AI, automation, robots—industry 4.0 is on everyone's mind. But what does it mean exactly and how can it help to grow your business?
Digital transformation is becoming a key factor in determining future business success, particularly for small and medium-sized enterprises (SMEs). This is partly due to the growing demand for customized design, and partly due to the ever-increasing pace at which competitors in the domestic and export markets are able to innovate.
Even so, many enterprises are still struggling to implement appropriate strategies that would strike the right balance between day-to-day business requirements and structural realignment.
“When I talk to CEOs and business owners about digital transformation, I find that many of them want a turnkey solution and rarely question how it is actually supposed to work,” says Karl Osti, Senior Industry Manager Manufacturing at Autodesk. He emphasizes that digital transformation is a step-by-step process that needs to be initiated carefully.
Sven Dickmans, Senior Technical Sales Specialist at Autodesk, agrees. “Going from zero to 100 in terms of digitalization would lead to a standstill at most companies,” he says. “It’s also important to consider and include the employees throughout the process.”
How to Get Started
The first step towards digitalization involves a comprehensive product lifecycle management (PLM) strategy. This will help maximize the efficiency of operational processes with a roadmap that covers everything from manufacturing to sales.
A good PLM strategy will start by scrutinizing any sub-processes, like preparing a quote. Next, it will help determine which work processes are necessary, how are they are organized, what employees and departments are involved, and what feedback or control loops need to be considered throughout the digitalization process.
“Many processes or milestones won’t even have been identified and first need to be clearly defined so that everyone involved knows what we’re talking about,” says Dickmans. He also advocates digitalizing a small area first. This allows employees to quickly familiarize themselves with the new system and accelerates testing, which saves time-consuming corrections later on.
The Benefits of Digitalization
1. Faster Development Cycles, More Sales
In sales, the adoption of agile product scenarios opens up new ways to acquire more contracts. Examples include faster production cycles and customized product models that are still cost-effective, thanks to modularized manufacturing techniques.
Added-value services offered as part of after-sales services are becoming increasingly important. Osti explains that companies are able to sell a whole range of additional services, including digital twins, remote maintenance, and a digital spare parts catalog, in addition to the physical product. “I’m not only increasing the overall benefits the product brings to the customer,” he says. “I’m also reducing my own costs.” One example he provides is remote maintenance, which reduces the need for service technicians to travel to plants.
2. Improved Innovation
The benefits associated with digital transformation extend far beyond the immediate operational processes. There are also important strategic advantages to digitalization that encourage company-wide innovation.
In many cases, restructuring production and supply chains will reveal an incredible potential for innovation. Restructuring by integrating generative design, for instance, will allow for faster, more efficient development of new components by combining artificial intelligence with design simulation.
Lennard Schulenburg, Managing Director of VisiConsult X-ray Systems & Solutions GmbH, sees the automation of internal processes as another way to use digital transformation to foster innovation. His company, which specializes in manufacturing systems for the non-destructive testing of materials and components for customers in the automotive, aerospace, and oil and gas industries, is currently working on practical implementations.
“The way we currently manage innovation is still quite unstructured,” says Schulenburg. But he believes this is going to change in the near future, as his company’s PLM strategy can support a more structured approach. “A digitalized innovation funnel will allow employees to submit their proposals for improvement via a corresponding interface,” he continues. “These are then reviewed by the R&D department and go into a pipeline.”
3. New Business Areas and Increased Productivity
Digital transformation often leads to significant increases in productivity. Increasing productivity ultimately improves profitability, which stabilizes the company’s financial foundation. This improves the balance sheet and frees up funding for both business development and R&D.
The company’s market position is also strengthened by its reputation for having a long-term commitment to the principles of digital transformation. The company’s own competitive position improves thanks to sophisticated order, production, and logistics processes, as well as value-added services in the after-sales area, turning digital transformation into a real competitive advantage for SMEs.
Extending the value chain also generates new revenue and sales opportunities. Companies that offer new services and products as a result of digital transformation are able to expand their portfolio and benefit from closing market gaps.
Implementing Digitalization with Change Management
A 2020 study by the Boston Consulting Group found that while services generate just 30% of sales, they account for 40% of the gross profit margin for the manufacturers surveyed. The service sector is growing at a rate of almost 30% above that of other business sectors.
VisiConsult is also focusing on offering services to generate additional growth. “In the past, we thought in terms of orders or projects and perhaps ended up finalizing a maintenance contract with the client,” says Schulenburg. “Our primary focus is now recurring revenues from services such as warranty extensions, spare parts guarantees, and even value-added services such as AI-based evaluation algorithms for our systems.”
Schulenburg explains that the equipment his company sells serves as a vehicle to realize these additional services. “I can only encourage every heavy equipment manufacturer to break down their business into one-off sales and recurring sales, and take a close look at the resulting figures,” he says.
Osti advises SMEs to sustainably implement their digital transformation strategy using change management to ensure the successful completion of this process. “As an SME, it’s important to set small-step goals and drive the digital transformation forward at a gradual but consistent pace,” he says. “But you should always be aware that you can’t make the step from sheet metal processor to high-tech company overnight.” Osti believes that SMEs should start their transformation journey by clearly defining their objectives. This requires long-term commitment, but it pays off in the end.