Strategy & Best Practices

Business Alignment: Setting the Right Foundation for Your Manufacturing 4.0 Initiatives

By Ideas @ AppDirect / August 9, 2018

Manufacturing Business Alignment Blog

Today, manufacturers are experiencing two trends that are upending their businesses: Massive digital disruption, and the increasing commoditization of hardware that is undercutting the value of their traditional business models.

To overcome these challenges, manufacturers are building digital ecosystems around their hardware offerings, a phenomenon known as manufacturing 4.0. Digital ecosystems allow manufacturers to bring new value-added services and digital products directly to customers, utilize new SaaS based business models that enable them to generate recurring revenue, and reduce churn by facilitating deeper customer touch points.

While the benefits are clear, the process by which manufacturers implement manufacturing 4.0 initiatives is fraught with difficulty. In fact, a recent study found that over 80 percent of digital projects fail. As with any project—especially one that is intended to transform a business—manufacturers need to analyze the foundation of their initiatives and gain alignment before anything happens. To do this, manufacturers must map out the following four strategic elements.

Four Actions You Must Take for a Successful Digital Initiative

1) Explore your unique business requirements: Understand the fundamentals of your hardware. Does the it have the capabilities to support new software and services? What are the business models that align to your current catalog of digital products? Are there new digital requirements, such as security and compliance, that you need to assess?

2) Identify your business priorities and challenges: This element requires your management team to outline the key priorities for your digital initiatives and clearly define any problems. This does not mean making more revenue; these are deeper, more meaningful objectives that should be focused on the development of a long lasting and profitable digital ecosystem. These questions can include: What are new approaches we can take with our customer touch points? Do customers find enough value in our current hardware? Where do customers want us to be with our solutions?

3) Make the build versus buy decision: Once your management team has decided what’s possible with your hardware, as well as the key priorities for your digital initiatives, the next element is centered around assessing whether you can build a solution internally, or if you need the support of an industry specialist to achieve your digital objectives.

To make the right decision, you should ask these key questions: Can you afford launch delays? Do you have the necessary in-house resources to achieve not only launch, but ongoing maintenance as the digital business evolves?

While some take on the challenge in house, it is still valuable to speak to an industry specialist at this stage to understand what is possible given your resources, as well as to uncover what you may have overlooked or underestimated in complexity. You should not thrust your team into billing and global taxation, for example, without proper understanding of these issues.

4) Plan for an ecosystem: No matter what your digital initiatives look like, they are not one-and-done projects. Manufacturing 4.0 brings with it a wealth of new opportunities for manufacturers who look to drive stronger competitive value and revenue. If you’re thinking of digital initiatives as a one-time build, it is likely that they will fail—and you will miss out on one of the biggest opportunities in the history of manufacturing. Instead, you should continually work to evolve your digital offerings with new digital experiences from developers.

If you would like to learn more about aligning your business initiatives for your manufacturing 4.0 projects, download our "120 Day Guide to Planning Your Manufacturing IoT Strategy" white paper, where we outline all the critical questions you should ask. You can also visit our Getting Started On Manufacturing 4.0: Resource Guides to learn about defining success metrics, dig deeper into the build vs. buy question, and get an in-depth walkthrough of digital marketplace strategies.

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