Tag: transformation

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InterAct Blog

How can we attract the next generation of young talent into UK digital manufacturing careers by 2040?

Karl Warner (University of Glasgow), Nicola Bailey (Kings College London), Anna Chatzimichali (University of Bath), Malek El-Qallali (University of Bath), Imtiaz Khan (Cardiff Metropolitan University), and Anastasia Kulichyova (Queens University Belfast)

Our exciting new project aims to develop a strategy to inform the rebranding of UK digital manufacturing to attract the next generation of talent into UK digital manufacturing careers by 2040.

In May 2023, the team members met at an InterAct research sandpit hosted by Loughborough University, which was held with the aim of developing research projects to accelerate the innovation and diffusion of Industrial Digital Technologies in UK manufacturing.

During the sandpit, it became clear that our interdisciplinary team shared a passion to make UK manufacturing a place that attracts, includes, and supports young talent from diverse backgrounds and mindsets. However, recent research conducted by MAKE UK reports only 2% of the average UK manufacturing workforce is currently below 30 years old [1].

Additionally, a recent InterAct 2023 survey on UK perceptions of manufacturing has found that younger generations identify UK manufacturing as an unattractive brand with uncertain employment prospects which is problematic for attracting ambitious and creative digital talent [2]. These negative perceptions in part could be attributed to older generational memories and experiences of physically demanding manufacturing jobs that fuelled the post-World War II economic recovery. Accounting for the rise of today’s digital labour market [3], these negative perceptions and experiences of UK manufacturing are likely to shape children and grandchildren’s career choices. This all adds up to a generational problem in UK manufacturing which is deep-rooted in the cross-generational experiences of what UK manufacturing once represented and the extensive and diverse career opportunities that are available today and will be realisable the future.

These preliminary findings paint an unsettling picture for UK manufacturing, especially when digital transformation has become a strategic priority for companies [4], industries [5] and countries [6]. At the country-level for example, if the UK is to pursue its levelling-up agenda and overcome its regional [7] and international [8] productivity gaps, then attracting young, digitally literate, and productive workers into well-paid, high-skilled manufacturing careers would seem an intuitive and rational approach. However, academic research continues to report that a major barrier for the digital transformation of older firms in various manufacturing sectors is the legacy of underperforming business models, inefficient workplace practices and traditional organisational structures [9], [10], [11].

These organisational legacies also raise the challenge that new digital competitors – such as the big technology firms and technology start-ups – are perceived to attract younger talent and the career aspirations of Generation Z [12] through creative workplace practices, new organisation designs and innovation cultures. 

Therefore, to address this problem, our project intends to co-create the most plausible future scenarios for rebranding UK digital manufacturing to help stakeholders attract the next generation of young talent into manufacturing careers by 2040. As our project is exploratory in design, we will interact with a range of policy makers, educators, employers, and university students to gather insights on how to attract young people into UK digital manufacturing careers by 2040. This will be conducted through six work packages that range from data mining four generations of manufacturing data held by the UK Office for National Statistics to interviews and focus groups with key stakeholders including business owners, industry bodies, technologists, policy makers, educators and students that are passionate about supporting the co-development of UK digital manufacturing.

We will also work with Strategic Innovation Ltd – a technology and innovation consultancy with a passion for sustainability – on a key output which will be the co-creation of a cross-generational map of peoples’ lived experiences of UK manufacturing. This will include both past and present experiences and will visualise potential rebranding opportunities for attracting the next generation of young talent into digital manufacturing careers by 2040.

By providing stakeholders with a visualisation of the future, our project will initiate  the development of a strategy for digital manufacturing careers that can play a central role in the UK’s economic and social development at home and overseas by attracting top talent into these roles.

If you or any colleagues would like to participate in our project, please contact Karl Warner, our Principal Investigator at karl.warner@glasgow.ac.uk for further information.  

