Why does a manufacturer that has been around for 20 years fail or succeed in the next year? Why does ERP, which supported the business at first, now need to be replaced? Why does your customer decide to buy your product today vs. last year or next year?
At its core, the answer is change. How we move from a current steady state to success or failure is a result of how we respond to change in a way that impacts our fit with the environment.
Competition Drives Change. Exponential Change In Technology Fuels It.
Companies compete vigorously. Change represents an opportunity and a risk to redefine the market. Competitors exploit change in an effort to gain competitive advantage. Nowhere is change more apparent than in technology. Exponential change in key technologies is fertile ground for the creative destruction we see occurring in the economy. Key technologies driving this include: artificial intelligence (AI), Internet of Things (IoT), additive manufacturing, biological technologies, and nanotechnology. As companies experiment and adopt innovations enabled by the rapid change in these technologies, they can alter the way consumers use products and the types of solutions they demand.
The exponential nature of the growth in technology is often overlooked. It took seven years to sequence the first 1 percent of the human genome. Linear thinking would suggest that it would take 700 years in total to complete the genome. But if you look at it in terms of exponential growth, 100 percent is less than seven doublings of 1 percent. As a process exhibiting exponential growth, the full genome was sequenced seven years later. The sequencing of the genome has created new areas of opportunity for pharmaceutical and medical diagnostic manufacturers willing to embrace change.
The Changing World of Automotive Manufacturing
Today there are widely varying predictions about when we will see fully autonomous vehicles in regular use. A look at the underlying technology shows exponential growth. This includes the rapid advancements in deep learning (a form of AI). In turn, deep learning has been enabled by advances in computers, specifically the parallel processing capabilities developed for modern Graphical Processing Units (GPU).
Autonomous vehicles could have a massive impact on auto parts manufactures. Utilization of cars is currently 5 percent. If you combine autonomous vehicles with ride-sharing (something Uber, Lyft, and Grab / NuTonomy are working hard to do) the demand for cars could change dramatically. A recent study based on actual trips taken in Lisbon, Portugal examined the potential impact of autonomous ride sharing. Their findings indicated a reduction in the number of cars on the road by potentially 90 percent. A large reduction in the number of cars needed may not reduce the number of miles driven, but it would impact the types of cars produced (along with their associated parts) and who buys them. Durability (miles driven) would become more important than longevity (time based life span). After-sales service and preventive maintenance would increase in importance. Cars would be more likely to be purchased by ride sharing companies who provide mobility rather than individuals (the cost savings through increased utilization will simply be too great). This shift would change the relative value of members in the supply chain and what they supply. Changes in the underlying technology shorten product life cycles and change customer expectations.
The Fast Nature of Change In Manufacturing
Change can sweep through an industry quickly. The U.S hearing aid industry converted 100 percent to 3D printing in 500 days. Companies that stuck to traditional manufacturing went out of business. 3D printing has the potential to completely change manufacturing and the supply chain. Think about every 3D printer you have ever seen. One thing that is always missing when compared to a traditional manufacturing is finished goods inventory; it truly is JIT manufacturing. It also has the potential to radically shrink the supply chain. Raw materials in, finished goods out.
“The secret of change is to focus all your energy, not on fighting the old but on building the new.” – Socrates
Beyond strategy and focus, creating an agile enterprise that can maintain alignment of people, processes and technology in the face of a changing environment is a critical component to success. Understanding and embracing change are increasingly important survival skills for manufacturers. As you’re probably aware, the manufacturing industry is changing as it faces a worker shortage. Millennials are looking elsewhere for employment and baby boomers are retiring. Millions of manufacturing jobs will go unfulfilled by 2025.