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Sponsored by Kula Partners—an agency committed to helping leading B2B manufacturers craft digital experiences that transform how they engage buyers, serve customers, and outpace their competition—The Kula Ring podcast features conversations about marketing, sales, and technology with top manufacturing executives from across North America.
The Kula Ring podcast is co-hosted by Kula Partners principals, Carman Pirie and Jeff W. White, both of whom are frequently sought after for their digitally-focused B2B expertise. They regularly share their insights with audiences including conferences like B2B Online and HubSpot’s INBOUND, the Gardner Manufacturing Marketer blog, and other podcasts focused on B2B marketing and technology.
As official media sponsors at ManufacturED 2019 in Chicago, The Kula Ring had the pleasure of podcasting onsite, interviewing leaders at the forefront of digital transformation in manufacturing.
This special compilation episode focuses on smart factory adoption, rethinking education, and jumpstarting digital manufacturing. Hear three short interviews with Paul Wellener, Vice Chairman of Deloitte LLP and Leader of the US Industrial Products & Construction Practice; Dr. Gary Bertoline, the Dean of Purdue Polytechnic Institute; and Raj Batra, President of Digital Industries at Siemens USA.
Smart Factory Adoption, Rethinking Education, and Jumpstarting Digital Manufacturing: ManufacturED Special Compilation Part 2 Transcript:
Paul Wellener: Emerging Smart Factory Trailblazers
Announcer: You are 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. Joining us today on this special episode at the ManufacturED Summit is Paul Wellener from Deloitte. Welcome to The Kula Ring, Paul.
Paul Wellener: Yeah, glad to be here.
Carman Pirie: Paul is, at this point, a familiar voice that we have on The Kula Ring. It’s great to have you back. Paul, I was really excited about the study that you released here with MAPI yesterday around smart factory adoption. I wonder if we could just start with you telling us a few key findings from the study. Then we can, maybe, dive into it a little bit further.
Paul Wellener: Perfect, yeah. We were excited to release the study yesterday as well. The collaboration with MAPI that we’ve done over the last six months in this focus on smart manufacturing has really been exciting and it’s really been insightful for us. We had over 600 manufacturers surveyed as well as interviewed as part of our study. We really came out with some key findings. Fifty percent of the organizations are investigating or investing in things around smart factories these days. Fifty percent are, kind of, on the sidelines and watching. Of those companies that are investing and investing early, we call them trailblazers, those are the ones that are really starting to see benefits that are pretty significant compared to the rest of the group that aren’t doing as much with smart factory initiatives.
Carman Pirie: I want to dive into that trailblazer bit further because you could tell when you released the study yesterday, that really got the room talking. A lot of the questions that came even after the presentation were just around, kind of, people, you could tell, trying to see how they fit.
Jeff White: Trying to self assess.
Carman Pirie: Exactly.
Paul Wellener: Oh, very much so. A lot of the conversations were around that. I think the trailblazers, one of the characteristics would be they’re really the first to innovate. They’re not necessarily a fast follower, but they’re definitely someone who is the first to innovate. They do that, kind of, with one technology or many technologies, they do that integrating across technologies. We see them embracing more and more use cases inside of their smart factories. We surveyed, as I said, the respondents and there were 12 use cases that we focused on to see if we could get a sense of whether trailblazers were adopting certain technologies faster than others. In the case of the top six use cases, we saw the trailblazers definitely adopting technologies more quickly than the rest of the group. We also saw, from an investment standpoint, their investing at, basically, twice the rate, assuming flat budgets for factories and manufacturing type investments, they’re investing at twice the rate of the rest of the group as it relates to smart technology. I think that was another insight.
Paul Wellener: They’re also the ones that, as they organize themselves to do smart factory initiatives, they’re much more of a combination of top down and bottom up. They’re not the bottom up grassroots efforts that are one cell, one manufacturing line, one plant at a time. They are some of that to test out technologies, but they’re absolutely a top down, CEO, CTO, CFO driven approach to smart because the organization gets it. They see the benefits and they see the long term path to becoming a more effective manufacturing organization with a smart connected supply chain.
Carman Pirie: That came across loud and clear. You could tell that the organizations that were being identified as trailblazers, just the importance they placed on it based upon who they put around the table.
