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Beacons of light for Asean manufacturers

A WEF-McKinsey study identifies 16 "lighthouses" that can act as a guide to others on how to get the most from 4IR technologies.

NO longer the stuff of technological aspiration, the Fourth Industrial Revolution is here. To reap its potential rewards, the time for Asean manufacturers to act is now.

Asean manufacturers are no strangers to the Fourth Industrial Revolution (4IR) - popularly referred to as "Industry 4.0" in our region. Heralded as the growth engine that will reverse a decade of stagnation in global productivity in manufacturing, 4IR is powered by emerging technologies such as advanced analytics and cloud computing, among others. The World Economic Forum (WEF) estimates that by boosting productivity on factory floors all over the world, 4IR technologies will create up to US$100 trillion in value in the next decade across all sectors.

At the World Economic Forum at Davos, Switzerland, in January, among the topics public and private sector leaders gathered to discuss is how to accelerate inclusive growth among the world's manufacturers. There we presented our recent collaboration with the WEF on the "Fourth Industrial Revolution: Beacons of Technology and Innovation in Manufacturing". The report identifies 16 manufacturers as "lighthouses" - organisations that can act as a guide to others on how to get the most from 4IR technologies - and sets out the quantum leap needed for success in today's potentially volatile environment.

A US$627B BOOST TO COME

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As the fifth largest manufacturing hub in the world, Asean has a chance to capture their share of 4IR rewards - predicted to be worth between US$216 billion and US$627 billion by 2025.

In recent surveys of Asean business leaders, we see that 79 per cent are aware of 4IR and its prospects, and more than 90 per cent believed that new business models and an improved business performance would result from the focus on new technologies. Yet, only 13 per cent said their companies have begun any form of digital transformation required, citing obstacles such as an unclear business case, cybersecurity worries, and the most telling - a chronic inability to turn pilot projects into full-scale change.

These hurdles mean that Asean manufacturers have a lot of ground to cover, and the clock is ticking.

So just what are these lighthouses getting right?

Several common attributes connect these 16 organisations. Firstly, they're embracing the three technological megatrends: connectivity, intelligence, and flexible automation. Most importantly however, they're doing it at scale. This means they do not get stuck in the "pilot purgatory" trap, in which small scale trial follows small scale trial, never expanding beyond a single business unit. Instead, multiple use cases are rolled out quickly, with more following close behind thanks to agile working methods.

Collaboration also features highly on the agenda of lighthouse organisations, showing itself in several ways. Organisations that collaborate with governments and academic institutions to create both the infrastructure and the skill sets needed in the new industrial era will be well positioned for success. Good news for Singapore, whose government was recently recognised by a separate World Economic Forum report as "the most future-ready" - evidenced by its adaptation of legal frameworks to new business models within a stable business environment. The same report also pointed to Singapore's openness and collaborative mindset as features that will help it succeed on the global stage.

As well as broader, external collaboration, many lighthouses promote this characteristic internally through the democratisation of technology. When people "on the ground" have ownership of 4IR tools, they are more likely to use them to create their own solutions. One example comes from Schneider Electric's plant in Le Vaudreuil, France, whose plant operators are empowered to make decisions based on data directly accessible from sensors. This frees up the capacity of plant managers, so they can focus on benchmarking and analysing their data to drive improvements for the factory. Combining technology with expertise creates insights that can increase productivity and efficiency throughout the value chain.

Finally, despite myths that human capital will be displaced by new technologies, it is people who remain key in 4IR: instead 'upskilling' is the critical task. Even relying on external specialists can quickly become too impractical and expensive to sustain for long-term digitisation.

Tata Steel's IJmuiden plant in the Netherlands thus set up an Advanced Analytics (AA) academy. To date it has trained more than 200 employees, ranging from data scientists and data engineers through to digital "translators" - who make sure the AA and business teams understand each other - and managers, who now need a sound understanding of digital as well. By reinforcing a collaborative mindset, these types of learning programmes create more interesting and diverse workplaces that can attract the best and brightest to careers in manufacturing.

We see incredible amounts of enthusiasm among manufacturers for the benefits promised by 4IR technologies, but little progress on factory floors. In the same way that the Internet revolution saw leaders capture great first-mover advantages, we predict a similar outcome from this new revolution. Companies that wait for better or cheaper technology will suffer serious consequences and be unable to catch the frontrunners - many of whom have already accumulated a 12- to 18-month headstart.

Increasingly, conversations among Asean manufacturers about the 4IR have moved from "why?" to "how?". The next stage is more critical: To fully commit to innovation. There is the potential to capture exponential value. But only if we act now.

  • The writer is chairman, Asia, McKinsey & Company.
  • The WEF-McKinsey report "Fourth Industrial Revolution : Beacons of Technology and Innovation in Manufacturing" can be found at http://www3.weforum.org/docs/WEF_4IR_Beacons_of_Technology_and_Innovation_in_Manufacturing_report_2019.pdf