LNS Research Analyst, Dan Miklovic follows up from his last IIoT focused post with "Digital Transformation in Manufacturing is an All-In Game."
On Wednesday, December 11, 2019, LNS Research hosted a webcast on “Industrial Transformation (IX) in Aerospace & Defense". The presentation covered the scope, scale, strategy, budget, organization and technology choices of Industrial Transformation (IX) Programs globally and in the Aerospace & Defense (A&D) industry specifically. We also looked at another regulated industry, Life Sciences, to validate our conclusions as to why A&D companies are leading in IX. The session concluded with detailing the 5 Best Practices for driving IX. Here we will look at the 6 most common questions that came out of that session.
As we noted in the webinar, IX is the proactive and coordinated approach in leveraging Digital technologies to create step change improvement in industrial operations. IX is an important, often the largest, subset of a Digital Transformation Program that includes initiatives outside of the industrial space such as readdressing customer relationships. These programs can go by a range of names: Digital Transformation, Industrie 4.0 and/or Smart Manufacturing. A&D is leading in IX with more “IX Leaders” than in other industries.
1. My company has not yet started an Industrial Transformation Program, what can we be doing in the meantime to position my company for success in IX eventually?
If your company is one of the companies that has “no plans” to initiate an IX Program or even one that has plans 3 years out, year after year, to initiate a program LNS believes a 3 Step Program might be useful:
- Leverage your challenges into Transformational opportunities
The primary reason companies are not initiating IX is that they are already consumed in a major IT rollout or upgrade. As we showed in the webinar, the data shows that the companies with “no plans” are behind in OT and IT. Therefore, focusing on upgrading and standardizing on those systems is the core transformational opportunity for those companies.
- Focus on business changes not technology changes initially
As we found, IX Leaders are 31% more likely to focus on business process change. Go look for opportunities, maybe around something like compression of processes that cross organizational silos and work to define the “To Be” vision. Such impactful work can be done without an organizational consensus on the need for an overarching IX Program and without a major technology investment initially. This can get the ball rolling so to speak.
- Build organizational consensus slowly
Play the “long game”. Share success stories. Get more people on LNS webinars and, dare I say it, our competitors’ webinars. Champion the flow of information without the expectation of some immediate change in organizational behavior. Focus on plant management and executives because top down and bottom up approaches are required.
We will be writing more on this topic in the future, stay tuned.
2. Is there any specific technology that really seems to be taking off and delivering results?
6 months ago, when asked a very similar question I had said: “Overall … we do not have enough data, yet, on what is working to answer that question across the wide variety of technologies and industrial organizations engaged with IX.” Today I would answer it differently. We are seeing three things:
- Very recent LNS research on IX Use Cases has identified the 4 use cases with the “best bang for the buck” in terms of value for effort. The “low hanging fruit“ in IX appears to be:
- Asset performance monitoring
- Prescriptive Service
- Predictive asset maintenance (based on sensors, not schedule)
- Mobile or Augmented Reality-enabled to scale rare/expert skills
- We are also seeing that video is beginning to have significant success in a range of industries and applications.
- And in discrete generally, and A&D specifically, we are seeing Manufacturing Execution Systems (MES)/Manufacturing Operations Management (MOM) have success as a platform for transformation.
We will continue to monitor the market closely to identify any additional trends across industries.
3. I keep hearing about “Pilot Purgatory”. McKinsey has even written about it. What is the story?
“Pilot Purgatory” is definitely “fake news” in A&D: not a single A&D company reported that the program was “stuck in pilot phase”. Overall, only 13% of companies said the program was “stuck in pilot phase.” So, despite all the vendors complaints about it and McKinsey writing about it, manufacturers are not feeling “stuck”. As we noted in the webinar, the funding model and implementations strategies are such that most manufacturers are not considering the roll out of solutions to be part of their program so are not feeling “stuck”.
We will be publishing more on how companies do get “stuck” shortly so stay tuned.
4. What do you think accounts for those big differences between Life Sciences and A&D companies? Why are A&D companies focusing on manufacturing and Life Science companies are not?
The key challenges in A&D are compelling companies to focus on manufacturing. New materials, significant order backlogs and the growth of performance-based logistics contracts force a focus on manufacturing and the digital thread. On the other hand, Life Sciences are putting a priority on new patient care solutions. And, Life Sciences companies have always tended to be late adopters of manufacturing technologies and tend to under-invest in manufacturing generally. I suspect that is driven by how small Cost of Goods Sold is for a Life Sciences company
5. You keep talking about OT? What is that? And what specifically are you recommending companies to do?
OT is operational technology. It refers to the computing systems used in manufacturing to control machines and materials that is historically supported by the plants rather than corporate IT. The big OT systems include Distributed Control Systems (DCS), Supervisory Control (HMI/SCADA), Enterprise Asset Management (EAM), MES/MOM systems etc.
The data suggests that in A&D companies should be focusing on OT as existing systems are aging and not meeting the needs of new users. In addition, A&D companies have not moved as quickly as their peers in other industries in making these systems common across sites.
So LNS is recommending that A&D companies consider OT a “Transformational Opportunity” and focus on OT within their IX program. This often can mean a focus on MES/MOM as a core step in an IX Journey.
6. What do you think is the most common mistake companies are making in their IX Program?
If I look at all the best practices holistically it is clear to me that if you are going to initiate a successful IX Program you need to be “All in”. Transformation is hard and everybody already has a day job. Don’t just play with technology (even if experimentation is important).
Earlier in 2019, LNS published a Research Spotlight the organizational “disconnects” <ADD LINK TO ORGANIZATIONAL DISCONNECTS> we found around IX (some of which we detailed in the webinar). The findings indicate many companies start their IX Program, for whatever reason, seemingly without a real commitment to it and without the organizational consensus needed to drive transformational change. The research indicates they are starting a program doomed to stagnation or outright failure. They are starting a “Zombie Program.”
Don’t start until you are ready and once you do engage and commit.