It’s Time to Get Real with Industrial Transformation

Find out about LNS Research's findings on companies' Industry 4.0 transformation efforts, success, and progress.

Diane Sacra, Director of Marketing, LNS Research
Diane Sacra, Director of Marketing, LNS Research

You likely already know of or have been part of the phenomena of industrial transformation if you hold a leadership role within industrial operations. Sure, you may know of this technology-enabled strategy by another name, such as Industry 4.0, or digital or smart manufacturing. But just like that proverbial rose going by any other name, industrial transformation’s mission is the same no matter how you term the concept: to proactively leverage digital technologies to create step-change improvements across the value chain. 

LNS Research, a subject matter expert in industrial transformation, reports that more than two-thirds of surveyed companies have implemented, are currently implementing, or plan to implement an industrial transformation (what LNS Research refers to as IX) program. And despite the challenges of a worldwide pandemic, COVID-19’s effects on business have not seemed to slow down the pursuit of IX. LNS Research reports 78% of companies are maintaining or accelerating their programs in the face of the economic turmoil created by the pandemic.  

Yet, while industrial transformation has been proving itself as a valuable strategy for some time and continues to grow in popularity, LNS research principal analyst Tom Comstock suggests that it’s time for industrial organizations to fully embrace IX and get real with their efforts. 

“One-half of industrial enterprises report they have embarked on an industrial transformation or IX journey. And the leaders in this journey have found very real benefits in the form of increased revenues, lowered cost of goods sold, and increased operating margins,” Comstock said. “These successes have put pressure on the rest of manufacturers to stop playing at industrial transformation and get real building a value creation engine in the form of an IX program.” In fact, Comstock goes on to say “…IX leaders are 72% more likely to have grown revenues by more than 10% and 57% more likely to have reduced cost of goods sold by more than 10% than followers as a result of their IX program.”

So, what does getting real look like in industrial transformation? Comstock advises that industrial companies need to adopt a number of best practices from IX leaders and learn from those who are excelling at industrial transformation programs. LNS Research has identified several of these best practices throughout its research, with each grouping’s best practices having a people, process, and technology dimension to it. These best practices include top-down implementations, engaging business operations, including the entire manufacturing network, IT/OT (operations technology) convergence, balancing short-term and long-term wins, and capturing and analyzing data. 

One of the key differences that an industrial transformation program brings from traditional continuous improvement programs like lean or world class manufacturing (WCM) is its focus on step-change improvement. According to Comstock, the challenging solutions of industrial transformation must be deployed across a manufacturing network that is, “diversified by manufacturing models, culture, operational technology-deployed, and digital maturity.” 

Perhaps one of the most misreported statements about IX is how difficult its implementation can be. From its study, LNS Research reports that only 7% of IX programs are considered “stuck” in pilot purgatory, meaning stalled periods of no progressive movement. In fact, LNS Research has found that more than half, or 57%, of companies report their programs meet or exceed their expectations. These programs typically include distinct initiatives—such as quality, connected worker, digital twins—and are seen as a three-year journey.

Comstock says, not surprisingly, organizational leadership is an essential ingredient in the industrial transformation process. “Industrial transformation should be tightly integrated and aligned with the overall corporate strategy,” he says.  “Senior leadership should be re-imagining business processes and service delivery to seek dramatic improvement in industrial operations and disrupt marketplaces. Meanwhile, the highest levels of the corporation should also be deciding how deeply to engage customers and suppliers in the IX program.” 

The support for industrial transformation seems quite clear. Now, more than ever, is the right time to begin, fully integrate or accelerate your industrial transformation program, depending on where you are today. Comstock boils down this key ingredient for success: “Industrial transformation is no longer a mystery that requires process innovation. IX now simply requires the application of identified best practices to your specific environment and culture.”

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