Jeff White: Yeah, the very fact that the C suite is at the table and considering the digital transformation and smart factory implementation just tells you that it is an important initiative across the whole org.
Paul Wellener: They know it’s important, the CEO knows it’s important because they see the connectedness of it as well. They see the ability to connect to the customer side of things as well as to the suppliers side of things inside of a smart factory and a smart organization.
Carman Pirie: When you start talking about the trailblazers being the first to innovate and now they’re really starting to see some traction and get some results, it leads me to the, you know, I don’t think we always think of industrial manufacturers as being the first to do anything, frankly. They would, I think, sometimes look in the mirror and say they ought to be faster in a wide range of their operations and businesses. I’m just curious, it seems like if they do struggle to get started, has the study identified any suggestions for what are the first steps for those ones who, maybe haven’t gotten started with smart factory technology at this point?
Paul Wellener: There are certain things that we see people using a lot of, and they might be used in the office and not in the factory. There are technologies that you can start small with where you might have experience in your organization already with the cloud, or analytics that gets applied to various different use cases, but there are definitely ways to start small. We don’t think you should do a big bang effort. We did not see the study supporting people doing a big bang effort of trying to do many, many things at once inside of a factory. We saw, kind of, starting small as a key element. Building a foundation of successes that enable you to then grow that base of starting small into something larger. Then the thing that we’ve seen people really focus on is the talents and the people associated with it. These strategies will fail if the people are not bought in and are not engaged across the board. It’s a combination of the right technology and the right strategy to go implement. Again, the starting small and scaling, but also having the right people and the right capabilities around the table.
Carman Pirie: Paul, I really thank you for just briefly introducing the study to our listeners today. I’m sure they can, in some way, contact Deloitte if our listeners want to learn more about your work in this space. It’s fascinating. I will say this, a completely tangential point, is in addition to the presentation and the report yesterday, probably the biggest talk of the town at the conference were those peanut butter cups that were at the Deloitte booth yesterday.
Paul Wellener: I was baking those most of the morning, yeah.
Carman Pirie: I did not know to which extent you were responsible for that, so I just wanted to highlight that and thank you on behalf of conference attendees everywhere.
Jeff White: Even Steven brought it up in our conversation, yeah.
Carman Pirie: It’s been repeated often, yeah. Thanks so much, Paul.
Paul Wellener: Thank you.
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Dr. Gary Bertoline: Evolving The Way We Teach and Learn
Jeff White: Coming to you from the ManufacturED Summit in Chicago, Illinois. Joining us right now, we have Dr. Gary Bertoline. Dr. Bertoline is the Dean of the Purdue Polytechnic Institute. Welcome to The Kula Ring.
Dr. Bertoline: Thank you very much.
Carman Pirie: I found it great when you said, look, let’s sum it up, we were just on a mission to basically reinvent, change education and how we educate. You just happen to be a Dean as your side job, almost.
Dr. Bertoline: Yeah. That’s actually very true. I don’t know what it is about me. I think I’ve been pre-wired to do this. I actually remember being in high school sitting in a study hall and writing down what I didn’t like about high school and how I should change it. I’m dead serious, okay? I hated school. I think I’m a pretty creative person and I was just too constrained. When I got to college, I got into a technical discipline and I really did well and I loved it because I had the freedom to, you know, I had an outlet for my creativity. I got into this role where I liked education, I love learning and I love reading, and I just kept on getting more education.
Dr. Bertoline: I ended up at Purdue University serving as the Dean, but something transformational happened to me just recently actually. President Daniels at Purdue became the president about eight years ago. I had some ideas about what we should be doing both in K-12 and higher education, and President Daniels, if you don’t know, was the Governor of Indiana and he has and had no academic background. I think I caught him off guard and he thought it was a good idea. He allowed me to start experimenting. At the end of the day, I think I’m an evangelist for change for education in the nation.
Carman Pirie: Let’s talk about that change, the change that you’re wanting to see, the change that you feel is required. How would you begin to describe that?