References

[1] MAKE UK (2021) Manufacturing Our Recovery Through Inclusion (https://www.makeuk.org/insights/reports/manufacturing-our-recovery-through-inclusion)

[2] InterAct blog (2023) Future workforces: job quality & perceptions of UK manufacturing

(https://interact-hub.org/2023/05/23/future-workforces-job-quality-perceptions-of-uk-manufacturing/)

[3] Digital Skills & Jobs Europa (2023) The Rise of the Digital Labour Market (2022)

(https://digital-skills-jobs.europa.eu/en/inspiration/research/rise-digital-labour-market-2022)

[4] Sousa-Zomer, T. T., Neely, A., & Martinez, V. (2020). Digital transforming capability and performance: a microfoundational perspective. International Journal of Operations & Production Management, 40(7/8), 1095-1128.

[5] Ciarli, T., Kenney, M., Massini, S., & Piscitello, L. (2021). Digital technologies, innovation, and skills: Emerging trajectories and challenges. Research Policy, 50(7), 104289.

[6] Senna, P. P., Roca, J. B., & Barros, A. C. (2023). Overcoming barriers to manufacturing digitalization: Policies across EU countries. Technological Forecasting and Social Change, 196, 122822.

[7] Office for National Statistics (2023) Regional labour productivity, UK: 2021

(https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/bulletins/regionallabourproductivityincludingindustrybyregionuk/2021)

[8] Office for National Statistics (2023) International comparisons of UK productivity (ICP), final estimates: 2021

(https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/bulletins/internationalcomparisonsofproductivityfinalestimates/2021)

[9] Warner, K. S., & Wäger, M. (2019). Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal. Long range planning, 52(3), 326-349.

[10] Jones, M. D., Hutcheson, S., & Camba, J. D. (2021). Past, present, and future barriers to digital transformation in manufacturing: A review. Journal of Manufacturing Systems, 60, 936-948.

[11] Ates, A., & Acur, N. (2022). Making obsolescence obsolete: Execution of digital transformation in a high-tech manufacturing SME. Journal of Business Research, 152, 336-348.

[12] Barhate, B., & Dirani, K. M. (2022). Career aspirations of generation Z: a systematic literature review. European Journal of Training and Development, 46(1/2), 139-157.

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InterAct Blog

Toyota, you and a “human centric” digital manufacturing future

Russell Watkins (Sempai)

The Interact tagline was carefully crafted when Made Smarter and ESRC stumped up the money to make this network a reality. That tagline being: “pioneering human insight for industry” with the spoken aim to create a “network that aims to bring together economic and social scientists, UK manufacturers, and digital technology providers to address the human issues resulting from the diffusion of new technologies in industry”.

Yes, yes and yes again – this is what drew me to interact in the first place. It makes perfect sense when you think about it; in our factories, to make things, you need to bring machines, materials, and a method of doing it together with people. People are the glue that make the 4Ms work in harmony. And yet, walking the halls of Smart Factory conferences – the exhibitor wares on show are 95% things or data.

IoT, Sensors, robots, cobots, AI and data analytics are all critical, in tandem with people. We need to concurrently invest in skills to get the best out of these innovations, especially if we want a long term functioning society to manage this nascent 4th industrial revolution, without unrest and social upheaval.

Ponder for a second on any investment you make in a manufacturing business. The following are likely to be true:

Somebody has to research the market

Somebody has to talk to vendors

Somebody has to negotiate and buy it

Somebody has to commission it

Somebody has to programme it

Somebody has to maintain it

Somebody has to load and unload it during the shift

Somebody has to change the kit over or update the programme/parameters

Somebody has to respond to it when the Andon goes off

Somebody has to act on that

Somebody has to interpret the data that comes out of sensors

Somebody has to troubleshoot

Somebody has to problem solve and…

…a number of people have to find kaizen to keep you competitive.

‘Somebody’ might be multiple people for each of these activities. What is clear is that ‘Somebody’ needs to considered alongside the physical and data innovation that Industry 4.0 has to offer. InterAct are, comfortingly, working in that space.

This raises an important question about where manufacturers should invest in digital manufacturing. Investment always warrants head scratching as capital dollars/pounds/euros and yen are scarce, but thinking is free. The mantra I’d advise you to adopt underpins the model below. Invest where you SHOULD, not just where you CAN.

