Digital Transformation: Now What?
By Dallas Soukup
A lot of my day-to-day is spent connecting with industrial operators – helping them explore new technologies and think of what’s possible. Once operators select a technology and everything gets moving, eventually the shine of a new toy will fade and these innovations become a way of life – and that’s assuming it goes well to start off, which it usually won’t. A lot of the hesitation around Industry 4.0 is due to a few ill-fated pilots (which were doomed from the start), so by and large most industrial operators have not scaled solutions.
I got some great insight on what scale looks like from my friend Peter Ommeslag, Director of Industry 4.0 at CNH Industrial. Peter is among the primary drivers behind digital transformation in manufacturing at CNH, a $30B world leader in agricultural and construction equipment. Peter shared some great insight on what got the team up and running, and how they are handling some of the hard topics: cultural shifts, data ownership, getting buy-in without immediate ROI, and much more in order to drive the success of the program.
CNH had been running a lean manufacturing program that generated significant cost savings annually for ten years. The company saw digital transformation as a way to continue saving money and boosting productivity.
Manufacturing innovation moves slowly – but successful first-movers have reaped major benefits. Over the last couple of years, CNH factories have been working on around 200 digital projects – they failed fast, iterated fast, and remained lean and flexible throughout the process. They proved that this new digital mindset works even in field as old-school as ag/construction equipment. Some of the more promising projects Peter is working on today include smart mobile robots, additive manufacturing, and VR for optimized training.
Digital transformation is a process, it’s iterative, and it requires a lot of adjustments to get it right.
One of the key points Peter made that really stuck out to me was around change management – it’s challenging to change the way people work, since it inevitably shifts how the business operates. Peter stressed that there isn’t a silver bullet for creating cultural shifts, but that two key questions always must be addressed: “Why do we need this, and what does this mean for each one of us?”
Many of the failures were due to a focus on short-term gains. While the promise of quick ROI is alluring, the damage it causes culturally ends up costing more than it saves. Peter credited success to a mix of short-term objectives to create credibility, and a longer-term vision to enable the workforce in a rapidly changing world.
Enter here the perennial issue: “Who owns the data?” The industry has largely settled on companies owning their own data. That said, there is a balance to be struck – partners and vendors come from a place of trust and collaboration so that vendor technologies can leverage customer data to achieve their full potential.
Investments for the future can be an awkward, but necessary topic of discussion, and innovation budgets for unproven technologies are no exception. For example, additive manufacturing technologies are currently not cost effective for many desired applications – but they will be someday, and those who adapted will be far better suited to adapt ever-shifting customer needs at a more rapid pace. CNH has a separate dedicated team focused on longer-term projects – this team has the freedom to try new things without the need for immediate ROI, and this has been successful. Peter even highlighted that in some cases, they outright didn’t consider ROI when making decisions, and as a result, the organization is far more resilient now than it has ever been.
Peter left me with this: “It is not a question of taking a one-off picture of the situation at a given moment, but a question of constantly adapting to ever changing conditions. It is not about a one-time lesson learned, but about the ability to continuously learn and adjust to the lessons learned.” Digital transformation is a process, it’s iterative, and it requires a lot of adjustments to get it right.
As a result of Peter’s work, CNH is on track to build its factories of the future. We’re going to see more and more this as more industrial companies commit to innovation and push through the growing pains. These companies will be ready to adapt to the challenges of tomorrow and become market leaders, delivering a competitive edge via cost efficiency and enhanced performance.