Future Ready, The Four Pathways To Capturing Digital Value, by Stephanie L. Woerner, Peter Weill, Ina M. Sebastian, Harvard Business Review Press 2022

"The digital era is a great opportunity for leaders to reinvent the firm.  The most successful firms will become future ready, developing ambidexterity:  constantly innovating to improve customer experience while also reducing costs," Stephanie Woerner,  the Director of MIT's CISR (Center for Information Systems Research.

For U.S. manufacturers, the drive toward digital transformation is fierce, but not all producers, say the authors, are ready for the kind of change that will put them among their top competitors.  The authors offer four pathways to success - 

1.  Pathway 1, Industrialize

2.  Pathway 2, Delight Customers First

3,  Pathway 3, Alternate the Focus, like Stair Steps

4.  Pathway 4, Create a New Unit

The authors' company examples include large and small firms; sometimes it helps to have good examples of the winners who continue to improve their systems presence, and sometimes bad examples of corporate misses are more powerful. The authors point out that of the firms the MIT Center for Information Systems Research (CISR) works with are some very large companies with more than $20B annual revenues.  For these larger firms the process of moving from "silos and spaghetti" is more difficult; of 350 publicly traded firms with average revenues of $29.5B, the results were "very sobering."  In fact, only 9% of the large firms, compared to 22% of average firms, had made it to future ready.  "The good news," however, per the authors, was that "the 9% of large firms that made it into future ready were also the top performers."  

All of which points to continuing challenges for most larger manufacturing firms.  The push is to move from "silos and spaghetti" to an industrialized, platform-mindset.  Leadership and culture issues aside, it looks like manufacturers, particularly big ones, for the next five - ten years will continue to be technology platform challenged.  

Although the news isn't all bad for manufacturing's journey toward digital transformation, the challenge is daily.  Future Ready's authors focus on Kaiser Permanente and Tetra Pak to show how organizations  can progress along the first of the four pathways - Industrialize.    "...35 percent of manufacturing and heavy industry firms in our latest survey pick this pathway...In contrast, only 16 percent of education, not-for-profit, and government enterprises pick pathway 1, with similar percentages for banking and insurance firms.  The technology industry has the highest percentage of firms picking pathway 1, with 42 percent of firms pursuing this pathway, typically rebuilding a series of platforms first and then (re)exploiting them by creating new and better offers "   The choice of platforms is key, and the authors ask decision-makers when they think about platforms, to ask "what you will do better than anyone else" and proceed from there to turn platforms into reliable, low-cost, standardized and reusable digital services to capture customers.  That's really what all this digital transformation business is about - capturing and retaining customers despite enormous digital and integration challenges for manufacturing.  

Some companies have just about pulled this off, say the authors.  Tetra Pak, a large manufacturer of food and beverage packaging producing over 183B packages a year, chose to integrate products and production from over 160 countries through automation accompanied by standardized strategies.  Key here is what former CEO Dennis Jonsson describes as the company's unified approach:

    Our starting point is strong.  We already have a range of industry-leading activities underway in the digital area; we have put in place a single shared platform on which we run our entire global business;          and we have lean and modern IT operations in many areas that provide a solid foundation on which to use information as a strategic asset.

For years Dick Morley and I hammered systems integration for manufacturing, starting with his trail-blazing creation of the PLC, because we knew that human brains could only take manufacturing so far.  To really compete globally, we knew the US would only survive with fully integrated manufacturing information systems paired with robots and advanced distribution systems.  Twenty years later, it looks like manufacturing is in the advanced software integration zone.  Dick would be pleased.  

Patricia E. Moody

FORTUNE magazine  "Pioneering Woman in Mfg" 

IndustryWeek IdeaXchange Xpert

A Mill Girl at Blue Heron Journal, on-line resource for business thought-leaders and decision-makers,  patriciaemoody@gmail.com