This requires pausing, thinking and coming to the CapEx table with a business problem to solve – low productivity or persistent specific quality issues for example. Having said that, the lean start-up principle of creating proof-of-concepts means we can place multiple bets (run trials) on various technologies, as long as we treat them like little experiments to learn whether they’re worth investing in further.

A smart way of thinking about all of this is the Toyota style thinking that I experienced on my last two trips to Japan. They think of it as a numerator and a denominator. The numerator represents the equipment you use to create value that your customers will buy. The aim is to improve the equipment work. The denominator represents the people working in the manufacturing business and asks whether we can improve people’s work.

Within this model, the categories to invest time and resources in are those that:

For the Equipment – “predict problems” or detect “early symptoms” of problems (both of these are likely Safety, Quality or Delivery related)

For the People – “eliminate low value added work” (like walking around checking things at the start of the shift or the admin burden of logging results/performance) or “reduce variation in standard work” (as an example, think 2 setters on opposite shifts changing the same machine from part A to part B, but the first setter takes twice as long)

The real gold to be mined is in the 2 bubbles that serve both. Digital manufacturing done well can “visualise issues” that are hidden to the human eye or our current data harvesting and sensor inputs. Rather nicely, if you listen hard enough to the data, it can identify the next, best kaizen to take you forward.

The idea is this; if you focus on both Equipment and People you’re going to open up a bigger benefit by improving both the numerator and denominator. That sounds very much like competitive advantage to me. As Eddie Jones (yes, the former England Rugby coach) said in his recent book on Leadership “The only reliable advantage we’ve got is to learn faster than the opposition”

InterAct is the best game in town, looking into the future to secure the role of human skill in our bright digital future. Get involved, you can either snooze your way to 2040 and then stand, blinking into the sunlight, complaining about the outcome. Or you can help shape and secure the UK’s place in manufacturing’s coming world order. Interact is moving into an exciting phase in 2023/24 where the research bears practical fruit. There are various ways to get involved, and you can keep up to date with all the latest news and opportunities here.

For more information about Sempai and the support they provide to employers, please click here.

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Future of Digital Manufacturing Ecosystems Resources

Delivering the digital future we want, together

On Thursday 8th June, InterAct Co-director, Professor Janet Godsell delivered a talk on the progress of the Future of Digital Manufacturing Ecosystems workstream to an audience at the Smart Factory Expo in the NEC, Birmingham.

In her talk, Professor Godsell addressed the need for self-sufficiency in critical production, lessons from the manufacturing past and the work of the Future of Digital Manufacturing Ecosystems team on analysing scenarios for the future.

Download “Slide deck - Delivering the digital future we want, together”

Delivering-the-Digital-Future-we-Want-Together-Jan-Godsell-Smart-Factory-Expo-June-2023.pdf – Downloaded 2977 times – 4.87 MB
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Industrial strategy: a manufacturing ambition

The UK manufacturing sector is an essential contributor to the country’s economy generating £206bn gross valued added in 2022 a fifth higher than a decade ago. It accounts for around half our exports, two thirds of spending on research and development and accounts for a significant level of business investment. The sector employs around 2.6m highly skilled people across the UK, many of them in areas that need levelling up. In short manufacturing matters to the prosperity and security of the UK.

The sector is now at a critical juncture. Ten years ago Make UK (then EEF) set out its case for an industrial strategy. Since then we have had six plans for growth but now find ourselves without one.

There is broad agreement among stakeholders about what the UK needs for a successful industrial strategy. These can be broadly categorised into five themes, skills; infrastructure; finance; innovation and the business environment. To these can now be added significant shifts in the policy landscape from the post Brexit and pandemic landscape, the transition to net zero, rapidly accelerating technologies spinning out from the fourth industrial revolution and the political imperative to spread growth more evenly across the UK.

