Accelerating Digital Transformation in ManufacturingAccelerating Digital Transformation in Manufacturing

Accelerating Digital Transformation in Manufacturing Transcript:

Announcer: You’re listening to The Kula Ring, a podcast made for manufacturing marketers. Here are Carman Pirie and Jeff White.

Jeff White: Welcome to The Kula Ring. My name is Jeff White, and joining me today is Carman Pirie. Carman, how are you doing, sir?

Carman Pirie: I am doing well Jeff, and I’m excited to be chatting with our guest today, because well, we’re going to be at the ManufacturED Summit in Chicago coming up in September.

Jeff White: That’s right.

Carman Pirie: 16th through 18th, and frankly, it’s a great excuse for us to get back in Chicago-

Jeff White: I love Chicago.

Carman Pirie: Good excuse to see everything that that city has to offer and frankly to eat a bit of steak. Let’s not get into the Chicago deep dish versus New York pizza debate, however, in this podcast.

Jeff White: I don’t think we should.

Carman Pirie: No, it’s a dicey territory, at best. So, without further ado, why don’t we get today’s guest introduced and we can unpack this a bit further.

Jeff White: Absolutely. So, our guest today is Stephen Gold. Stephen is the president and CEO of MAPI, which is the Manufacturers Alliance for Productivity and Innovation. And the organization that is putting on the ManufacturED summit that you were just mentioning. Welcome to The Kula Ring, Stephen.

Stephen Gold: Ah, great to be with you gentlemen. Thank you.

Carman Pirie: Stephen, most of all, just a pleasure to have you. I wonder if you might just give us a bit more of a fulsome introduction to you and your role and just the organization briefly?

Stephen Gold: Sure. And if you’re interested in my opinion on New York or Chicago style pizza, I’ll provide that to you as well. So, MAPI is Manufacturers Alliance for Productivity and Innovation, MAPI. It’s a manufacturing leadership network. It’s been around for about 86 years now. It’s a membership group, several thousand senior-level manufacturing executives, they work in a variety of executive functions in manufacturing, from finance to operations to business strategy. We have a number of them in legal and risk management.

And they belong to MAPI because of the peer benchmarking, and networking, and the thought leadership that they get out of it. It helps them in terms of their jobs, it helps them in terms of their careers. Basically, we like to say we help manufacturing leaders make smart decisions. And it’s a very loyal following, I’ll tell you that. We’ve had some members who have been around for 15, 20 years. So it’s a good group to belong to.

Carman Pirie: That’s fantastic. Thank you for that introduction. We’re really pleased to be associated with it here as a media partner for the upcoming Summit. It’s just… I think it’s an exciting crowd to be a part of and I’m really looking forward to the folks that are in the room. Let’s chat just briefly though about that pizza question, so Chicago or New York, what do you say?

Stephen Gold: You know, I love them both. I got to tell you something, I have friends in both cities. It just depends. Do you want them thin and lots of cheese, or do you want that deep dish kind of hearty. And so, it depends. When I’m in Chicago, I do not eat New York style pizza and when I’m in New York I do not eat Chicago style pizza.

Carman Pirie: Man, that is a political answer. I mean, it’s just basically a when in Rome is what you’ve said. So fine, I think we’ll let you get away with that considering you probably have members in both cities, we don’t want to put you on the wrong side of that. Stephen, talk to us about the vision for the ManufacturED Summit and what you’re trying to accomplish with the event. I know it’s being held in a really interesting location, and I am excited by the collision of ideas that you’re trying to bring together there.

Stephen Gold: Thanks, yeah. We’re excited too. And you’re right, the location is new for us. Morgan Manufacturing, the former Morgan Manufacturing facility is being used for events now. It’s in a great part of town, the West Loop across the street from Google, and just a very exciting part of town. So, this is our annual thought leadership conference. We’ve done this for seven years now. It attracts a wide mix of manufacturing executives to it. Basically, we see it as a chance for those top executives in manufacturing just to get a better understanding of the overarching challenges and the opportunities that the sector’s facing. And also how it relates to their own jobs and their careers. Get a lot of marketing folks and sales folks, we get a lot of operations folks, get some finance folks, people in purchasing logistics, a really good mix.

