Maximizing Innovation in Digitally Maturing Process Manufacturing

Overview

Supported by constantly evolving digital technology, business innovation, commonly referred to as digital transformation, has become central to the market strategies of many process manufacturers. Progress has been made, both in terms of internal improvements in operational excellence as well as new ways of gaining competitive advantage in markets.

Use cases now abound, solutions are widely available, and process manufacturers are improving their ability to harness data and deploy digital technologies at scale. And transformation has been accelerated by the harsh lessons presented during the pandemic, where the necessity and pragmatism of innovation became immediately evident as overdue. That acceleration has continued, still driven by fragility in markets and supply chains, but now also pushed by the global need to act on climate change. Environmental, social, and governance (ESG) issues and sustainability performance are being woven into the core fabric of business strategies. Process manufacturers view digital transformation, and the myriad technologies associated with it, as inseparable from the transition away from fossil fuels and improvement in environmental stewardship.

Despite the numerous advances made, the majority of expected benefits of digital transformation are still in front of most process manufacturers, even as they mature in terms of building digital competencies. How can process manufacturers continue to mature, arriving at a place where digital transformation delivers competitive advantage and dynamic business agility while also addressing energy transition needs and sustainability performance? Learning from the best practices of digital leaders is key.

For digitally maturing process manufacturers, this report examines the roadmap that market leaders follow to identify and build the digital core competencies needed to leverage transformation as a competitive advantage. It also outlines three critical objectives they strive to achieve along the way. Also, it discusses their modern approach to a key technological tool that all consistently, successfully leverage—analytics.

Digital Leaders Execute a Distinct Roadmap

For most companies, and this goes for digital leaders when they started, it is typically overwhelming to determine an effective starting point for digital transformation. Without solid ideas on how to develop strong digital competencies, what ARC refers to as “the accrual of digital wisdom,” companies often experiment and fail. They get stuck in cycles of technology deployment and ensuing collapse of pilots and projects, leading to the internal perception of wasted investment. So, what do leaders do differently?

The common thread is clarity around starting points. For leaders, effective digital transformation doesn’t occur unless the organization connects the change to some external market or customer signals. They use those signals as a basis for identifying what must change within the organization, how it will change, and what incentives exist for doing so. Beginning with those signals, these leaders create a roadmap that includes:

• Emphasis on business outcomes that differentiate: The company defines ideal outcomes that emphasize speed and accuracy of how a company recognizes and reacts to these external market signals. This provides vision for what needs to change.
• Transparency of objectives: Armed with an externally based vision for change, leadership is transparent by communicating what transformation will look like and how it will impact people.
• Aligned incentives: By realigning incentives with the vision, transformation leaders reward transformative behavior. This becomes the lynchpin step for realigning the work culture, which is fundamental to transformation but also the single-most difficult change to affect for industrial companies.

Using this step-by-step process, it becomes evident what people, processes, and data are involved as well as a clear picture on before and after states of transformation.

Two Key Objectives Accomplished

In executing their digital transformation roadmaps, leaders inevitably identify two key objectives that need to be achieved as innovation is implemented. Both are critical to fully maturing as a digitally transformed business.

The first objective relates to identifying and securing critical intellectual property (IP) and then amplifying its use across the organization so that it delivers new value. This IP resides within people (i.e., tribal knowledge), as well as in the massive volumes of structured and unstructured historic and real-time data inherent to industrial businesses.

Leaders in digital transformation aggressively secure, codify, and magnify this expertise. In doing so, the organization can then extend this differentiating knowledge across the organization where it can be applied to gain the most effective outcomes.

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Keywords: Industrial Digital Transformation, Industry 4.0, Operational Excellence, Process Manufacturing, Competitive Advantage, Sustainability, Energy Transition, Analytics, ARC Advisory Group.