There is no more exciting sector today than industrial products. So much opportunity. So much dynamism.
So much disruption.
Yet, amid all the new business strategies, tools and processes that will make a more competitive future possible for you, there is a dark underbelly: you do not get to that future without ripping up a bit of your present. No matter how much — or how little — transformation you have undertaken, you are probably asking the same question every industrial company has grappled with.
How does one plan for future economic viability while sustaining current economic viability (and shareholder obligations)?
Within the EY organization, we call this the industrial products “balancing act.” From our experience, working with hundreds of clients on the challenges of achieving future-readiness for success in the Transformative Age, we have compiled three organizing constructs that should help minimize the disruption.
Make the Right Bets
There are so many initiatives you can take — and so many variations you can take on any one area of transformation. But we have identified six “big bets” that hold the most potential to heighten competitiveness, both now and into the future:
- Customer connectivity
- Supply chain reinvention
- Talent and culture
- Big data and analytics
- Digital assimilation
- Enterprise protection
None of these transformation targets are likely to surprise you. You’ve probably already dabbled in all six of them. In fact, according to the EY Industrial Products Continuous Innovation Study 2018, 31% of respondents say that big data/analytics will be most influential on their business over the next three years.
Further, many industrial companies are embracing digital technologies: 38% of our survey respondents’ innovation budget focused on digital skills. But the leading companies are developing multi-faceted strategies across these big bets including digital transformation, embracing cultural change, evolving business models and revolutionizing their customers’ experience. At one EY client, major initiatives have been launched in multiple areas. It has deployed digital technologies throughout its operations, which has cut time to market on R&D innovative products up to 90%. It also has enhanced its customers’ experience by signing on to a business-to-business shopping platform and installing a digital shipment-tracking system to proactively provide shipping-delay alerts. Finally, the client has built an employee-friendly culture that addresses everything from extended parental leave to social atmosphere to skills development. It has essentially reinvented the way it conducts business across every facet of its operations.
Look for Optimum Synergies
If there were a single focus for future-ready transformation, the balancing act would be simpler. But the Transformative Age lends itself to holistic, integrated solutions. We have found that the companies introducing more innovative and solutions-driven business models were also exploiting the synergies among the six big bets.
Getting the most out of big-bet initiatives requires a different, less single-focused approach to implementing change. Initiatives in one area often do not fully deliver on their potential if they are not matched with advances in another big-bet category. For instance, you may have done a brilliant job on supply chain transformation but have not yet implemented the talent-acquisition strategy that attracts the people whose innovative thinking will maximize ROI from your advanced supply chain.
Once you appreciate the interplay among the six big bets, you can make decisions on what level of change in one area is necessary to fully realize ROI in another area. Thus, part of the balancing act is looking at the balance of changes needed across all six areas that will deliver quick wins, maximize benefits in the most critical area for your business and set the table for your next stage of investment.
Do Not Wait
These Transformative Age initiatives are called “big bets” for a reason: they do not lend themselves to half measures. You cannot optimize your results by hedging your bets and not fully committing. For that matter, the further you have to catch up with competitors who have taken the lead in embracing necessary change, the more disruptive that catching up is likely to be.
The value chain is being reinvented. Your choice is to be a part of the reinvention — or be subject to it. Every decision to put off launching a transformation initiative, for whatever reason, puts you months behind your traditional competitors — and makes you less able to respond to unexpected competition from outside your sector.
The balancing act is at least as daunting as the challenges of the Transformative Age itself. With the complexities of today’s marketplace, industrial companies are constantly wrestling with how to pace investments and actions to optimize value in both the short and the long term — you want the rest of your increasingly complex ecosystem to stay with you during the change. An equilibrium must be maintained.
Every company, of course, has its own distinctive circumstances and challenges and its own optimum strategy for moving forward and engaging the digitally enabled future. But you must rigorously assess your present status and the universe of change options you can entertain. Then, piece together the most “balanced” package of change initiatives to enable you to get the most mileage out of your investments, both in the near term and beyond.
Jerry Gootee is an Americas Advisory Leader for Automotive and Industrial Products Sector at EY.