And we started it seven years ago because we thought, these are senior level leaders and mid-level leaders who really need to be with other executives who are struggling with the same challenges. Because it’s a rapidly evolving marketplace for industrial manufacturers and other manufacturers. So, in terms of this year’s Summit, over the past years, we’ve based the theme on digital transformation, and especially the transformation that’s occurring in manufacturing. And I’m not just talking about automation and robotics, I’m talking about the impact of artificial intelligence on the future of the manufacturing workforce, we’re talking about the challenges of integrating information technology and operating technology, and obviously what is on everybody’s mind, the growing risk of cybersecurity to manufacturers, and to others for that matter.

And also what we’ve heard over the last at least five years, the dramatic effect that smart factories and smart supply chains are going to have on productivity and business models. So it’s a combination of a broad view into digital transformation, but also a deep dive into some of the most pressing topics related to digital transformation. So that’s our objective in the summit, is really just introduce the concepts and allow people to walk away with a great deal more knowledge about some really pressing issues facing manufacturers today.

Carman Pirie: And Stephen, that’s really why I was excited to have you on today’s show, because we talk… Obviously the show is for manufacturing marketers, and we talk almost exclusively about digital transformation therein, within the marketing and sales apparatus. But I think it’s healthy and worthwhile for our listeners to be able to place that digital transformation that’s happening on the marketing and sales side within a broader dialogue of transformation within the enterprise. And I know in speaking with the marketers, I think they sometimes feel that they’re on a bit of an island as they’re having this conversation. It’s interesting, because it’s not that at all. So I wonder if… let’s discuss digital transformation, writ large, if you will. And you know, as you look at your members and manufacturing in the U.S. more broadly, you just mentioned, you kind of defined a number of areas where the opportunity of digital transformation… I suppose it’s a bit of a double hinge, both the opportunity and the challenge.

Stephen Gold: Mm-hmm.

Carman Pirie: So, are those really the buckets, AI and its impact on workforce, info tech meeting up with operation technology, risk and then the smart factory, is that really how you would break it down?

Stephen Gold: No, it’s much, much broader than that. When I define it, I defined it in terms of… There are a lot of terms that people use, you hear about the industrial internet of things and industry 4.0, which is more out of Europe, and smart factories, and artificial intelligence. So it’s just like I was saying, but to me it’s much broader. It’s really, digital transformation, it’s the integration of digital technology into the entire manufacturing value chain, right? The supply chain production, the distribution chain. That includes sensors, controls, software platforms. It’s the use of data related to those. So it’s really much broader than simply the buckets that I was mentioning. I mentioned those because we are going to be focusing on a great deal of that at the conference.

In terms of the opportunity that digital transformation provides for manufacturers, I have two perspectives. One is a general perspective and one is a business perspective. The general perspective, you’ve already kind of alluded to this and it’s something that lots of people talk about. Digital transformation has the potential to transform every single facet of manufacturing, from how products are designed and fabricated, how they’re assembled, how factories and supply chains operate. And, what’s interesting, and we can talk about this a little later, but it’s how products are sold and how they’re serviced afterwards. Completely new aspect to manufacturing. That’s the general perspective, I also have a business perspective on it, which is, digital transformation’s going to increase individual companies’ productivity, it’s going to increase their time to market, it’s going to help business leaders make informed decisions.

It’s already doing that in terms of the data that it’s providing. And, it’s definitely going to alter the nature of the company’s workforce. For marketers, I think it’s going to mean realtime access and better data analytics and better customer service, at least potentially. And for people in operations, definitely, it leads to better connectivity, better data, less downtime, more safety. And again, by the way, I mentioned earlier, two minutes ago, it’s altering how products are sold and serviced for manufacturers. And the reason I wanted to mention this, this is altering our business models, the business models that you see in manufacturing. You’re going to see more and more B2B manufacturers exploring how they can use sensors and data analytics to service their products after sale, which of course creates a completely new higher value customer relationship. And those are issues that we’re going to be touching on at the conference.

We’re going to have Deloitte just talking about the value capture in the smart factory. It’s a study that Deloitte has done with us, and we’re going to be presenting the findings there. And we also have Microsoft at the conference talking about AI’s role in accelerating digital transformation. So, to me that’s, as you said, writ large. That’s what digital transformation in my view, really means to manufacturing.

Carman Pirie: And I think when you mentioned the business model fundamentally getting disrupted and almost every aspect of it, it someway summarizes what has to be the biggest challenge facing manufacturers as I look at this. It really is calling upon an entirely new way of thinking, isn’t it?

