How do you balance future plans with present needs?

By

EY Americas

Multidisciplinary professional services organization

6 minute read 13 Jul 2018

Industrial companies must embrace new ways of working while preserving their existing business models. We identify six big bets to focus on.

Balancing investment for the future with the needs of sustaining success in your current business model and markets can often seem like a mutually exclusive proposition – particularly when the transformations required to deploy future-enabling capabilities, technologies and systems can be so disruptive to everyday business. How does one plan for future economic viability while sustaining current economic viability?

It is a dilemma so trenchant that we recently conducted a major study to see how industrial companies were cracking the code of this balancing act. After surveying 500 senior industrial-company executives, nearly all C-suite officers from 500 discrete companies, we found that a sizable majority of the respondents came from companies that were lagging behind in their efforts — and paying for it with sluggish revenues and growth and little innovation outside their R&D departments.

And yet, sluggish revenues and growth are just harbingers of what might be ahead. When it comes to falling behind in today’s industrial sector, the company that hesitates could well be lost.

Leaders are looking at the strategic risk universe, as opposed to only focusing on compliance and operations. Even innovation is being considered in terms of risk management.
William Thomas
EY Americas Advisory Risk Sector Leader, Industrial Products

The urgency

Industry innovation leaders are launching everything from new business models to highly connected ecosystems to smart factories. Thus, every decision to put off launching a digital transformation initiative, for whatever reason, puts that company months behind its traditional competitors — and makes them less able to respond to new competitors.

To get the most out of the big-bet initiatives shown above requires a different approach to implementing change. Initiatives in one area often don’t fully deliver on their potential if they aren’t matched with advances in another big-bet category. For instance, you may have done a brilliant job on supply chain transformation but haven’t implemented the talent-acquisition strategy that attracts the people whose innovative strategies will maximize ROI from your advanced supply chain.

The way forward

If there is one overarching theme to the way industrial company leaders are looking at the big bets, it’s that they are making a strategic move from a business-to-business (B2B) framework toward being more business-to-customer (B2C). You can see how this plays out in each of the big bets — and how each of them is interlaced with the others.

Customer connectivity

Customer expectations have changed. They want that same 5 p.m.-to-9 p.m. at-home experience in their 9-to-5 workplace environment. Thus, interactivity, intelligence and awareness have become key aspects of industrial companies’ increasingly customer-centric engagement model. This brings digital capabilities into play, to collaborate with business partners.

Such cross-pollination leads to the rapid emergence of new business models out of necessity: digitally enabled disrupters, often from outside the sector, are forcing industrial companies to think and act differently. This, in turn, puts new stressors on the value chain, which will fragment as industries converge and new the way forward economies emerge.

Supply chain reinvention

Your supply chain is not just an operational function — it’s a customer experience. Today’s supply chains are no longer linear, but complex ecosystems. They’ve migrated from on-premises to the cloud, which alters the whole notion of collaboration, with suppliers, with other third parties, even with customers.

With cloud-based data, the supply chain is better connected to more intelligence derived from data and therefore more responsive; it’s easier to build your ecosystem and adjust it on-demand. Communications are multidirectional, with information-sharing throughout the entire ecosystem. Digital enablers support the end-to-end process improvement that make enhanced customer responsiveness possible, yet the increase in connectivity also threatens supply chain resilience.

There’s a digital thread that must be woven through the supply chain — digital enablers embedded through process improvement from things like RPA, artificial intelligence, machine learning and Internet of Things.
Regenia Sanders
Advisory Principal, Supply Chain and Operations, Ernst & Young LLP

Talent and culture

Industrial companies are playing the culture card by creating a more purposeful work environment to attract millennials. That a lot of emerging technologies are targeting the industrial sector is also building appeal — millennials are able to work with cutting-edge tech and apply it in unprecedented ways. This isn’t just about attracting talent. It’s also about keeping them.

Workplace

44%

of all survey respondents find that the biggest barrier to retaining existing talent is creating an inspiring culture.

Digital assimilation

Innovation is not just about creating ideas, but bringing them to market effectively, which is why digital assimilation requires an agile culture. In our digital development framework, companies work through a continuum, from use-case prioritization to assessing commercial viability — in no more than 8 to 10 weeks.

Digital is an enabler, a means rather than an end. Your strategic process should be to develop the solution first, then infuse it with the necessary technology to bring it to life. You can see this in the smart factory, where digital technology raises productivity by empowering the worker on the shop floor. But ultimately, digital assimilation means evolving from “doing digital” to “being digital” — where digital is deeply ingrained and part of the basic thought process.

Digitization or data assimilation is not an option. It’s a ‘must have’ for every company to remain competitive.
Ranabir Bhakat
Executive Director, Enterprise Intelligence Advisory, Ernst & Young LLP

Big data and analytics

Data is the language of innovation. But the challenges of working with today’s data are captured by the four V’s of big data: volume, velocity, veracity and variety. That’s why we call it “big data” and not simply “data.”

Data is the new natural resource, but to make productive use of data requires a system that can really manage them. This involves developing a data management platform that will handle gathering the data, curating/integrating it, and then activating it to produce insights. But data management also requires governance policies to prevent your data lake from becoming a data swamp.

Enterprise protection

Enterprise protection has its own balancing act, between compliance risk, operational risk and strategic risk. When our survey asked about the 10 highest-priority risks, more than half of the risks named didn’t even exist for industrial companies 10 to 15 years ago: digital operating models, robotics, customer focus, 3D printing. At this point, these are all strategic opportunities that require sound risk management to seize competitive advantage and support successful deployment.

But they also are largely distributed risks as opposed to centralized, top-down risks. Your risk-management model has to align to this reality — because innovation happens out on the periphery.

Summary

You must rigorously assess your present status and the universe of change options you can entertain, then piece together the most “balanced” package of change initiatives to enable you to get the most mileage out of your investments.

About this article

By

EY Americas

Multidisciplinary professional services organization