Dr. Bertoline: I’d begin to describe it by… compare it with the automobile that you drive today with the model T. Not just, well, I mean think of all the features that you have and all the things you can do with the modern automobile. Most automobiles are connected to the Internet, right, if you have a recent model. There’s sensors that will tell you if your tires are low. The sophistication of that technology, of that piece of technology is much greater than the model T was. Here’s the key, our education system was set up for the model T. The K-12 system and the higher education system, as you see it today, is much closer to reflecting the model T than it does the modern automobile. That’s the best way of thinking about it.
Dr. Bertoline: You do not get out of your car, get in the front and use a crank to start the engine, right? Why do we stand up and lecture? Why are we limited to three credit hour courses? Why do we have disciplines? Why do we have tenure? I mean, you can go right down the line. Why is only 12 years of education enough? As I said earlier in my presentation, I asked the question, “What was the name of the prophet and the name of the mountain where the stone tablet came from that said that a high school education is all you need? That actually was done back in the early 1900s. Now, you might claim we still need 12 years and that’s, kind of, what we’re stuck with, but if we do differently what we do in that 12 years, we actually can probably get by with 12 years, but people make assumptions about things that you’ve done.
Dr. Bertoline: You both went through high school and maybe some higher ed, and you think that’s just the way the world is. It’s because you don’t have a long enough perspective and you don’t study education, so you just think that’s the way it should be. Who is to say that someone can’t get a high school education, the equivalent of a high school education in nine years and move on? I mean, some of our most successful entrepreneurs, as you know, have no college education. It might be a heretic for someone that’s livelihood is higher ed, but I mean who says that that’s the right period. What we know about the science of learning now compared to the 1900s is to stuff everyone through the same system and to think that that’s going to be good enough for the future, I just think you’re dead wrong.
Carman Pirie: Of course, I mean, even if you just work on the numbers, if your life expectancy is 70 and you’re spending 12 years of that, you know, there’s a ratio there. As life expectancy, now goes to over 100 or what have you, in some ways, yes, we may be able to do more in less time, but then there may be even an argument to be spending more time as a percentage of one’s life or keep the percentage consistent, at the very least, which would mean spending more years.
Dr. Bertoline: Yeah. I mean, we have a presidential candidate that says everyone should get $1000 dollars a month, I think it is. Maybe we should only be working four days a week and we just pay more, so it allows more workers into the workforce. If everyone is afraid of the machines are going to replace all the jobs, well, the ones remaining, we can have more people working on it because the wealth that’s being created… I mean, the whole idea around technology and industry is we actually become better at doing what we’re doing. Actually, if you look at it, our companies in this nation are doing well. Their profits are higher than ever. They’re not under any stress. There’s a disconnect here where everyone is running around talking about all these problems, yet our companies are doing fine. Yeah, there’s the labor shortage and, of course, there’s little pressures here and there, but overall the companies are doing well. It’s because we’re much more efficient because of the technologies.
Dr. Bertoline: Where’s the stone tablet that says we work 40 hours a week? That’s what I’m talking about. You have to open up your mind that we’re living in a totally different age and it’s a transformational time that’s being driven by these transformational technologies that are now starting to merge and it’s the integration of those. Part of my evangelism is to get people to wake up the next day thinking they’re in a different world. Until you understand that, you really cannot contextualize all the pressures that we are having in society and some of the problems that we’re having because the root cause is because of the technological transformation that’s going on. You can just look at historical precedent. The first industrial revolution was extremely disruptive. We had people moving from the country into the city because that’s where the jobs were. Then automation started and people thought they were losing jobs, well, some people were but there were others that were making the machines. Someone had to make the machines, so there’s a transfer of jobs and skills.
Dr. Bertoline: We need a society that can react to that through its educational system. Instead of guaranteeing jobs, why don’t we guarantee education. If you lose a job, we will retrain you and you will have a skill set that is going to serve you well. The problem is if you’re living to 100, and because of technology changing so rapidly, you might actually have to change careers. To think you’re going to stay in the same career is fallacy because those careers, in many cases, are going to go away unless you’re at the very high end of the food chain. The general workforce, they’re literally going to have to go from one career to another. We, as a society, have to figure out how we do that. In the past, we’ve always done it through the education system.
Carman Pirie: You speak of a requirement for teaching methods to change as well as, perhaps, the “what” we teach needs to change. Let’s just unpack both of those.
