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Re-inventing Asia-Pacific's industries
- Gianfranco Casati, group chief executive – growth markets,Accenture;
- Samuel Garcia, vice-president – product supply, P&G Asia-Pacific;
- Sachin Gupta, chief of IoT capabilities, Rolls-Royce;
- Low Ming Wah, chairman,the Singapore Precision Engineering & Technology Association (SPETA);
- Gerd Schenkel, digital practice leader, Partners in Performance
THE Fourth Industrial Revolution - and its associated breakthroughs in artificial intelligence, advanced materials, cloud computing, mobile connectivity, the Internet of Things, robotics and more - is transforming the world of manufacturing.
As change unfolds on an unprecedented scale and at a dizzying pace, The Business Times hosts the following virtual roundtable, posing five questions to five industry leaders on what this latest wave of industrial transformation might mean for businesses and policymakers in the Asia-Pacific region.
Question 1. Are there challenges unique to manufacturers pursuing industrial transformation in the Asia-Pacific? Are there aspects of North America and Europe's Industry 4.0 experience that may not be as relevant to this region?
Gianfranco Casati: Obviously, looking to see how North America and Europe transform some industries, and choose to not pursue others anymore, is instructive - but it's limited as well. A lot of what Europe and the US are doing is about transforming existing infrastructure and business models; both are not necessarily required in APAC economies which "leapfrog" straight to newer technologies and ways of doing business. In short: every country has a different starting point, a different set of challenges and a different goal post.
For China, digitisation of industrial transformation is part of a national agenda: China's Made in China 2025 policy objective has put a heavy focus on technology. Similarly, there is a powerful incentive to embrace digital solutions such as artificial intelligence and robotics in Japan where an ageing society directly translates to a dwindling workforce. These are big incentives to leapfrog forward and embrace innovative solutions to manufacturing.
Asean and India have not been traditional manufacturing hotbeds, but that doesn't mean that in the future, where IT capabilities are required and already exist, they won't become bigger players. The world of manufacturing is being redefined and therefore so is the landscape of where it will be best performed.
Gerd Schenkel: In general, the digital economy is a global one, so differences across regions tend to be smaller rather than larger: digital platforms tend to be global platforms; data moves faster across geographies and so on. The Asia-Pacific region is probably more geared towards exports rather than production for local consumption, so cross-border communication and trade is likely to be more important. This should mean that Asia-Pacific will benefit disproportionally from Industry 4.0 concepts compared to more domestically-oriented economies.
Samuel Garcia: Asia-Pacific is highly diverse, ranging from technologically advanced and high-cost manufacturing countries, to labour intensive and low-cost manufacturing countries. This poses two unique challenges.
One, while Asia has proven to be quicker to embrace digital technologies, the diversity and fragmentation in the region makes achieving an end-to-end synchronised supply chain more challenging. Connectivity quality varies greatly from country to country in the region, resulting in a fragmented and disconnected data network.
Two, diverse economies within the region require even closer collaborations between private and public entities, and across countries. For example, talent with Industry 4.0 expertise is concentrated in regional hubs and must be exported across the region.
Sachin Gupta: Diversity is both Asia-Pacific's biggest strength and weakness. The technological challenges each individual country faces are unique. Manufacturers have to face up to this complexity in order to pursue industrial transformation effectively - especially if their value chain stretches across different locations. Moreover, integrating diverse supply chains into today's digital transformation journeys can be challenging. It is a long-term process that requires not only technological change but shifts in process and mind-set.
Individual countries also define Industry 4.0 according to their own terms. For instance, one of the focuses for Thailand 4.0 is smart farming while Singapore manufacturers have to contend with smaller floor spaces and learn to "work more with less". The supply of tech talent is also an issue, especially with the varying access to quality education. It can be a challenge to impart STEM (Science, Technology, Engineering and Mathematics) know-how and skills in countries with larger rural areas.
Low Ming Wah: There are definitely challenges - not problems, but challenges - in every country, when it comes to industrial transformation. Differences in political and economic conditions, skill levels, as well as cultural and regulatory differences will affect the way industrial transformation is communicated and implemented. For better results, we need to understand the differences. The intent and purpose will be the same. But the differing technological levels of products and services determine how relevant they will be.