Stephen Gold: Yeah, it really is. I see several significant challenges and one of them does have to do with the business model. I think manufacturing has a very complex business model. The infrastructure around manufacturing is more complex than say, finance or real estate or construction sectors. And, we’ve talked about this in the past, investment lifecycles in manufacturing are very long. You just can’t do a complete capital replacement overnight. Right?

So, that means the only true smart factories, talking about that aspect of digital transformation, that we’re going to see in the next couple of years… and when I say a true smart factory, I mean the ones that have a complete cyber-physical integration, those are going to be started from scratch, they’re called greenfield. You’re only going to see a few of those because really, what they called the brownfield, or existing facilities, they’re going to have a much slower pace because of the cost of replacing the equipment.

And then, I mentioned at the start, in terms of the purpose of the conference, there’s the challenge of integrating information technology and operating technology, IT and OT. One of the things that we found when we talk to our members about this, because this is why manufacturing I think is more complex in terms of its business model, is that they have different priorities. If you’re in IT, your priorities are confidentiality and integrity and availability. But if you’re in OT, operating technology, it’s the exact opposite. Your priorities are availability, integrity and confidentiality, and what does that mean? It means if you’re in IT, you can do a fix really quickly. Think of your smartphone, right? You simply reboot the device, a patch is installed, and you’re up and running.

In manufacturing and operating in OT, you cannot simply reboot the production line. If it goes down it’s a really serious issue. So, it is a very complex business model, manufacturing, I think is it’s a harder push uphill to get to digital transformation. If you have time, I have at least one… but two other issues, challenges, I think are facing manufacturers in this, and that’s the workforce skills gap and the cyber risks.

Jeff White: I think that’s a really fascinating side of things. The workforce, and how that plays off of the digitalization and integration of new technologies and sensors, at least on the shop floor, I think. And the kinds of higher functioning jobs that are required that are more technologically enabled than simply shuttling pieces of gear from one side of the factory floor to the other. That’s going to be massive.

Stephen Gold: It is. And we’re going to actually… how could we have a digital transformation conference without addressing that, right? We have a couple of sessions at the conference, one is, we have done some new research in conjunction with another think tank about artificial intelligence’s impact on the future manufacturing workforce. So, we’re going to be talking about that at a session, but we’re also going to have the Dean of the Purdue Polytechnic Institute talking there as well. The essence of the challenge, and you’ve just nailed it, there aren’t enough students with STEM education or people with STEM education selecting manufacturing as a career. Digital technologies runs the gamut in terms of skill sets needed. But if you are science, technology, engineering, math… if you’re good at those, chances are you’re going to be very good at what manufacturers need in terms of digital skills.

And one of the solutions by the way, and this is why we have the Dean of Purdue Polytechnic Institute coming in, is that one of the solutions is simply for manufacturers to work more closely with high schools and community colleges and trade schools. We need them to develop more relevant digital skills in their students. And then, we need those students to select manufacturing as a sector to go into for a career. You know, these kids who are coming out today, they don’t know much about manufacturing. They know a lot about Google and Amazon and Silicon Valley. But realistically, there are lots of middle class jobs available in manufacturing, but again, we need more and more employees who have that digital skillset.

Jeff White: The Kula Ring is proud to be a media sponsor of the 2019 ManufacturED Summit Conference, which is being held September 16th to 18th in Chicago, Illinois. Carman and I will be live onsite recording interviews for future episodes of The Kula Ring. You can save $200 now with the discount code KULAPARTNERS200 at manufacturedsummit.com. That’s manufacturedsummit.com.

Carman Pirie: It’s so fascinating to me, too. Quite candidly, this hinge of the discussion and the debate is just largely absent in the political arena around this. All the political conversation is about how these poor starving factory workers will never get back their jobs again. And the reality is the unemployment rate is dramatically low in many manufacturing intense areas of the country, and they just can’t find people with the right skillset.

Stephen Gold: Yes. Yes.

Carman Pirie: And I mean, everybody in manufacturing knows, and nobody outside of manufacturing in the political world seems to want to talk about it realistically.

Jeff White: Stephen, you were just talking about the education of new students going into STEM based programs and hopefully trying to bring some of those people to the manufacturing sector. But I mean, the current workforce is what we probably really need to be concerned about. I mean, obviously the next generation is going to be very important, but that feels like a task that through appropriate marketing and things like that, can be managed. But migrating existing workforce to a higher technology seems to me like a much greater challenge.

