Digital transformation is no longer optional for Manufacturing Companies

Business finds digital transformation challenging, but options are limited as they have to remain competitive in the manufacturing world.  Starting and sustaining digital process transformation remains a challenge for small to medium-size manufacturers.

Becoming digital is a requisite for survival in almost every industry verticals, top management has to bring all stakeholders from R&D to Marketing under the digital umbrella and figure out art and science of successful digital process implementation.  Force in certain areas to stakeholders to adopt new digital technologies for good, delaying implantation will increase the cost of productivity and reduce profitability.

Digital Opportunity and Threat

Generally, top management misses out the fact that a digital process transformation isn't the same as the digitization of an existing business. It's not about creating useful looking websites, popular mobile applications, or creating a strong social media presence online.  Being Digital is about infusing information technology into the core DNA of the organization, which may overall improve process efficiency but will not fundamentally alter change strategy. 

Companies who genuinely care about digitization empowers teams with smart cloud base tools that allow people to make a profitable business decision faster, improve transparency for direct and indirect stakeholders. Mainly one of the areas which need immediate attention is the Procurement sourcing process. Smart cloud base eSourcing Software tools not only bring speed and transparency but also allow companies to cut the cost of procured raw materials, CAPEX, or logistics.  Implementing ERP does not solve sourcing problem; today, most of the procurement teams still manage sourcing events using Excel Sheets, and all communication is over email, in which supplier diversity and transparency is minimal.

Even companies that have today woken up to the digital threat and opportunity find the transformation process extremely difficult.  The barriers are both structural and people behavioral; they are embodied by systems and embedded in mindsets. Manufacturers must overcome three major obstacles to escape inertia and become dependable digital companies.

Forces of Inertia which avoid Digital change

Incumbency: 

Every organization develops capabilities and business models intending to deliver value to its customers and become profitable, with time Business leaders stick to proven driving principals as they generate profit and are hard to replicate by competitors. Thus management misses the danger of new disruptive business & technology emerging from time to time.  The old models when performing at their peak, managers see no incentive for change.  That's the point when businesses are at most risk of losing their competitive edge.

Performance measuring metrics such as sales growth and increased profit margins compound the problem by focusing on short term performance and avoid innovative thinking and investing for long term gains.  Investing in future procurement sourcing technologies is helping business to stay ahead of competitors and deliver value to investors.

Talent: 

In our last decade, manufacturers saw investing in digital technologies as from a marketing point of view rather than top-down process improvement, and in-house tools built by internal teams allow limited flexibility and are not focused on creating groundbreaking technologies and tools.  It is smart for Mangers to work with startups, which brings a new perspective on the table and is continuously striving to lead innovation and bring change.

Culture:

Changing the operational culture in an organization often proves to be a considerable obstacle; manufacturing companies have till now worked on long product development cycles, they spend huge money in machinery, training, and marketing.  But a limited budget is allocated in utilizing digital technologies. Manufacturers believe in continuous process improvement, while digital companies add constant innovation at every step.

Bringing new digital tools in the Procurement department often sparks an internal rivalry between people willing to change for good and the one's defending the old process.  It would be true that when digital transformation starts, former teams who are not ready to change will leave the organization, and some existing or new groups who are willing to accept change will learn and adapt.   Changing habits have been true even when computers were introduced in the manufacturing process in early 1980,  many opposed and now we see computers are at the center stage of the manufacturing industry.

Finally, CEOs and managers who are at the forefront of business transformation should not be scared to lead the change. When the future is uncertain, there will be push back internally and externally to justify investment in new technologies. Manufacturing Companies who have adapted digital transformation are paving ways in which it allows them to innovate and make affordable products faster for the new economy.