Business transformation of Manufacturing companies

Mitja Kolbe, Digital Advisor at MicrosoftMitja Kolbe, Digital Advisor at Microsoft 

Manufacturing companies are on the verge of great opportunities for unprecedented development of their industries, enabled by big data, AI, and cloud computing. Those who are exploring and investing in this area could be massively rewarded by optimized costs, improved end-product quality, increased throughput, improved competitiveness, better customer service, and eventually also transforming (or at least upgrading) their products into valueadded services.
On the other hand, market trends and customer expectations are imposing many challenges to manufacturing companies, expecting them to adopt hyper-customized production (series-of-one), to accommodate extreme volatility in production volume while maintaining short delivery times and a competitive price. 
 

Manufacturers are already running IoT projects 

Manufacturing companies’ mission is to produce quality end-products with defined features and characteristics in the desired quantities and delivery times in the most cost-effective way. Hence, manufacturers have a long history of operational efficiency programs like Six Sigma and a vast amount of manufacturing equipment with lots of sensors, which looks like an ideal field for the Industrial Internet of Things (IIoT). The recent Microsoft study involving more than 3,000 key decisionmakers in larger, global manufacturing companies shows that 87% of companies are already running IoT projects. Most commonly, these projects include automation (increased productivity, lower costs per unit produced), quality assurance and compliance of end-products, production planning, supply chain logistics, and health and safety scenarios.  

BI before AI, walk before you run 

Automation is usually the entrance point where the IoT story begins. Traditionally, process control and automation has been done in closed systems using proprietary protocols and later developed standards for interoperability (like OPC UA). There are tons of measurements collected and data generated in manufacturing process control systems, which never leaves the process control loop. On the other hand, IoT is about connecting every product, every machine, every manufacturing line, gathering all possible data, and establishing digital feedback loops. Bringing this data together in the cloud is the first step, and it enables scenarios like remote monitoring from anywhere and interactive, drill-down BI dashboard capabilities. Once the data from various sources are available on a common data platform, scenarios including AI, like predictiveor even prescriptive maintenance, which have a great costsaving potential, can be further pursued. 

Cybersecurity is a major concern for manufacturing companies 

In order to achieve the biggest impact, IoT devices, process control units, and business processes need to work on a common platform, connected through an IP network. This increases cybersecurity risks as it opens-up more potential attack targets and the impact of possible cyber-attacks. Hence, companies are concerned about the security of IoT end-2-end at the level of hardware, software, devices, connections, and cloud services. Businesses want to prevent attacks first and foremost, be alerted about an unusual event that could lead to a security incident, automate response to an incident and have full support in eliminating potential incidents. 

In addition, manufacturing companies also place a lot of their concerns on securing the data itself in terms of data ownership and data access. Similarly, as people become more aware of the privacy of personal information in the digital age, so too do businesses look to protect their business and production data appropriately. 

Business transformation of Manufacturing companies

IoT and digitization are a source for building one’s competitive advantage 

According to a Microsoft survey called IoT Signals, 92 percent of businesses believe IoT is a key factor in their future business success. They recognize the opportunity to constantly add value to their business through IoT, change their cost structure in an increasingly competitive market, and identify levers for new sources of differentiation from competitors. 

IoT is also the basis for better and more comprehensive customization of products for the customer and the development of business models that offer the product as a service, in which end products are intertwined with advanced analytics that provides value to users. Digitization is not an opportunity for companies and organizations, but also the countries of Central and Eastern Europe. A recent survey by McKinsey, The rise of Digital Challengers, concludes that ten countries in the region are well placed to use digitization as a new source of growth. The key to achieving this is a cooperation between businesses and countries in the region. 

The key differentiator for success is management commitment and access to talent 

In many cases, IoT projects require visible upfront investment. Besides, projects with AI require lots of data engineering, improvement iterations, and experimentation in order to achieve the objectives. Hence, it is very difficult for project teams to commit to results. Consequentially, successful companies are the ones which are embracing a culture that accepts failure as an integral part of the path to transformation. The leadership commitment is reflected in the empowerment of multidisciplinary teams in which business and technical functions are involved, in rapid decision-making, and in supporting teams to learn in the face of failed initiatives. Successful businesses integrate IoT initiatives into business and technology strategic plans that keep teams focused on key initiatives.  

Due to the lack of competencies, companies are also leveraging IoT to attract the best talent through innovative projects. In addition to individuals, successful companies early and often include an ecosystem of technology, platform, analytics, integration, and security partners in their projects. Successful organizations are aware that the rapid development of technology is an opportunity for radical transformation, so they set about transformation comprehensively, programmatically, and with small but decisive steps. In doing so, they place people at heart, change the culture of the organization, and successfully communicate the transformation internally. 

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