This week’s Economist looks at the impact of digital platforms on the industrial and manufacturing sectors, and questions the ability of established players and practises to continue to generate value as digital technology permeates every stage of the production process.
The article is interesting, not just in that it mentions the innovative work of Klockner, whose ASD subsidiary is a Metapraxis client, but because it highlights the need for all organisations to recognise the true drivers of value in their organisation.
Car manufacturing is one of the most interesting examples covered in the Economist piece, with real potential for disruption as well as formidable strengths amongst the established players. Continually increasing customer expectations, high purchase costs and enduring social attitudes dictate that, while car manufacturing may always be relatively low-margin, engineering and design will retain their importance, and are unlikely to become truly commoditised. The automotive industry is over a hundred years old, but that has not stopped customer demand for steady advancements in comfort, performance and economy. Even as the importance of autonomous driving systems, and in-car communication and entertainment continues to increase, that is unlikely to change quickly.
Thankfully for car-makers and other manufacturers of capital-intensive goods, it is a lot harder to build a good car, or a good industrial robot than, for example, a good smartphone. The challenge they face is to effectively define where they add value to the eventual sale, so they can focus on expanding and protecting those strengths. For some, that may mean a radical readjustment of the supply chain, and shifting some stages of production to third parties focused on speed, efficiency, agility or low cost.
If those opportunities exist, then they must be identified, so that the business can concentrate on maintaining and growing margins in areas where its market position is sustainable in the long term. That can only happen if the company leadership can create a precise and detailed map of how the business adds value to its finished product, and a deep understanding of the relationships between the factors which create that value. Strategic analytics of this type has the potential to be the difference between growth and decline in some areas of manufacturing.