Today, businesses are presented with a plethora of opportunities arising from digital transformation. However, not all business leaders know how they can turn such opportunities into tangible value for their organisation. The lingering challenge is how they can drive successful digital transformation strategies to improve productivity and ensure business growth.
Increasing productivity can create accelerated growth and profit for businesses. And it also drives economic growth, which in turn creates new jobs and improves living standards. The IMF estimates that GDP in advanced economies would be about five percent higher today if the pre-crisis productivity growth trend had continued. However, a recent IMF report revealed that productivity in developed economies has declined dramatically since the economic crisis and remains sluggish, with political instability, global trade decline and the slow pace of technology innovation being cited as the key factors contributing to the poor results. And while businesses have no control over the geo-political environment, they can control technology deployment in their own facilities and this is where the big opportunity lies.
Our own estimates suggest that digital technologies will deliver $8.6 trillion in productivity gains in the industrial world over the next decade. These innovations promise to bring greater speed and efficiency to industries as diverse as aviation, rail, power generation, oil and gas development, and healthcare delivery. They hold the promise of stronger economic growth, better and more jobs, and higher living standards.
But how can business leaders drive successful digital transformation strategies to improve productivity and ensure business growth?
Embrace the Industrial Internet to improve productivity
There are countless ways to improve productivity and a plethora of software solutions which can help you achieve this. However, finding the right technology for your business does not need to be overwhelming. Focus on understanding your strengths and weaknesses as a business and identifying the clear outcomes or improvements you need to drive in your company. And use this as your guiding principle to select the Industrial Internet of Things (IIoT) technologies that will drive those improvements. IIOT is one of the best ways to improve productivity across industries.
The Industrial Internet, which connects machines, product diagnostics, software, analytics and people, is worth about £173 billion globally, compared to the consumer Internet, which is valued at about £131 billion.
The deeper meshing of the digital world with the world of machines holds the potential to bring about profound transformation to global industries. We call it “the power of one percent”. In the commercial aviation industry alone, a tiny one percent saving in global aviation fuel usage would yield an enormous savings of about £23 billion over 15 years. Likewise, a one percent efficiency improvement in the global gas-fired power plant fleet could yield over £50 billion savings in fuel consumption. These are jaw-dropping figures based upon tiny percentage gains. The real savings are likely to be much greater.
Our own experience from fully embracing the Industrial Internet is a testament to this. Thanks to rolling out digital industrial apps developed on our IIoT operating system Predix, we managed to achieve $1 billion in efficiency gains in 2017 across our factories globally.
Accelerate business change
When we started our digital transformation in GE eight years ago we found that our business was at risk of being disintermediated by software companies. To tackle this challenge, we looked at how we could reorganise our business to make it more agile. Digital transformation cannot happen without organisational change, so we reorganised our business by looking at what the most disruptive Silicon Valley companies were doing to move so quickly and adapting it to our environment.
In an industrial setting, it’s essential to manage risk – but that can make organisations slow. So we created a culture around “fastworks”, a simple agile methodology for creating value quickly at the lowest possible cost – without losing sight of the critical requirements of assets like jet engines and wind turbines. It allows us to fail small and often – but most of all to learn fast. It lets us build teams around problems quickly, at low cost – and then when we know we have the right answer, we can invest and scale very rapidly. Traditional hierarchies simply don’t let you move that fast, and you need to adapt quickly to be a truly digital industrial company.
To be able to accelerate innovation and business change, businesses leaders need to learn to move faster – to decrease the time to launch new services and products. And thus you need to create a business structure that is adaptive to change and speed. This means moving away from the traditional “proof of concept” approach and adopting agile frameworks for managing IT projects and organisational change. This requires taking people out of their functional domain and moving away from the command/control management style that dominates traditional working environments. By incentivising people to work together and to think out of the box, business can drive collaboration and innovation, which in turns improves productivity.