Dr. Bertoline: How we teach actually is just as important as the subject matter. There’s a lot of need for cybersecurity experts, right? Yeah. Okay, let’s get more people in cybersecurity, but what’s more important, in my opinion, is actually how we teach. The dirty dark secret in our nation is that 40% of kids that go onto college never finish. Can you imagine running a business where 40 percent of your product fails? Somehow, you know, we just don’t realize that it’s having a huge impact. There’s the student debt piece because of that. The root cause is not the 40%, it’s very hard to blame the individual person. Obviously, there’s stories that come up where someone just decided to wake up and not go to class, but the fact is that they’re ill prepared. That’s our K-12 system, which we need to work on. The methodologies have to change because the methodologies that we see mostly in education were developed back in the model T era.
Dr. Bertoline: The model T era said that if you had a high school education, you could read, write, and do a little bit of calculating. That was enough to go work for Ford, or whatever. That, obviously, isn’t enough because the machines are much more sophisticated now and the expectations of that particular job is much higher. The methodologies have to change based on 120 years of research that’s gone into how humans learn. We are not maximizing that. It’s because our system keeps on preparing teachers to teach the way they have been taught for generations. The example I give that I believe is just as serious is that if I was a medical doctor and I use bloodletting as a technique to cure some disease, I’d be kicked out. Why is it okay for teachers to take their 50 minutes-1 hour and lecture when it’s been proven… There’s a meta study that’s was done a few years ago that looked at over 250 research papers and those papers were all about active learning compared with lecture. Every one of them said that active learning is better than blood letting, okay? How come we keep on getting away with this? There has to be accountability.
Dr. Bertoline: What we’ve tried to do is we create accountability through standardized tests. That’s not the problem. The problem is the teaching methodologies focus on what is happening in the classroom and less on what the score is later. We think that by creating some kind of test that the system will change is wrong. It’s just not education. You do that with just about anything. If you put some metric on, that doesn’t automatically mean that the system is going to change at the same time. I mean, the car industry, if we were to hold to our fuel standards that were in the Obama administration, for example, all of the internal combustion engine companies decided that they were going to make their internal combustion engines more efficient. Did any one of them say, “No, we’re going to go all electric?” That would have solved the problem. Right?
Carman Pirie: Yeah, exactly.
Dr. Bertoline: You see what I’m saying? It’s because we live within what we know.
Jeff White: A construct of that, yeah.
Dr. Bertoline: Yes. That’s why you have to have a transformational mindset. It’s not incremental, it’s too late to do incremental.
Jeff White: I think one of the other interesting things that you spoke about is, and you teach and are dean at a highly technical institution and are obviously very digitally savvy, but you also have worked to bring more liberal arts curriculum into what these students are studying.
Dr. Bertoline: Yes.
Jeff White: Tell us about why you’re doing that.
Dr. Bertoline: Yeah, I think the most important thing we’re doing, actually, is that. Students have shown they can survive lecture, I don’t really want to act like I’m backing off on what I said earlier, but I think the integration of liberal arts, especially in the technical disciplines, is an absolute … we cannot continue to graduate students especially in the technical disciplines that do not have a bigger view of the world. We’ve partnered with our College of Liberal Arts, and all of our students are required to take something that’s called the cornerstone certificate, which is a 15 credit hour sequence of courses. Purdue is a very large university. Many liberal arts courses at the 100 and lower levels are taught by graduate students. At Purdue, this cornerstone is taught by faculty. These are experts in their field. The first two classes that our students take are in classic literature. That’s where they learn about critical thinking and creativity because they also have a big writing element. They have to write short stories around certain themes.
Dr. Bertoline: I mean, one of the assignments, which I thought was brilliant, is the students had to read Frankenstein, that classic book, and the assignment was to write a short story as if you were writing Frankenstein today. One of our students out of the 900 students at Purdue University who are taking the cornerstone, one of our technical students won the writing contest because she was able to mold her understanding and what she learned about good writing and she created a character, a Frankenstein, that was based on artificial intelligence and the story ended with you not knowing who the real Frankenstein was. Was it the one that was actually made partly out of a human or was it the robot? You see what I mean? It was a great story line. She won the contest. That’s what we need to give our students more of.
