business Intelligence
When you have the previous steps in place, you have what we call the ‘digital thread’ through your business which enables you to capture information across your whole factory. And you can begin to analyse that information all together.
With data analytics tools you can have that information on your mobile phone. You can monitor current work-in-progress while speaking with customers. You can receive alerts when issues occur so you can manage by exception.
When you know that your team are equipped in using these tools and acting on accurate data, not just gut feel, you can feel more confident in how your company’s running, and only get involved when you need to. This further facilitates creating capacity for change – but for the whole company. This intelligence and information frees up your workforce from performing mundane tasks to allow them to focus on improving the business, and performing value adding tasks.
So, with those 6 foundations in place, you will be well placed to begin your digitalisation journey and avoid the pitfalls of digitalisation.
If we return to Jonathan, he has stepped back from his company, outlined a vision of where he needs to be, and invested 12-18 months in embedding these core foundations. He is still missing some steps to achieve digitalisation, but he’s no longer at risk of falling into the water and falling prey to the sharks.
By implementing the 6 foundations, you should be better equipped to start looking at Industry 4.0 technologies. This is not even starting on your 4.0 journey. What this does is it de-risks yourself from failure. So now you’ve got a solid foundation, you can start to step back, and think about digitalisation of business systems.
Not only does it give you a good chance of being successful with further investments in Industry 4.0, but, if an implementation fails or doesn’t work out you always have this basic level to come back to. So you don’t have everything to lose. That is the first and most important step.
At Valuechain, we are enabling industry 4.0. We provide technology for companies to manage their business, get better information from their plant and people, and generate actionable business intelligence. Working with industry leading companies and SMEs, we have developed our software to be scalable to support your digital journey, whichever stage you’re at.
We provide modular ERP/MRP systems for advanced manufacturing SMEs and supply chain intelligence tools to better communicate and share information across the supply chain.
If you’re getting started on your digital journey and need someone to speak to, get in touch.
And, if you'd like to learn more about Jonathan's digital journey or any other posts we share, you can follow the valuechain blog using the form below.