Collaborate to encourage innovation
As we worked to advance our digital transformation, we realised that encouraging innovation only within the four walls of the organisation is not enough to keep you ahead of the competition. If we look at the most successful players in the consumer Internet market, such as Amazon and Uber, we’ll see that they all created broad ecosystems of technology platforms and partnerships that foster collaboration. The faster these ecosystems grew, the more value they created for their members (the developers) and end users. That’s why we started developing an open ecosystem around our Predix platform to nurture a community of systems integrators, technology partners, independent software vendors and developers – to grow and scale the Industrial Internet of Things.
Once we started to see the benefits and the results from these changes, we started to use what we’ve learned to help our customers in their digital journeys.
For instance, we worked with the Dutch Chemical Company Akzo Nobel to help them optimise the value of their manufacturing processes. At the beginning, they were not able to trace customer deliveries back to specific batch numbers, so they wanted to achieve more visibility into the origins of the raw material, process and finished product data.
Aggregating their data in our brilliant manufacturing system enabled them to optimise their capacity and achieve an increase of 20%. It also enabled them to better spot key production trends and optimise operations.
Don’t focus on the cost, focus on the long-term benefits
When thinking about new technology investment many organisations are focussing too much on the cost. This often prevents businesses from making the right decision when it comes to investing in the technology that creates long-term strategic advantage for the business. Short-term criteria can hamper the success of the long-term business strategy. Investing in technology can drive continuous improvements across the business and the long-term benefits and total value that the technology can drive must be taken into account. Businesses often source IIOT technology like a cost to manage down, rather than an investment from which to manage yield.
For instance, the UK-based factory of Cristal Global (SA) implemented our digital Asset Performance Management (APM) and Integrity Management technology to drive continuous improvement. This enabled Cristal to implement “just-in-time” training, focussing education on the knowledge needed at different phases of implementation. As a result, Cristal Global was able to reduce the risk of equipment failures by an estimated £2.12 MM per year. By looking at the long-term benefits of the technology the company also developed a 10-year projection, which indicated a 56% reduction in required inspections and overall savings of £3.31 MM over 10 years in inspection costs.
Similarly, we are working with Intel to implement long-term digital improvements which complement the infrastructure at their Ocotillo’s semiconductor manufacturing facility. These improvements will make the manufacturing facility smarter and more connected, resulting in improved emissions management, facilities reliability, manufacturing capacity and OT enablement. Intel is expecting $5MM savings per year across all its facilities based on small set of use cases.
It’s all about the people
The World Bank recently reported that within 20 years, 90% of all jobs will require digital skills. Finding people with the right skills is one of the key challenges facing modern organisations. To be able to nurture and encourage new tech talent, organisations and governments need to invest more in training and R&D to create a pipeline of tech talent that can fill the skills gaps that exist in all European markets.
To achieve this, companies need to work alongside governments and educational institutions to establish a technical education system that is fit for the needs of businesses today and capable of adapting to the changing skills market. In particular, we need to focus on maths and other (STEM) skills. But we also need work-study programmes and apprenticeships that deliver real technical skills.
Second, we need to invest more in on the job training on an ongoing basis. This includes regular training and upskilling, but also investing in retraining schemes that support and encourage employees to expand their skillset and deliver the tech skills we need.
In conclusion, it’s all about agility and change
By making the most of people’s skills and adopting an agile approach to business management, organisational change and technology innovation, businesses will be able to better respond to the challenges of their market environment and achieve a strong competitive advantage that allows them to stay ahead of the competition. In the next couple of articles I’ll explore which industries are leading the way in driving productivity and will look more closely at some of the biggest opportunities in this space.[/ms-protect-content]
About the Author
Deborah Sherry is the Senior Vice President and Chief Commercial Officer of GE Digital in Europe. Her division delivers cloud-based solutions that connect industry, transforming industrial businesses into digital industrial businesses. Prior to joining GE, Deborah has had experiences with companies such as Google, France Telecom Group (now Orange), Samsung, and Citibank in London. She holds an MBA from the London Business School, an MA (Hons) Law from Oxford University and a BA from Columbia University. She is a strong supporter of diversity, promoting equality for women and the LGBT community.