Industrial Transformation Blog

Industrial Transformation (IX) is the proactive and coordinated approach to leveraging digital technologies to create step-change improvement across the value chain. IX is a key mechanism that Consumer Products and Goods/Food and Beverage (CPG/F&B) companies are using to address the changes rolling across their industry: pandemic driven demand fluctuations, worker shortages, increasing competition from local brands, new channels to the consumer, and ever-increasing use of contract manufacturers and copackers. Yet the industry is falling behind in IX and is paying the penalty in the form of sub-optimal financial performance compared to manufacturers more generally.

LNS Research has defined Industrial Transformation (IX) as the proactive and coordinated approach in leveraging digital technologies to create step-change improvement across the value chain. By definition, we are contrasting IX from such Continuous Improvement (CI) programs as Lean or World Class Manufacturing (WCM) by its focus on step-change. Further, we consistently note that IX is particularly challenging as solutions must be deployed across a manufacturing network that is diversified by manufacturing models, culture, Operational Technology (OT), and digital maturity.

In our last blog on Operational Excellence, we defined OE 4.0 as “sustainable value creation through a holistic approach, supported by an enabling execution platform.” We said that with OE 4.0, we shift away from safety, compliance, and Continuous Improvement (CI) to comprehensive risk management, moving beyond mere EHS & PSM compliance to a proactive, integrated operations system. Of course, we don’t leave CI behind as incremental progress is always welcome, but OE 4.0 seeks a permanent and continuing step-change in performance.

It’s that time again…each year, LNS Research puts forth predictions around the key trends in the Industrial Transformation (IX) topics where we focus our research. In the case of Asset Performance Management (APM 4.0), our 2021 forecast focused on multiple definitions of Digital Twins, the shift of APM 4.0 to a broader view in terms of Operational Excellence (OE 4.0) and Operation Risk Management (ORM), the Connected Worker (CW), now called the Connected Frontline Workforce (CFW), and the Open Process Automation (OPA) pilots and related progress. Two additional trends are that the path to autonomy flows through Operational Excellence, a concept that requires redefinition and reimagining compared to past approaches; and second, the scale and depth of what it will take to be autonomous is not yet well understood.

In my recent The M&A Rumble in the Jungle blog, I highlighted my 2021 number two prediction that "the focus on APM 4.0 will shift to a broader view in terms of Operational Excellence (OE 4.0) and Operational Risk Management (ORM). This will lead to increasing friction, and at the same time opportunity, between APM and EHS, and quality too...competitors will begin to react in 2021, and we'll see more partnerships and M&A ramping up." We said that the trend has been for both EHS and APM vendors to expand into each other’s territory, in most cases bypassing EAM, since APM solutions can drive whatever EAM is in place. While EAM vendors have a solid business, they risk being squeezed out of the running in the battle over Operational Risk Management (ORM), a key objective of what LNS Research calls Operational Excellence 4.0 (OpEx 4.0). Here, LNS Research refers to the fight between EHS and APM where ORM software straddles the divide between APM vendors' asset reliability, integrity, inspection, and maintenance focus, and the process safety management, incident management, and worker risk assessment functionality of EHS vendors.

In a recent blog post, our fearless leader, President and Principal Analyst Matthew Littlefield, noted that, “Although no one can argue with the technological innovation and productivity gains that lighthouse plants demonstrate, our data shows that including lighthouse plants as part of your Industrial Transformation (IX) program does not correlate to success.”  This post builds on that earlier post and drills into when lighthouse strategies can be effective and what is an alternative strategy more correlated to success.

Four recent M&A announcements have prompted us to catch up on our view of where the industry is heading and follow up on our earlier predictions for 2021. They are:

In our 2021 Industrial Transformation (IX) Readiness research, we asked more than 300 industrial companies where they were on their IX journey. Since our 2019 study, the share of companies fully committed to the journey soared from 16% to 28% - crossing the proverbial chasm. Conversely, the share of companies “stuck in pilot purgatory” fell from 13% to 7%. 

Recent moves by some of the market's major players are beginning to confirm what LNS previously identified as a trend toward renewed interest in and a fresh approach to what LNS calls Operational Excellence 4.0 (OE 4.0). We are seeing new partnerships as well as M&A between suppliers of APM, EHS, Quality, and Connected Worker applications.

LNS has long focused on Operational Excellence (OE) as part of our Digital Transformation (DX) Framework, now Industrial Transformation (IX). In 2013 and 2014, we talked about Operational Excellence as a journey and stated that people, processes, and technology are the underpinnings of Operational Excellence initiatives.