Stephen Gold: It is. Although, you know, if you think of it, anybody who has entered the workforce in the last 15 years, and so that gives you a group of millennials, it gives you some… maybe last 20 years, it gives you some gen Xers. They have technology skills, essential ones, because they’d been working on computers and smartphones and such. So, the good news is the foundation in technological knowledge is being raised as the years go by, more and more people have an essential knowledge of technology and how it used. The question is, how do you train people up to work in a manufacturing facility? And again, this is where manufacturers have to coordinate their efforts with institutions of learning. Because the manufacturers are the ones who have to help with the training. You can’t just expect these kids, or anybody, even if you’re in the workforce, to learn it on their own. So, there’s a big role for manufacturers to play as well as the schools, needless to say.

Carman Pirie: And can I say to our listeners, this is a really great role for marketing to play in this. Anyway, I think of a recent episode that we recorded with Greg Palese from Klein Tools, where he talked about an initiative that they’re doing to try to get more people into the trades, as an example. Not only is it what’s needed for the manufacturers, but it’s also, it’s a great message for the marketers to be carrying and to be a part of creating that solution. I think they can really add a lot of value there and they don’t always think about it.

Stephen Gold: Positively. No, in fact, I think it’s essential to get that aspect of the manufacturing sector, especially in terms of promoting the benefits of working in a manufacturing career. Exactly right.

Carman Pirie: I know we chatted before this show in the lead up to today’s recording and I had kind of suggested that maybe marketing and sales transformation was a bit of the ugly stepsister and gets passed over in favor of bigger investments that are more related to the actual manufacturer, or product. And I loved at that time that you completely disagreed with me, and really, you chose to frame the marketing department and others in the enterprise as really being brothers in arms in this transformation.

Stephen Gold: Yeah, no, I appreciate that because look, the reason why I think marketing, when we talked earlier, may have an easier go of it is because of what I just went through, the uphill climb that operations has to even understand what digital transformation means. Right? At the same time, the digital imperative in marketing and sales both is probably greater than that on the operation side. You have a far more advanced state of digital communications in our society than you do of digital operations, so to speak. I think marketers, they’re on the cutting edge of the change. It’s the same change that’s affecting the news industry and all other communications industries. In a sense, the way I see it, it’s like marketing and sales are already swimming in the ocean because of the technologies that are already available, while the operations colleagues are just starting to dip their feet in the water.

And so that’s why I believe that it may be easier for them. They’re brothers in arms, it may be easier for them because they understand what’s going on in terms of digital transformation a lot more, I think, than their ops colleagues are. But with that in mind, I do see there’s a great deal of opportunity in marketing and sales. I meant it a little earlier. I think in sales, digital transformation offers capability of accessing more information, right? Analyzing it faster, a tremendous advantage when it comes to understanding the voice of the customer today. Much bigger advantage, especially over what their predecessors 20, 30 years ago had to deal with. And marketing, I think the advent of digital marketing and social media, they’ve completely altered the terrain.

It’s helping manufacturers reach new audiences. It’s really lasering in on customers’ interests. I do think the biggest challenge in the case of marketers is simply the competition for eyeballs, and the challenge of continually trying to keep up with the best social media tools to reach customers. It’s kind of a Wild West out there for them. So that’s what I meant in terms of our conversation earlier.

Carman Pirie: Yeah. Yeah, no, I appreciate that context. It leaves me wanting to hear a story of a manufacturing marketer who actually is leading the digital transformation of the enterprise more broadly. Almost through the lens of maybe marketing and sales transformation seeing it first. But maybe that’s just me wanting to play on the marketing team.

Jeff White: This is what I like.

Carman Pirie: I wonder, if you had to pick an example of a manufacturer that is really taking a thorough approach to digital transformation and doing it well. A case study example to point our listeners to, who would you point to.

Stephen Gold: So, it’s interesting you mentioned the New York versus Chicago style pizza cause it’s kind of… you got to be a little careful when you’re mentioning one company over another, because a lot of these guys are doing a lot. I mentioned at the outset, digital transformation is a very broad term. It means a lot of different things, so if somebody were doing really well in AI and somebody were doing really well in automation, they’d still both be doing well, but how do you determine who’s doing better? But that’s-

Carman Pirie: I think you can completely blame me for the specificity of this.

