From fads to 5.0 – Building the future of manufacturing

Most industrial companies struggle to keep existing business competitive while driving new digital-led business initiatives at the same time. Indeed, industry 4.0 is a fad – here are the true winning formulas.

Traditional industrial business is process-oriented, risk-avoiding, and tends to optimize costs. Major changes in the field occur over a longer period of time. As a polar opposite, the world of digital business is heavily defined by volatility, uncertainty, complexity, and ambiguity. It's simply impossible to push the new forward with the old methods.

Most industrial companies struggle to keep existing business competitive while driving new digital-led business initiatives at the same time.

Traditional industrial business is process-oriented, risk-avoiding, and tends to optimize costs. Major changes in the field occur over a longer period of time. As a polar opposite, the world of digital business is heavily defined by volatility, uncertainty, complexity, and ambiguity. It’s simply impossible to push the new forward with the old methods.

There will come a time when mere optimization of the current business is no longer enough. Prominent trends in the market already suggest the change lurks just around the corner and alters companies to disruption. At Reaktor, we’ve already seen this happen within other domains – from media to transportation – and the manufacturing industry will be no exception.

The keys to success

  • Change perspective from inwards to outwards, involve stakeholders and customers
  • Empower people, share decision-making power, enhance collaboration
  • Invest more to future-oriented business initiatives
  • Prioritize talent, speed, and learning over planning, risk-avoidance, and unit-pricing
  • Grow internal capabilities and ensure your talent gets training and coaching
  • Partner up strategically for systematic change, forget pairs of hands
The promise of the ongoing fourth industrial revolution deceives in its simplicity: Let’s take what started with computers and automation and lead it to endless profits with autonomous systems fueled by data and machine learning.

The deceiving simplicity of change

It’s about more than optimizing

Yesterday’s competition was focused on building and delivering products. The competitive edge was built on pricing and features. Then came the era of reducing costs and offering additional services. 

The promise of the ongoing fourth industrial revolution deceives in its simplicity: Let’s take what started with computers and automation and lead it to endless profits with autonomous systems fueled by data and machine learning. And already, many industrial companies have sensors in their machines. They utilize the cloud. They harvest data, build data platforms and implement emerging technologies. And yet, they fall short. The value doesn’t follow the investment.

To the optimization-focused, risk-avoidant minds, the idea of even more savings, automation, and risk avoidance sounds like the perfect match.

Here’s where the problem lies: Most of the investments into digital are short-sighted as they focus solely on catering to this old idea – and on incremental improvements and singled-out technology implementations.

The major problem is the broken connection between individual initiatives and strategic landscape, future trends, value chain analysis, and customer insights.  Moreover, there’s a clear need to change the ways of working, collaborating, and involving talent and stakeholders in the development processes.

While this mismatch is gaining recognition, with an existing talent gap in the market and growing competition it’s difficult to move from noticing to talking and then to walking. Industrial companies need a plan on how to grow the needed capabilities and change the ways of working. Getting started is possible, efficient, and fairly quick with the right partners.

Learn how Reaktor has helped Cargotec, the leader in smart cargo, navigate the waters of digitalization through an ongoing, long-term partnership 

“Reaktor has in many ways been our backbone through the years. They’ve helped us get up and running, and have supported us in transforming the culture and ways of working.”

– Tommi Pettersson, VP, Cargotec Digital Solutions Hub
This is because the process of physical product development shouldn’t be applied to digital development. Digital product development allows faster iteration cycles and rapid, smaller changes when needed. This isn’t easy nor cheap when you're building a physical machine.

Towards strategic, systematic thinking

Where the competition focuses

The future is still unwritten, but it will certainly only increase uncertainty and ambiguity for businesses. Thus, industrial companies need to figure out how to grow their resilience. The needs and positions of stakeholders up and down the value chain are already in flux. What customers have come to expect is more, and then some. As an example of the most prominent market trends, sustainability is already affecting funding, brand image, employee value proposition, and customer demands.

Existing industry knowledge can no longer be the single source of strategic scenario work. Using second-hand assumptions to drive development will lead to second-hand solutions. The persistent know-it-all mentality has to change more towards curiosity, collaboration, experimentation, and iteration. 

This is because the process of physical product development shouldn’t be applied to digital development. Digital product development allows faster iteration cycles and rapid, smaller changes when needed. This isn’t easy nor cheap when you’re building a physical machine. 

Building a digital service or a new digital business initiative involves constant exploration of opportunities and re-calibration of the value hypothesis. There will be failures and needs for pivoting along the way. The changes in direction and learning about the validations need to be rapidly injected into the development. However, in digital development, it’s far easier to achieve the fundamental goals of lean manufacturing, e.g. reveal and remove waste and find the product-market fit quickly.

New approach to talent and organizations

Building internal capabilities

Working with different modes, the existing and the future requires different skill sets. Therefore, industrial companies need to figure out the quickest, most efficient way to infuse both into the organization while helping existing teams develop their skills.

Hiring digital talent is a necessity, but it will take time. Building internal capabilities and organizational resilience is one of the most important matters when it comes to surviving in the future. All the while, you have no time to waste. That’s why partnering strategically can be the right solution: The right partner provides more than just pairs of hands, is able to train and coach your teams, help you own your future, develop strategies, and enables fast and high-quality delivery.

An organizational mindset change is needed as well. Industrial companies should up their game by being more curious and bold, by creating ways to drive experimentation. Ultimately, a successful digital business requires you to empower and trust your employees to make decisions about skills, solutions, technologies, and even the ways of working. The leader’s task is to drive a shared vision, shield and help the teams, deliver insights, and enable decision-making without delay.

Instead of gimmicks and fads, the true change happens on multiple interrelated parts. Sounds like an extensive effort, but is possible with the right partner by your side. At Reaktor, we’ve learned the modern fundamental factors of success with multiple industrial clients and the leading players from other domains. 

With Reaktor, you can

  • Experiment with new technology
  • Build data-intensive digital services and products
  • Define digital strategies and new business opportunities
  • Transform the ways of leading and working, building resilient organisations

Let's build the future of manufacturing together

Markku Myllylahti

Business Director

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