Posted By Andy Chatha, June 01, 2011 at 6:57 AM, in Category: The Innovation Enterprise
While the key business drivers for success may not have altered significantly for the manufacturing sector over the past year, the intensity of change continues to increase. This growing intensity now demands new value-chain approaches that harness the latest technology tools and techniques -– especially in the creation of more collaborative cultures in manufacturing enterprises.
For example, recent events in the Middle East have increased the level of uncertainty. Security -– both physical and cyber -– is becoming a bigger challenge for all companies. The BRIC countries (Brazil, Russia, India, and China) are becoming stronger and more competitive. More “Facebook-generation” people are joining the workforce every year, bringing many new ideas and working styles. Government regulations increase seemingly by the day. We have started to upgrade the electrical infrastructure, with the smart grid having the potential to become as powerful and intelligent as the Internet. And the IT revolution continues, bringing with it what ARC calls "easy IT" solutions.
With all these changes going on, we need to become highly flexible and agile. Fortunately, more investments are being made today in IT than in any other area. We have a tidal wave of new technology coming in social networks, mobility, smart grid, electric vehicles, and other areas. Corporate and venture capital investment in IT is at an all-time high. Facebook was recently valued at $50 billion, and this number will continue to go up every year. We will see many more Internet companies go public over the next couple of years.
Industry has many opportunities to take advantage of this easy IT technology to help it meet current and future challenges. The newer IT solutions are easy to use because they focus primarily on the consumer. Social networks and smartphones have become popular because they are so easy to use. The emerging smart grid is starting a revolution and, ultimately, will connect all home devices and appliances. Cloud computing makes IT look like a utility, hiding all complexity from the user. As we’ve been saying for several years, we all need to start adopting more of these easy IT solutions at our companies because they can help us reduce both cost and complexity.
Two relevant statements from Bob McDonald, CEO of Procter & Gamble, appear in the company's annual report. The first statement refers to digitization: "With digitization, our goal is to standardize, automate, and integrate systems and data so we can create a real-time operating and decision-making environment. We want P&G to be the most technology-enabled company in the world." In the second, related statement, McDonald indicates that the company is looking for a sevenfold increase in real-time data to help it meet its targeted 20%-25% reduction in selected spending areas.
Any company that wants to reduce costs by 20%-30% to compete effectively must, like P&G and others, innovate and look for new ways to do things, using new solutions that enable new business models. Which leads us to the topic of Collaborative Value Networks.
For context, consider ARC's Collaborative Manufacturing Management (CMM) model, introduced in 2000. While the CMM concept provides a meaningful way to visualize and analyze the plant as a node in a supply chain network, it doesn't go far enough. Today's companies realize that they must become more design- or innovation-centric, and supply chain networks don't incorporate design and engineering departments, which are managed separately by a different group. To become more innovation-centric, companies need to integrate their design, make, and deliver processes from end to end. Collaborative Value Networks extend CMM to the enterprise.
To enable a Collaborative Value Network, you need an easy-to-use, Facebook-type platform and you have to digitize your company, moving your boxes of paperwork to the cloud. A few years ago, building this type of platform would have been prohibitively expensive, but today, the information technology is in place to build this platform at a reasonable cost. However, building such a platform requires both executive leadership and common standards and processes at all levels. These enable everyone to work together efficiently, to stay engaged, and to share ideas with internal and external colleagues, whether in the same building or halfway around the world.
If we are going to cope with the increasing intensity of change in today’s industry and make the best use of the innovative technology tools now becoming available, manufacturing need to focus more than ever on creating collaborative cultures that will help drive the enterprise value chains of the future.
Andy Chatha is president and founder of ARC Advisory Group, and a member of the Manufacturing Executive Leadership Board.
Written by Andy Chatha
I appreciated your recent posting on the notion of collaborative value networks and their importance to the future viability of manufacturing enterprises. I would offer exclamation points to your comments.
The “Cloud” in the form of ubiquitous network communications and increasing computing power and availability will enable new and more effective means of inter-organizational collaboration. The potential of the Cloud is that it becomes a platform to create innovative business models and processes. The promise of Cloud (yet unfulfilled) is to abstract the underlying technical considerations (become a utility) to empower enterprises to collaborate to offer new and compelling value-propositions to customers.
As you suggest, traditional value-chains have evolved into value-networks. The contemporary notion of supply-chains, with a focus on supply and movement of tangible materials for manufacturing, has shifted to a broader focus on partnerships, relationships, and value networks. The supply-chain itself has become embedded in larger more encompassing value-networks. Value-networks enable enterprises to leverage the complementary resources, capabilities, and skills of business partners for complex business services such as information technology, customer relationships, product innovation, manufacturing flow, and supply-chain flows.
What is important for manufacturing firms to recognize is that we have moved beyond the traditional business-to-business integration toward relationships that are more service-oriented. Services (knowledge, skills, competency) are the basic unit of exchange. To your final point, here lies the potential of the Cloud as a platform to deliver easy-to-use (IT-Consumer based applications like Facebook) tools to enable higher levels of intra/inter-enterprise collaboration.