Read Make UK’s industrial strategy report
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InterAct Blog

Future workforces: advanced manufacturing & Generation Z

Dr Robert Stewart (University of Strathclyde)

Forget some of the negative media hype and concern that you sometimes see from some social commentators and employers about Generation Z (Gen Z). Unlike us Boomers, Generation X and Millennials, Gen Z are the first truly ‘native’ digital generation, more tech savvy, nurtured on constant access to new technologies and more likely to be comfortable in the newly emerging worlds of digital manufacturing[1]

The high digital literacy of Gen Z offers many benefits for advanced manufacturers. They are more multi-skilled and able to execute (simultaneous) work tasks and roles across different digital platforms, while being more readily plugged into virtual and augmented realities[2]. As a workforce, they will be great for advanced manufacturing in the years to come; very likely to tell you that your technology and IT might not be as cutting edge (or confusing) as you thought. If this is not enough, given the right in-work supports – from ‘onboarding’ and beyond – they will allow manufacturers to create better value from problem solving, innovation, and creative roles using their digital toolboxes.

In many ways, the entry of Gen Z to the labour market is ideal for advanced manufacturers adopting new technologies, and their great potential to further change workplace people practices and business models. However, as in all happy(ish) marriages between the needs of employers and younger people’s lifestyle interests and skills, both partners may have some underlying issues that will make an effective relationship based on new technologies difficult to sustain unless they both work at it.

There should be no doubts about the high demand for digital skills in advanced manufacturing. Employers need to understand some key elements of Gen Z thinking and to build this into their recruitment and retention strategies. Ongoing staffing shortages, the seemingly blurring pace of digital and technological change, ‘quiet quitting’ and some issues with workplace upskilling have all helped to accelerate industry demand for digital and multi skilled workforces.

These changes have pitched advanced manufacturers into the ‘talent war’ to attract, retain and develop the most skilled and capable young people. Attracting and keeping the best talent, however, is highly competitive and many industries (including manufacturing) are reporting skill shortages and high levels of unfilled vacancies[3]. Very simply, manufacturers without the right set of people capacities (and practices to support these), digital skillsets, and multi-skilled workforces will struggle to capture and use those advanced technologies to help them compete and innovate.

These labour demand and supply issues pose some interesting questions about how UK manufacturers should be competing for Gen Z talent in terms of job quality. A downside? Well like Millennials they are very values driven and possibly sensitive to your image as an employer on social media. Image matters for the new generation. For advanced manufacturers, one major challenge is the problem with some of the wider UK manufacturing sector. This comes with some powerful historical baggage.

Manufacturing is sometimes be seen by young people in the UK and US as an old-fashioned industry, low paying and male-dominated, offering large numbers of dull, insecure, and dead-end shifts in factory jobs[4]. Forget those images you may have in your head about the emerging SMART factories of the near future, this legacy persists, particularly among the older population segments who remember it and whose opinions may negatively shape their children and grandchildren looking for jobs and careers in today’s labour market. They are not flattering perceptions of a sector looking to recruit ambitious and creative digital talent or even broaden its appeal among older or mid-career workers, or people in under-represented groups such as women and minorities.

On a positive note, these perceptions are very unlikely to match the reality of many or most modern advanced manufacturing settings, particularly in big multinational companies and those who‘ve adopted and transitioned into digital technology. These settings offer (less monotonous) more interesting, exciting, highly technical and financially rewarding work. The recruitment messaging needs to dispel the old legacy of your sector, show the augmented reality, the AI of the bots, the predictive and the multi-purpose data analytics, and whatever metaverse you can conjure.

Apart from showcasing exciting, innovative clean tech, what else should manufacturers be doing to better attract and retain Gen Z talent? There is no shortage of commentary on what Gen Z expect in the workplace, so let’s take three of the more important issues that often feature in wider discussions about them: values, diversity, and flexibility. Helpfully, all of these things connect with each other.

We know that an employer’s image, brand, reputation, prestige, mission, vision and values really matter in recruitment, commitment and retention. Its’ not just about pay, it really isn’t. Values make a big difference in competitive labour markets with restrictions on supply. Potential recruits and employee’s want to know something about your identity and values: how these resonate through your products, people practices, and culture.