Q 2. Some say the advent of artificial intelligence and digitalised factory processes could spell the end of 'Factory Asia' - Asian economies that industrialised by wooing foreign investment with relatively low cost, lowly-skilled labour may not do so for much longer. What are the largest obstacles small and medium-sized manufacturers in the region face in embracing Industry 4.0? What practical steps can they take?
Mr Garcia: Some companies take a technology-first approach - eager to invest in the latest technologies and building major platforms while focusing too little on use cases. Other companies are slow to adapt - concerned about automation and robotics and its impact on jobs on the factory floor. Here are three practical tips for SMEs.
One, build IT and data architecture to allow rapid deployment of new digital solutions. Using data effectively requires the right data architecture, built on a foundation of business requirements. Consider not only addressing the immediate needs, but also the sustainable creation of mid- and long-term capabilities through IT and data architecture.
Two, "Test-Learn-Do" internally. Adopting digital technologies can be costly and even bigger companies like P&G do pilot tests with clear success measures before full implementation, or Test-Learn-Do. It is critical that the organisation's culture enables experimentation and learning from both successes and failures to be able to transform the business.
Three, embrace new ways of partnering externally. Industry 4.0 is a shared vision and we can build and benefit from collaboration. Co-innovation helps companies create digital solutions faster and more efficiently by bringing together different companies and industries to share expertise and development costs.
Mr Casati: What we are seeing right now is a rearrangement of the field. As China moves up the value chain, we have seen some of the less digitised, more labour-intensive manufacturing move to other parts of Asia, such as Bangladesh and Vietnam. Many of the SMEs in China already embrace robots and have begun digitising their factory processes with basic AI.
The challenge for SMEs, and for larger manufacturing companies, will be recognising that investment isn't just in machines and technology - it is in continuous education. The most practical step businesses can take is allocating funds wisely: for digitisation and continuous training.
We must also not forget that countries such as China, India, Thailand and the Philippines have nurtured a highly productive pool of human resource in the field of software and coding that will drive 'factory Asia' in the digital disruption era. Growing availability of off-the-shelf solutions, software, and cheap hardware is transforming many software engineers into entrepreneurs who are helping SMEs digitise affordably.
To take advantage of this trend, the top management at SMEs must consciously think of building an ecosystem of customers, vendors, innovators and startups that will help them digitise their processes and build new offerings at speed and scale. They must constantly focus on building digital skills at all levels of their businesses and put in place metrics that will measure the digital rotation of the company in terms of its revenues, product mix, process mix and so on.
Mr Gupta: Speed of disruption and lack of tech talent are some of the biggest challenges that manufacturers face in the region.
While small and medium-sized companies are the ones driving digital disruption, they have to constantly stay ahead in order to not get swept under the change they create. To use a non-manufacturing example, new business models such as Grab and Uber swiftly affected Singapore's traditional taxi business. It is important to disrupt yourself constantly in today's climate.
The supply of tech talent is another challenge for small and medium enterprises. Apart from dealing with scarcity, they will have a tougher time attracting the available pool compared to larger and more established brands. Hence, the most important step they can take is to cultivate a collaborative and agile mindset. Teams need to go beyond their comfort zones and be open to technologies such as automation to help them process simpler tasks. This frees them up to pursue more value-adding activities. Meanwhile, partnering other businesses or bigger players will help smaller players fix their gaps mutually while facilitating transfer of knowledge and skills.
Mr Low: The biggest concern for SMEs is whether embracing Industry 4.0 benefits them more than it costs them. Most SMEs are in high-mix, low-volume businesses, supplying indirect materials. Quite a number of them may have automated machining cells with a few machines, but many smaller ones are still very manual and have not reached even a stage of basic automation.
SMEs may not need to implement a full slew of Industry 4.0 technologies as their businesses may not require it. Certainly, changing of mindsets, upgrading of skills and optimising with digitalisation are musts to improve efficiency and stay competitive.
Mr Schenkel: Manufacturers of all sizes need to adopt new digital technologies to stay current. Asian-based manufacturers have more to offer than just low labour cost: they are also integrated in the global supply chains, for example.
