Practical advice for manufacturing CEOs based on KPMG’s Global CEO Outlook Survey and Global Manufacturing Outlook Survey
Three out of five manufacturing executives (59%) in our Spring 2016 KPMG Global Manufacturing Outlook survey1 ranked economic growth as one of the top five factors impacting their companies’ growth. Significantly fewer cited disruptive technologies (44%) or data and analytics (34%).
The questions become: Where can manufacturing executives exude the greatest impact on their performance? Where should they focus to deliver breakthrough results? And the answers should be: Don’t focus so acutely on what cannot be controlled but rather, focus on where you can add value. Which means: to build differentiating value, focus less on the economy and much more on disruptive technologies and analytics.
Service, design or both?
You build anything, and more than likely the tech component is on the rise. Maybe you use data in understanding customer and therefore design needs; maybe you build on a tech-infused service component to your product. And if you’re not pursuing tech, know that others are using robotics, AI, machine learning – even 3D printing or advanced materials – to supplant your competition.
You build industrial machines – do they include Internet of Things (IoT) sensors to provide feedback on usage or to perhaps advise on maintenance needs or warn of imminent failure?
You build components for cars. Cars today are essentially computers on wheels given all of their controls, sensors, IoT devices and web links, etc. So what technology-driven services can you think of to differentiate your component from the competition? Alternatively, what data could you track and retrieve via sensor to improve performance of your component?
Closely related, what about processes? Tech saturates every phase of the manufacturing value chain. Innovation driven by massive connectivity – in R&D, logistics, design, sales & marketing, physical industrial assets, IoT sensors – is quietly (or sometimes not so quietly) taking place in all corners of every industry. Without question, companies can create significant or even profound added value by reengineering and reimagining how technology can support, subvert or otherwise improve effectiveness and efficiency across internal processes and the whole of the value chain.
Jumpstarting the process
Businesses are notorious for their tendency toward inertia. Consequently, simply proclaiming “let’s harness technology” won’t get it done.
Instead, take specific actions to help ensure innovation takes hold. Start by evaluating the talent on hand. In materials, production, design or logistics: Does your company have the right mix of tech-savvy pioneers versus traditional industry veterans. To stir things up, consider adding a non-traditional hire or two and absolutely, engage consultants, customers and other external voices.
Simultaneously, promote a culture of innovation. Let executives know that it’s okay to take chances, even if the initiatives fall short of expectations. Perhaps create a sort of internal venture financing mechanism where new ideas can find the cash they need to incubate a new idea.
Harness innovation and disruption
Thoughts of manufacturing often conjure cauldrons of molten iron, massive metal benders and rows of hard at work riveters. But the future of manufacturing – a key driver of its resurgence in developed nations – is technology. Offshore if you must; conduct business as usual because it seems less risky, but in truth, the future of manufacturing lies in the embrace of leading-edge technology.
Economies – local and global – will go where they will. Manufacturers can create far greater differentiating value through a focus on technology-driven innovation and disruption.
1“KPMG Global Manufacturing Outlook: Competing for growth: How to be a growth leader in industrial manufacturing”, May 2016, 360 manufacturing executives from a broadly even mix of the U.S., EMEA and Asia/Pacific.