Ideally, younger employees want to share in the positive impact and success of your business, be ‘proud’ to work for you and share that in their social media networking and posts. This means that the backstory (and the ‘future-story’) of who you are as an industry, sector and employer is a key part of attracting and keeping the brightest, the capable and the digitally skilled. You can be as sceptical (or ‘boomer’) about this as you like but realising the importance of the ‘image’ and what you stand for, and how you show and tell people your story is something that. For example, big UK-based multinational manufacturers who compete across international markets understand very well. It works.

Your values should set the tone for a whole series of complimentary policies and practices at work that help young people see meaning and purpose in their work. For advanced manufacturers, investing in people, developing their skills and caring about their wellbeing play very well to younger and early career audiences who will still be unsure about their place in the labour market.

A focus on Net Zero and the principles of the circular economy has a strong appeal to the wider social values of many young people keen on environmental messaging and actions around reducing waste and your carbon footprint. Employer values tell people what you care about: whether you look at your workforce as individuals and people; whether you care about their wellbeing and development; and whether you really are asking them to help make ‘useful’ products and have processes that are helping to make a more sustainable world.

Employer values and practices also feed into areas like diversity and being clear about your recruitment messaging. Why is diversity important? Well it isn’t about the numbers of women in your workplace, or those coming through the STEM pipeline. Research shows that gender diversity in manufacturing leads to greater innovation and profitability, and the benefits of having women in leadership positions are even greater. In other words, the implications of diversity (and more representative workforces) seem to be reasonably clear. The more diverse you are as a workforce and the more this is represented in the higher strategic decision making levels of companies, the more you will be likely to be able to harness these different views and experiences, produce better products more geared to different customer segments and better innovate than your competitors.

You can disagree about the need for diversity but the figures tell a different story. Manufacturers need to be much more proactive (and transparent) about equalities, diversity and inclusion at work, particularly when it comes to gaining ‘fair opportunities’ for career progression. Gen Z are more racially and ethnically diverse than previous UK cohorts and there has to be a bigger focus on minorities, and on women.

Only around two-thirds of manufacturing firms currently have an EDI strategy or even an intention to develop one and not surprisingly, minorities only make up 5% of boards and women only 18%[5]. Both groups still largely occupy supporting administrative and clerical roles, or in HR and marketing: far removed from key areas of senior management, making executive decisions and having a strategic influence in their firms. On these figures alone, you would be doing well to describe manufacturing as offering modern, equitable and progressive working environments. For Gen Z talent looking for employers who mirror their personal and social values around racial, ethnic and gender equality, these numbers will make depressing reading.

So how do you address this? At the very least, sense-check or independently audit the recruitment messaging to make sure you are maximising your appeal. In terms of the career progression of women and minorities there are also a few useful ways of addressing some of the internal cultural barriers that they face in moving into senior management roles: mentoring and sponsoring. To some these approaches are probably not as ‘bombproof’ as deciding promotions out with the lads on the golf course, but they are likely to be more effective in helping the business keep good talent.

One popular (post-pandemic) way of addressing the diversity issue concerns giving people greater flexibility at work, through re-designed shift schedules and working from home. Easier said than done for production staff than their non-production co-workers. There are certainly strong hints in the literature that greater flexibility and hybrid working (with some task autonomy) is very well suited to Gen Z workers. Perhaps too suited! Hybrid models bring positive wellbeing benefits for workers, allowing women to balance work and domestic schedules. However, we need to be cautious about visibility at work and that out-of-sight working from home does not translate into out-of-contention workers when it comes to promotions and rewards.

In short, there are sound reasons for believing that Gen Z will be ready-made for advanced manufacturing. To capture the benefits, advanced manufacturers need to understand this audience. They must ensure messaging, imagery and marketing addresses some of the more unhelpful legacy images of their sector, treat their own values and story seriously, and deliver on EDI and flexibility.

Read the first entry in the the ‘future workforces’ series: ‘advanced manufacturing & Generation Z’.

References

[1] Francis, T. & Hoeful, F. (2018) ‘True Gen’: Generation Z and its implications for companies. McKinsey & Company.

[2] Gomez, K., Mawhinney, T. & Betts, K. (2022) Understanding Generation Z in the Workplace. Deloitte US.