Digital technologies to be adopted range from low tech (such as exchanging demand data) to high tech (such as AI and automation), and they cover actuators (such as robots and drones) and data analytics and software.
Smaller manufacturers might struggle with the required investments to stay competitive. It is therefore even more important for them to be focused and selective in their investments.
Q 3. How might the policymakers of Asia-Pacific's economies further catalyse adoption of Industry 4.0 type technologies, strategies and initiatives? Are governments in the region responding swiftly enough to the accelerated pace of innovation and change, in terms of regulation and their industrial policies?
Mr Gupta: Collaboration will be the catalyst. Policymakers and governments must constantly adopt a mind-set of cooperation and partnership. In this way, they can bring together teams with a diverse set of skills, backgrounds and industry knowledge.
They will have more perspectives on a single problem, leading to better solutions that have a real positive outcome on the economy and societies. It's not so much a matter of responding swiftly enough, but that collaborative spirit of continuous improvement and evolution is what keeps countries and organisations ahead.
Mr Casati: Policymakers can and should signal to their industries that adopting new technologies is essential. And we are seeing this, with Singapore's Smart Nation agenda and China's Made in China 2025 ambition. In addition, policymakers need to assure industries that they will have the workforce available to them prepared for a new digital world order.
This is achieved through education. Ultimately, most of our education systems were designed for an industrial age - to generate engineers, administrators and academics. Education systems need to be prepared for the inevitable future of intelligent systems. Here are three areas policymakers could focus on when redesigning the education system.
One, schools should seek to build lifelong learners. This means more project-based learning, where getting something wrong is seen simply as a step on the learning journey, not a signal that we are "no good at maths". And it means encouraging collaborative or team work in school.
We also need to build well-rounded learners. That's because the skills needed in the workforce will be more broad and complex. In the past we just needed an engineer to be good in a lab. Now that engineer needs to present his or her work to non-engineers in a comprehensive and comprehensible manner. This requires creative and socio-emotional intelligence. Marketers, on the other hand, historically may have been known for their creative skills and EQ, but now they are expected to deep dive into data. Schools need to focus on developing well-rounded students, as a result. And policymakers should make that a priority, not an option.
Finally, we need to enable learning through technology. Today, interactive, engaging platforms such as group work via laptops and mobile phones are the norm. Going forward we should focus on more use of artificial intelligence, artificial reality and new technologies such as blockchain as part of the learning experience because they most certainly will be part of the work world as well. Again, policymakers should make technology in schools a required building block, not a nice-to-have.
Mr Garcia: Every country faces challenges that cannot be resolved by the private or public sector alone. Expertise from both sectors are required, and innovative approaches are needed to accelerate transformation. We need to have a collaborative public-private ecosystem that complements traditional models and can help quickly and effectively form partnerships that unlock new value for both government and companies.
Regulation and industrial policies need to be pragmatic to enable and accelerate the pace of innovation in the new areas of artificial intelligence, Internet of Things, manufacturer of the future, and advanced robotics for agile development.
To attain success eventually on disruptive and exponential technologies, it is important for the industries and government to create an ecosystem that is open to experiments and creates more opportunities for the manufacturing companies.
Mr Schenkel: Manufacturers need to expand their capabilities to also include data, analytics and software. Governments ought to consider how they can help the manufacturing sector adopt these new technologies, either through subsidies, centres of excellence, or knowledge transfer mechanisms.
Q 4. Klaus Schwab, chairman of the World Economic Forum, said that with the Fourth Industrial Revolution, and the potential and disruption it brings, businesses' most important strategy will be 'to experiment more, while simultaneously investing in people'. Do you agree and how do you see this playing out in your own organisation/industry?
Mr Gupta: Yes, and I'll add 'with a focus on impact' as another component. It's important to make sure that experimentations and people investment are driven by actual outcomes. This is one of the strategies we use at Rolls-Royce and with our partners. At our Smart Manufacturing Joint Lab, researchers, technicians and business leaders come together to identify areas of improvement in existing processes, trigger research projects and guide them with an agile, gated approach. This means we consistently review projects according to changing market needs, re-focus our investments if need be and target our efforts to solutions that will lead to positive change. With this agile methodology, it helps us stay connected with real industry circumstances and ensure better return on investment.
