New roadblocks continue to appear as companies race toward greater i4.0 competence. Many are still blinded by the technology. They fail to focus on opportunities to enhance performance and value across the entire spectrum of the value chain.
Real interconnectedness can only be attained through a cross-functional approach, with new value opportunities explicitly identified. We use cross functional teams and a performance and value-based approach to defining the i4.0 roadmap. This helps companies focus on the appropriate scalable initiatives en-route to a more connected environment. The critical component, however, is that strategy and business-related questions are answered before the technology questions.
“We see a marked difference when companies engage us with strategic business transformation objectives (versus one-off implementations) in mind. They are knowledgeable about the benefits of enterprise interconnectivity, decisive about their digital requirements, clear about the strategic value they are pursuing and understand the urgency to act in order to seize opportunities and/or mitigate risks. Their confidence is a direct reflection of the mandate and support they are receiving from top leadership,” says Howard Heppelmann, vice-president and general manager, Connected Operations at leading Industrial IoT software provider PTC Inc.
Unfortunately, many companies launch i4.0 initiatives aligned around a specific technology — augmented reality or digital twinning, for example — rather than as a component of an integrated plan or roadmap. Diverse projects or use cases are simultaneously conducted — but rarely aligned. This picture is complicated by the traditional organizational structure in which projects are managed within separate functional groups.
Ultimately, these businesses are working backwards. Yes, analytics tools will deliver new customer insights. Digital twinning may improve design and performance. Robotics and machine-to-machine capabilities can accelerate production. So your factory might run a bit more smoothly. Costs could decline. Customer satisfaction may rise. But maximizing i4.0 value hinges on interconnected technologies whose vast capabilities are integrated at a product and value-chain level.
“If you are like many companies with isolated or technology-led i4.0 initiatives already in play, it is time to take stock, evaluate the results from your efforts to date and engage the C-suite to pursue a more strategic vision that includes performance and value creation,” says Michele Hendricks, executive director for global i4.0, KPMG in the US. “Avoid analog thinking in a digital world,” warns Philip Harris, associate partner and i4.0 country leader, KPMG in the UK. “Functional silos are the historical legacy of a time when we kept things simple so that we could make decisions in our heads. Now, technology frees us to look broader and further, finding the sweet spot of performance for the organization as a whole.”
The need for speed should be obvious by now
Today’s global leaders on transformation have bolted from the starting blocks with a vengeance. Forrester Research is projecting that global purchases of technology software, hardware and services by businesses and governments will rise by 4 percent this year. Software and tech consulting services spending are expected to show the strongest growth — spending in both categories jumping by more than 6 percent this year alone. That is not surprising, considering the explosive and sustained growth of the so-called Big 5 technology giants that are among firms and start-ups disrupting every sector. Apple, Alphabet, Amazon, Facebook, Microsoft are, combined, worth in excess of US$3 trillion. And the disruptors are growing by the day.
According to KPMG International’s 2018 Global CEO Outlook survey, meanwhile, just over half of the manufacturing CEOs we surveyed said they are actively looking to disrupt the sector in which they operate.
“What surprises me the most is that companies are failing to see the impending disruption that integrated data and IoT is bringing to every industry. Manufacturers large or small are in no way insulated from this disruption,” says Greg Corlis, managing director, Advisory and global IoT leader, KPMG in the US.
Businesses need to respond now, as we continue to stress to the organizations and leaders we encounter.
“The coming decade and beyond is expected to produce a massive realignment in every industry and slower-moving players will become irrelevant on tomorrow’s redefined playing field,” says Martin Saier, manager and i4.0 country leader, KPMG in Germany.
“Businesses have no time to lose in their quest to respond to how future value will be derived via i4.0 amid the changing ecosystem of new business models, products and markets,” he adds. “I emphasize with clients the critical need to choose a long-term view that transcends short-term, siloed, technology-led gains.”
© 2020 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.