[3] For example, The Manufacturer (2022) We need a super solution for fixing manufacturing talent issues (https://www.themanufacturer.com/articles/we-need-a-super-solution-for-fixing-manufacturing-talent-issues/)

[4] For example, Deloitte (2017) A look ahead: how modern manufacturers can create positive perceptions with the US public. (https://www2.deloitte.com/content/dam/Deloitte/us/Documents/manufacturing/us-public-perception-manufacturing-study.pdf)

[5] MAKE UK (2021) Manufacturing Our Recovery Through Inclusion (https://www.makeuk.org/insights/reports/manufacturing-our-recovery-through-inclusion)

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Resources Video

Storytelling Fellowship videos

The Storytelling Fellowship programme is a core element of the InterAct Network. It aims to harness the power of stories to learn from, and address, the human aspects of the diffusion of new technologies in industry. These human aspects include themes such as:

• Productivity
• Resilience
• Competitiveness
• Sustainability
• Levelling-up/inclusion
• Wellbeing

Our Storytelling Fellows have created a growing archive of digital, video stories that you can access below:

watch the storytelling fellowship videos
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InterAct Blog

Making investments into digitalisation – the manufacturer’s perspective

Dr. Andreas Schroeder (Aston University), Dr. Yang Zhao (Aston University) and Dan Andrews (Aston University)

Digitalisation offers significant opportunities for manufacturers. By leveraging digital technologies and data, manufacturers can generate substantial efficiency gains in their own processes, create new forms of value for their customers, and develop innovative business models. These digitalisation opportunities are critical to address the productivity and sustainability demands the manufacturing industry is facing.

Although the range of opportunities digitalisation offers to the manufacturing industry is widely recognized it is of concern that only 35% of surveyed firms have adopted digitalisation solutions at scale[1]. One of the root causes of the lack of adoption in the UK is the lack of investment[2]. According to the Manufacturing Digital Productivity Report from iBASEt[3], 94% of UK manufacturers believe their industry has already fallen behind the US because of a lack of investment into digitalisation, and more than half of UK manufacturers are losing sales as a result. It is even more worrying that 93% of respondents expect that this lack of investment into digitalisation will lead to many UK manufacturers going out of business in the next decade.

To help manufacturers invest effectively in digitalisation, it is important to understand the range of challenges manufacturers commonly face. Only then can the appropriate solutions be identified and put in place. Aston University used a systematic review method to study the challenges for manufacturers and identify critical questions. The results are summarised in Table 1 and discussed below.

Digitalisation goalsThe lack of agreement on the goals of digitalisation encumbers the investment process.
The lack of ambitions in the goals of digitalisation limits the leaders’ ability to justify significant investments.
Investment processDigitalisation integrates a wide scope of investment domains which makes it difficult to apply established processes to assess and prioritise investments. 
The metrics used to evaluate business cases for investment do not relate to the opportunities that are particular to digitalisation.
Digital technology attributesThe high cost of digitalisation and the high uncertainty of return make it difficult to justify investments.
The rapid innovation (and obsolescence) of digital technology acts as a discouragement to making substantial investments.
People and their expertiseThe lack of expertise on acquiring external funding for digitalisation creates an investment barrier.
The lack of senior leaders with digitalisation expertise hampers investments into digitalisation.
Organisational cultureThe difficulty of accepting investment uncertainties inhibits investments into digitalisation.
The lack of openness and trust creates barriers to making effective investments into digitalisation.
Business networkThe lack of digital readiness of the wider network limits investments into digitalisation.
The lack of experienced or relevant finance partners reduces the opportunities for making investments into digitalisation.
Table 1. Challenges for manufacturers investing in digitalisation
Digitalisation goals

In manufacturing, digitalisation affects a wide range of stakeholders and they all feed into the development of the goals. The lack of a specific and widely agreed goal is a critical barrier to making investments into digitalisation.

Digitalisation offers manufacturers opportunities to significantly change how they operate, what kind of relationship they have with their customers, what products or services they offer and who they offer these to. However, many manufacturers restrict their goals to incremental changes and, therefore, struggle to justify making the necessary investments.

