What Drives Change and What Does It Take to Succeed in The Digital Future
An interview with Jerry Zhang, Technical Director, M&M Software
Q: What are the key drivers and challenges for factory automation system suppliers and manufacturers today?
Jerry Zhang: Generally, for users of manufacturing systems, there is a lack of financial support for hardware and software development in factories; most of the budget goes to real estate and other overheads. Hence, there is a resistance to investing in upgrading manufacturing systems.
From device and system suppliers, we hear two common refrains: margin pressure, and urgency and anxiety around adopting digital technologies in their products. They feel pressure from manufacturers to reduce prices as manufacturing margins are thinning, and new competitors with new business models are entering the industry to make their mark on their customers’ value chains. At the same time, there is an increase in costs – labor costs, material costs, operating costs, and cost of capital. As the hype surrounding digital technology and digitalization grows, there is a sense of urgency to implement new technology, but due to the lack of corresponding growth in concrete business cases, there is also anxiety around how much value can actually be drawn from these technologies. This usually results in a deadlock situation in which both the supplier and the user want to “do something around digitalization”, but are not sure of how to proceed.
In China, we also see a unique issue of different development speeds of hardware, software, and middleware. Software is growing very rapidly with a lot of advancements in IoT and connectivity, but hardware and middleware are not as dynamic. China is a unique environment where adoption is faster than other markets because of a general disposition towards implementing new technology – for example, many customers in China request mobile apps as opposed to other countries where they are satisfied with desktop functions. Fundamental hardware is growing too slowly to be able to support these new software innovations and leads to generation problems and limits the functionalities of software applications in industrial settings.
We can say that change is driven by business pressure and an awareness of the opportunities presented by emerging technologies.
Q: What are some actions that industry players can take to overcome these challenges to digitalize effectively?
Jerry Zhang: Organizations are made of people and processes, so the first step is to ensure that people are convinced of the business value and to implement processes to support that. From our experience, it can be done the most effectively by taking a widely accepted use case, such as predictive maintenance, and making a pilot project from it, perhaps for one product line or model.
When designing the components of this pilot, it is also crucial to design components in a way that allows them to be used for other projects, so that it facilitates the expansion of the pilot.
To prove business value when piloting a concept, it is very important to build an end-to-end solution so that the user can experience the full benefits, and imagine how it would be to implement it at full scale. To address the issue of financial support, it is important to track KPIs so show quantitative results internally, as well as demonstrate the technology to external customers to garner their support as they are the ones ultimately paying for it.
Q: What are some factors that contribute to the success of a digitalization project?
Jerry Zhang: It is very important to keep abreast of the new use cases that come from new or existing technologies. Of course, software providers and system integrators can provide expertise on technologies, but it is important to understand the business value of what technology can bring because only the company itself can understand their internal processes and challenges the most. In the same line, it is important to be able to articulate internal processes and constantly be aware of areas for improvement in these processes. There is a lot of expectation on digital technology to make big leaping improvements, but most of the time, it would be incremental improvements that add up to big improvements over time.