Mr Casati: I fully agree with this and cannot underscore enough the importance of investing in people. At Accenture we have already invested over US$900 million, reskilling 250,000 of our people over the past three years.
Digital-savvy companies should also roll up their sleeves and help invest in training workforces in their communities. In the Philippines, we are about to launch a Skills to Succeed Academy, a free, digital, interactive programme which aims to support disadvantaged young people to build the skills and confidence needed to make career choices and develop the key employability skills they need to find and sustain employment.
Technology is only useful if it can be used. That requires continuous education and companies should start with their own people and those in their communities.
Mr Schenkel: Experimentation is important in software-driven activities: the cost of being late is much greater than the cost of failure or error correction. At the same time though, whilst software is going to drive most activities, people will become more important, not less important: people will design and train machines to execute their directions; and people will make only the most important decisions.
Mr Low: I totally agree! We need to put our people first, empower them and constantly remind ourselves that all of these new technologies are first and foremost tools made by people for people. Our government emphasises the need for SkillsFuture to provide Singaporeans with the opportunities to develop their potential throughout their life, regardless of their starting points. We have used the SkillsFuture programme to reskill and upskill our existing and new employees.
Q 5. Which are the most significant and game-changing aspects of industrial transformation (eg, industrial IoT, artificial intelligence, digital factories, additive manufacturing etc) for your organisation/industry now? Which do you see as being particularly transformative for manufacturers in the Asia-Pacific region?
Mr Schenkel: We believe that the digital abstraction of physical processes will be the biggest game changer, not physical actuators themselves. The smarts embedded in algorithms and software decision-making tools will make the biggest difference to performance.
Mr Casati: We find that the most game-changing aspect is not so much one particular technology - but the right combination of technologies that unlocks both higher efficiency and new growth.
Our research has shown: The real winners are the companies that figure out which combinations work best for them, and then leverage the right way. So, it's not "are you using AI?". It's "are you combining AI with IoT, analytics, and mobile computing to make your workforce safer and more efficient - and are you selling some of your new solutions to your customers, too?"
Asia-Pacific companies that can master this kind of value- and customer-centric technology combinations will reap the most rewards. The potential for change, growth and prosperity is still tremendous, and is why the potential for the re-invention of APAC's industries is so huge.
Mr Garcia: The consumer goods and retail industry is a highly competitive industry - and at P&G, we aspire to lead in digital. We believe many aspects of the industrial transformation are relevant in our business, and we use different technologies to improve every aspect of our business to better serve our consumers.
Consumer and customer requirements are exponentially changing, impacting manufacturing and our entire supply network. At P&G, we are leading manufacturing of the future, creating an end-to-end synchronised supply chain which allows for seamless collaboration between P&G, suppliers and customers. We believe that such a supply chain will be very transformative in Asia-Pacific. How we connect the different nodes and execute with excellence will lead not only other companies in the region, but also in the world.
Mr Gupta: Without a doubt, artificial intelligence and machine learning have the most potential to change the face of the industry in the long term. As AI capabilities become more developed and intelligent, the range of applications will grow exponentially as time goes on.
But amid the hype, we should not overlook innovations in industrial IoT, digital factories and additive manufacturing. They are the ones that will drive productivity, speed and competitive advantage.
At Rolls-Royce, we are looking into IoT sensors that can withstand the high-pressure/temperature environments of engines. This sensor network will give us the insights - in the air and on the ground - to improve performance.
Meanwhile, digital capabilities like simulation and modelling can help speed up engine development times and robotics can help improve the precision of the manufacturing processes. These transformations across the value chain will help drive enhancements end-to-end and ensure better services and solutions for our customers.
Mr Low: The smart or digital factories today represent a leap forward from more traditional automation to a fully connected and flexible system - one that can use a constant stream of data from connected operations and production systems to learn and adapt to new demands.
The results are a more efficient and agile system, less production downtime, and a greater ability to predict and adjust to changes in the facility or broader network, possibly leading to better positioning in the competitive marketplace.