Investment process

Digitalisation cuts across established investment categories as it involves aspects of R&D, employee training, and education, as well as the acquisition and implementation of technology solutions. The multi-dimensional nature of digitalisation challenges the traditional investment processes of manufacturers.

Manufacturers traditionally rely on internal rates of return or net present values to justify their investment decisions, and these are not well suited to the possibility of dynamically adjusting an investment after it has been initiated. With digitalisation opening future and potentially unknown opportunities, metrics are required that reflect the flexibility to adjust an investment, change a technology or even abandon it.

Digital technology attributes

The research identified the high costs of required technologies as a major reason that manufacturers do not carry out investments into digitalisation. The cost of technology is particularly high to early adopters, before economies of scale are achieved. Furthermore, while digital solutions are highly scalable, the returns on investments are limited if scale is not achieved.

The pace at which digital technologies develop is unprecedented. Any technology manufacturers choose could become outdated rapidly and require updating, which increases costs. Manufacturers may, therefore, decide to wait for the next digital technology generation to become available or for further standards to emerge before making investments.

People and their expertise

To make significant investments requires manufacturers to raise external finance; but manufacturers often lack the expertise to raise external finance for investments into digitalisation, which significantly differs from raising finance for investments into capital equipment: it requires different funders, business case details and preparations.

Also, decisions on investments in production machinery are often made at the plant level, and are aligned with responsibilities for performance and quality. As digitalisation affects the direction of manufacturers, with implications for their customers and wider networks, identifying the right locus of decision-making is critical for making effective investments. It requires a senior leader with the authority and expertise to make such wide-reaching decisions.

Organisational culture

Creating value with digital technologies requires product and process experimentation following test-learn-tweak cycles. Organisations need to develop a ‘tolerance for uncertainty’ to make effective investment decisions within this context. For manufacturers with limited R&D activities, dealing with these uncertainties is particularly difficult.

Although digitalisation will require changes in organisational roles and processes, the creativity and imagination of staff members across the organisation need to be drawn on to capture the opportunities presented. It is critical to ensure that digitalisation is not perceived as a cost-cutting exercise aiming to create redundancies to ensure the widespread support and effectiveness of investments.

Business network

It is not only the manufacturer’s own investment into digitalisation but also that of their customer and wider network that is critical to making an effective business case. Ultimately, value is co-created by the customer and the wider network, and if these parties do not make investments into digitalisation themselves then the manufacturer’s chances of deriving a return from their investments are reduced.

Making investments into digitalisation also puts a focus on the external finance partner as a member of the network. Finance partners are often overlooked in industrial value networks, but in a digitalisation context their role is critical. This is because these partners are not just financing a machine but also a business process or business development, which requires a much closer relationship.

Making effective investments into digitalisation is a critical challenge for manufacturers. These investments not only determine the success of current digitalisation initiatives but also affect the viability of future digitalisation journeys. It is today’s investments into digitalisation that enable the future competitiveness of the manufacturing industry. Manufacturers need to rethink their established investment processes and organisational practices as many of them stand in the way of making effective investment decisions into digitalisation.

Download the full report
References

[1] https://stories.ability.abb.com/better-decisions

[2] https://www.makeuk.org/-/media/files/insights/reports/infor-make-uk-innovation-monitor-report-final.pdf

[3] https://info.ibaset.com/hubfs/ibase_PDM_090522.pdf

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Link Resources

Is your supply chain sustainable?

Sustainability in manufacturing is a hot topic. And rightly so – many manufacturers produce large amounts of waste, much of which the supply chain creates. Rather worryingly, our supply chains make up 60% of carbon emissions in the UK.

The UK government’s initiative to reach net zero by 2050, as well as the legal obligations under the UN’s 2030 Agenda for Sustainable Development and the OECD Guidelines for Multinational Enterprises, is now well known. However, there is much, much more that can be done to reduce emissions – and digital technologies have a crucial role to play.

Click below to read more about the five best ways to promote sustainable practices within your supply chain.

find out more about sustainable supply chain practice with made smarter