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Do Manufacturers Need Chief Digital Officers?

Posted By Jeff Moad, September 15, 2015 at 4:03 PM, in Category: The Adaptive Organization

On a recent Manufacturing Leadership Council Roundtable call, Dr. Dean Bartles, Executive Director of the Digital Manufacturing Design and Innovation Institute and a member of the Council’s Board of Governors, laid out his vision of manufacturing’s digitized future.

Manufacturing leaders in aerospace and other industries are already using integrated suites of tools that work with product definition data to support tool design, manufacturing process design, visualization, modeling and simulation, and data analytics, said Bartles. This digital future will allow manufacturers to model and perfect production lines based on the digital representations of products to be fabricated, driving down production costs, lead times, tool design times, and change order times while speeding manufacturing planning processes.

More importantly, said Bartles, digitization will bring unprecedented transparency to manufacturing value chains. By combining digital representations of products and production lines with real-time sensor data, manufacturers will be able to transform relationships with customers and suppliers. They will, for example, be able to keep on top of not only how their own products are performing in the field, but also whether their suppliers’ plants are encountering problems that might lead to shortages of critical parts.

In other words, digitization will have the potential to transform manufacturers’ relationships with their customers and their suppliers (More details in the upcoming October 1 Manufacturing Leadership Journal – see www.MLJournal-digital.com )

A compelling vision, to be sure. Unfortunately, it’s one on which most manufacturers today are still unprepared to act. While a 2012 Manufacturing Leadership (ML) survey showed the vast majority of manufacturers—94%--expected some level of end-to-end digitization of their business processes within 10 years, a study by McKinsey just last year said many companies are still struggling to achieve significant levels of digitization. Many, the study said, are unable to calculate the value of digitization and are saddled with inflexible business processes and organizational structures that resist digitization.

Manufacturers on the ML Council’s recent roundtable call echoed those concerns. Manufacturers said that, although they are beginning to factor the potential of digital technologies into their next-generation factory designs, they struggle with how to manage the vast amount of data that sensors and other digital technologies will produce, not to mention how to incorporate legacy systems and non-digital processes into a digital future.

It’s clear that many manufacturers are still just in the early stages of thinking about and planning for how digitization will impact their strategies and business models.

But how to accelerate this process?  In a report issued this month, McKinsey researchers suggested that more and more companies are designating Chief Digital Officers to help guide them into the digital age.  

According to McKinsey, the Chief Digital Officer (CDO, of course) has a daunting brief. First the CDO must see to it that digitization-related opportunities, threats, and trends become an integral part of the company’s strategic planning at the highest levels. That means the CDO must have the CEO’s ear on all matters digital and be able to calculate the value of digitization initiatives in ways that the CFO will buy into.

McKinsey suggests that the CDO must also be able to bring a clear and passionate customer focus to the table and, perhaps most importantly, be able to “increase the ‘metabolic rate’ of the organization” around digitization. For those who do not speak consultantese, that means significantly speeding up the rate at which manufacturers envision and deploy digital initiatives (…and kill the ones that don’t work.)

Ultimately the CDO, as defined by McKinsey, is a disruptive force using new digital technologies and models to deliver value by doing things in new ways.

Which brings us to the biggest challenge that CDOs will face: finding ways to collaborate with existing C-level executives and business unit leaders who may, or may not, wish to be disrupted. The CDO is unlikely to be afforded a large budget or a significant headcount, so he or she must collaborate with the CIO, for example, to prioritize digital platform purchases, and with the head of marketing to construct a new customer experience that is digitally enabled.

According to the McKinsey report, some CDOs say they spend 80% of their time building these peer relationships. “In our experience, successful CDOs have the patience to navigate the complex organizational structures of large businesses,” says the report. “Additionally, they collaborate to get buy-in across functions and are able to diplomatically challenge the status quo and solidify relationships with a broad group of people. They also demonstrate leadership and charisma that excites the organization to drive change forward.”

This, no doubt, constitutes a challenging balancing act and will require a very special type of leader who is both very practical and goal-oriented and, at the same time, able to articulate and inspire others around the promise of a digital future.

But maybe this is just what manufacturers need to jump-start their journey.

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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