Part 1 in the 4-part series “Opportunities for Digital Manufacturing“
I once explained to my then ten-year-old son that 30 years ago, passengers waited in queues for several hours to buy train reservations from Mumbai to Hyderabad. It was a manual system long overdue for automation—even for its time. Having grown accustomed to spending his allowance online with a click of a button, he responded, “Dad, you must have been born in the Stone Age.”
Perhaps a slow-moving government bureaucracy was to blame for this inefficiency. But the perception that private companies always optimize their use of new technologies is far from the truth. Fourteen years have passed since I had that exchange with my son, and I still see large global enterprises sift through file cabinets to give customers hard copies of invoices and service reports that could be easily sent online.
We expect profit-motivated enterprises to be at the forefront of automation and innovation, and yet I am always surprised by the plethora of straightforward technological opportunities that go untapped. For example, polls show that manufacturing and field service industries are lagging in the pursuit of digital transformation—and from my experience, this has been my impression as well.
Companies in these industries have several low-hanging opportunities for technological innovation. This suggests that leadership is either unaware of such opportunities or does not fully appreciate the ROI from technological innovations. I suspect that leaders at some of these firms mistakenly see technological investments as a necessary cost induced by the competition. As a result, companies with large market shares—which are often best equipped to be at the forefront of technological innovation—will sometimes wait and react to quickly changing industry standards rather than strive to set them.
The pursuit of creating new disruptive technologies is often thought to be strictly in the domain of startups. I have heard some executives in manufacturing and service industries express that they could buy technologies from a startup or simply buy the startup when the need arises. However, these outside options are becoming increasingly more expensive. In addition to upward-trending direct costs, late adopters risk incurring a loss in market share, whether temporary or permanent, to firms that are successfully implementing technologies that enhance the customer experience. On the other hand, companies that proactively seek out opportunities to adopt new technologies can win significant edge over competitors. But ultimately, executive management needs to put in place the right leader and governance structure to capture that value.
There’s a lot to learn from the degree of success that enterprises that have crossed over from offering traditional products to wrapping in digital services around their existing portfolio. In the coming weeks, I will continue this series with a discussion on opportunities for digital innovation in manufacturing and services, and the role of leadership in the pursuit of digital transformation.
For more on this topic, read “The Digital Advantage: How Digital Leaders Outperform Their Peers in Every Industry,” MIT Sloan Management, sponsored by Capgemini, 2012.