Stephen Gold: So here’s the deal. A lot of our members are making advances in this area. You know, and a lot of companies… GE is probably the best-known company, but you’ve got Siemens, they’re a sponsor of ManufacturED, the Summit. Siemens is, and Rockwell Automation, both of them. Their automation solutions for the shop floor are considered among the most cutting edge in terms of creating a smart factory. Stanley Black and Decker has an advanced manufacturing center of excellence. They’re doing really cool things with generative design. And then John Deere and Caterpillar, talking about changing business models, their business models are changing pretty quickly. They’re using sensors now in their equipment for predictive maintenance for their customers. So they’re actually able to keep track of the product long after it’s left the shop floor, long after it’s left the sales and they’re able to work with customers say, “well this is what’s going wrong, and this is the piece that warning out,” and such. Frankly, it’s a good segue into the Deloitte study that I mentioned, that study that we’re doing that we’re going to talk about at the conference, it shows that there are certain characteristics that leading companies have over others in terms of being cutting edge in digital transformation.

And, for the purposes of the study, we call them trailblazers. These are companies like in CAT, and Deere, and such. One of the key qualities for all these companies is they are unambiguously all in when it comes to transforming their businesses. These are guys who have… everybody in the enterprise knows that they’re committed to digitalization. What I mean by that is, and not just doing pilots or trials, they’re actually, in some ways, over-investing in smart manufacturing. The research we’ve done that we’re going to talk about at the conference, it’s like 50% of their global factory spend is going into digital transformation.

Carman Pirie: I think this is about the only time I’ll have in the history of this podcast to use this quote. I think it was Andre Guild who said, “one cannot discover new lands without consenting to lose sight of the shore for a very long time.”

Stephen Gold: Exactly. Exactly. That’s great.

Carman Pirie: That notion that you have to be all in.

Stephen Gold: Yep.

Jeff White: There’s no half measures here.

Carman Pirie: No, and people always, “I’m going to dip my toe in the water. I’m going to see, I’m going to dip, I’m going to see.” Well, the definition of something new, it hasn’t been done before. If you’re going to really get to a place new and innovative you’ve got to be willing to go a little bit on your own.

Stephen Gold: No, that’s good. Exactly. And that includes, by the way, investing in people too, right? You’ve got to be able to invest in and develop the talent to fuel all of this. Because, if you’re going to create a new digitally transformed value chain in manufacturing, you got to have the… we talked about this, you got to have the people who can actually drive it.

Carman Pirie: Stephen, I appreciate you teeing up the Deloitte study because I think if we’re successful here, there’s a good chance we’re going to be chatting with the Deloitte lead on that study.

Stephen Gold: Excellent.

Carman Pirie: On a future episode of the podcast, so our listeners can tune in and get some insight into those findings. So, really looking forward to that. I wonder, as we… looking at the clock here, we probably should start to wind down, I wonder if you have any parting advice for marketers that are really looking to advance the case of digital transformation, and really encourage their organizations, as you say, to be all in? How do they maybe place what they’re trying to do within the broader context? How do they get support for what they’re trying to do?

Stephen Gold: Yeah, well, aside from attending our conference, I think marketing execs, they have to stay on top of the changes that are occurring and understand exactly what’s going on in their companies and in their sub-sectors, because different manufacturers have different approaches and different momentum in terms of the digital transformation. My parting advice, if that’s what you want, it’s a revolution in the making, and they need to understand that it’s going to take a while, but eventually, every manufacturer is going to have to dive into the ocean, as you just said. And so, I think marketers are going to play a large role in the transition, and in terms of explaining how we’re transforming. And so, to me, they need to do what they can to understand where the company stands and where it’s going in the race for digital relevance.

Carman Pirie: And it is a race. It’s funny, I know that a lot of manufacturers, they do feel that they’re behind before they even get started on this. So, I really thank you for bringing it into some level of context, and I look forward to chatting in person here in just a few-

Stephen Gold: You betcha. And maybe eating some Chicago deep dish pizza.

Carman Pirie: Potentially. Potentially. Now, we have to get your reco on your favorite Chicago deep dish. Somebody within MAPI has to have that reco.

Stephen Gold: Yes, but you know this brand placement and I haven’t been paid the money to… so we’ll do it offline.

Carman Pirie: Excellent. Excellent.

Jeff White: I like how you think, sir.

Carman Pirie: Thanks again, Stephen, really appreciate you coming on the show today.

Stephen Gold: You betcha. Thank you both.

Jeff White: Cheers.

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