The digitization of manufacturing

When I was younger, I used to think of the classical manufacturing companies as dinosaurs, part of the old economy. For me, they were large and slow lumbering beasts, many of them soon to be extinct, and rendered obsolete by emerging high-tech companies like Nokia, Intel, Microsoft. I was not alone in this feeling.

Manufacturing companies built cars, compressors, drilling equipment and all sorts of other products that I rarely encountered in daily life. In my mind, I contrasted these traditional manufacturers with the new economy in which I was working. High-tech and software was cool, innovative and forward looking. Manufacturing was boring, dirty and obsolete.

That stereotype was probably always misleading, but it is even more so now. What is collapsing this misleading distinction between high-tech and traditional manufacturing generally is the high-tech digitization of manufacturing itself.

All of us can see various outward signs of this digital transformation in many consumer products. Everything is going online creating the Internet of Things (IoT): modern light bulbs, coffee makers, doorbells, garage doors and refrigerators are all on the Internet and can be operated or responded to with a mobile phone while away from home.

The car is another obvious example of accelerated digitization and innovation. Using Bluetooth in one’s car to stream music or GPS to follow a map are only the most visible manifestations of the transformation of the automobile into a mobile computer system. Tesla is revolutionizing the electric cars and the automotive industry with the use of small, cylindrical, lithium-ion batteries. Google is working on the driverless car and it was recently reported from Bloomberg that Google founder Larry Page has invested in two startups developing flying cars.

As dramatic as these technological changes are, they are in fact only the most visible symptoms of a deeper digital transformation in manufacturing itself. Today, computer chips, sensors and software are going into all kinds of manufactured products, meaning that most products today include computer systems. They can go online, be tethered to the Internet and be operated or diagnosed remotely.

The back story in this transformation is the deeper changes going on in the manufacturing process itself. Not nearly as flashy a consumer story as driverless cars, the digitization of manufacturing nonetheless is transforming what used to be traditional manufacturers into the equivalent of agile, high-tech companies. Not every manufacturer is there yet, but the majority are somewhere on the journey to redesign how they innovate and build products, deliver those products to market, and support their customers.

The magnitude of this transformation is suggested in IDC estimates that manufacturers will invest more than $2.1 trillion (£1.5trn) on digital transformation technologies in 2019. They already spend an estimated $224 billion (£160trn) on such technologies now. As IDC notes, the drivers of digitization are customer centricity, the desire to improve product quality, the urgency for product innovation and faster response to market opportunities.

What Is the Digitization of Manufacturing?

Broadly speaking it includes the digitization of not only products, but the processes of innovation, collaboration and manufacturing itself. Key to this change is the way that different groups inside and outside of the manufacturer with different types of specialized knowledge can collaborate.

Nowadays products are more complex and cut across different engineering domains, not to mention geographical boundaries. Therefore, the collaboration across product silos and specialisms is more critical than before in developing and supporting innovation around the new digitized products. Furthermore, with so many more products now online or with embedded sensors, manufacturers have to transform how they gather and analyze user data and provide customer support.

All of these changes, and others, intensify the need to share product related information across the enterprise. As IDC puts it, "Information is at the core of the new digital ecosystem and therefore needs to be treated as any other asset, with the proper governance and investment to maximize its value to the organization".

Couple this growing need with the emergence of cloud, Big Data, and mobile technologies and you have a perfect storm of synchronous changes that require strategy, governance and process. You can read more about these challenges in the 5 Market Forces that are Driving Digital Transformation ebook and IDC’s whitepaper, Information Digital Transformation in Manufacturing.

But the fact is that digitization is really changing how the manufacturer does everything it does. This is why digitization is treated not as an isolated task for various departments, but as a C-level strategic initiative since it cuts across the whole enterprise. And the success of this digitization program will determine why some of the dinosaurs of the past will survive and are becoming the digitized high-tech giants of today and tomorrow.

Stefan Waldhauser, director of Market Intelligence, Alfresco.

Published under license from ITProPortal.com, a Future plc Publication. All rights reserved.

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