Dr. Bertoline: You see this reflected all the time in our society right now because the technology is so sophisticated and it’s very hard to predict where a technology is going to impact society that we need to change how to do things. When a software company releases a software or a new version, if they do not take a lot of time to study what the possible impacts are, we need to start holding them accountable. Better yet, is they need to hold themselves accountable in what they need to do. We have safety standards for automobiles. We really don’t have anything like that in our software industry. You can create an app and no one looks at it. If it’s on Apple, they’ll look at it and if they can make money, maybe they’ll publish it, but they’re not looking at it, like, the possible consequences, the unintended consequences and we need to have technologists think that way, that take time to reflect deeply about how humans actually use it.
Dr. Bertoline: One of the other things, we teach design thinking. Every one of our students learn design thinking. Most of the students get exposed to the anthropology department because this is about you knowing about humans and the study of humans. If you don’t know anything about humans and how they react to different technologies, you cannot even surmise what the possible consequences are. That’s where the liberal arts come in. It’s a much deepening of their understanding. It’s not just about them being more creative, which we want them to be. We want these technologists to be deep thinkers because that’s the ones that are really going to help lead us out of some of the challenges that we have going forward.
Carman Pirie: It is interesting to consider the just incredibly diverse impacts of technologies and how fast it can happen. I mean, we can look at everything, well, I think you can make an argument that, without Twitter, you may have a different precedent.
Dr. Bertoline: Yeah, exactly.
Carman Pirie: How much clearer an example could you have of technology driving unintended consequences.
Dr. Bertoline: Oh, yeah. The other thing is the cybersecurity. The new weapon of mass destruction is cybersecurity. The problem with this one is that we cannot see it. Most citizens don’t ever see it. It’s all going on in the background. If you own a company and you’re being attacked, you know it, a lot of your workforce don’t know, because you don’t necessarily…
Carman Pirie: You’re not looking to publicize it anytime soon.
Dr. Bertoline: Yeah, exactly right. There’s this veil of secrecy that goes over on top of it, which makes it worse. That’s just one small example where we really need to get ahead of that.
Carman Pirie: Thank you so much for joining us for this brief Kula Ring segment. I really enjoyed the chat and the chance to go a little deeper on your talk. I really appreciate having you on the show.
Dr. Bertoline: Oh, thank you for letting me share my ideas. I really appreciate it.
Jeff White: Thank you.
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Raj Batra: Jumpstarting Digital Manufacturing
Jeff White: The Kula Ring coming to you from the ManufacturED Summit in Chicago, Illinois. Joining us on this episode is Raj Batra, the President of Digital Industries at Siemens USA. Welcome to The Kula Ring, Raj.
Raj Batra: Thank you. Good to be here.
Carman Pirie: Really great to be chatting with you today, Raj. I just really enjoyed your presentation at the conference today. I thought that you had a very concise and easy to digest, frankly, way of explaining digital transformation, smart manufacturing, and where it’s going but also how to think about it. I wonder if you might just take our listeners through a bit of a highlight, or a brief few minutes fly through or fly by of your talk. Just to give us some context.
Raj Batra: We talked today about jump starting the digital evolution in US manufacturing, and that’s really critical because as manufacturing becomes more relevant state side and people want mass customized goods, they want it now, they don’t want to wait for the last generation or products on ships to, you know, consumer preferences are changing very rapidly, so if you’re waiting 18 or 24 months to get your products, and designs have changed, preferences have changed. You see that a lot in the apparel industry. It’s just not the way the consumer is moving. This mass customization in every part of our business requires that you’re manufacturing in the locality that you’re in. It’s very important. Of course, we have a political environment right now where tariffs are in play and there’s retaliatory tariffs. That probably drove a different level of fear with large enterprise corporations about, you know, is it just in vogue to really go to a low cost country and manufacturer for being a low cost country?
Raj Batra: This all moved into my talk, which was about how do we up the game in manufacturing here in the country? Better quality, more customization, more flexibility. What does it take to do that? Jump starting digital evolution, in my view, is really using digital manufacturing practices to get an edge. To be able to design, to simulate, to do things virtually before you do things physically. There’s a lot of work and detail that can be worked out when you virtualize manufacturing processes. Not just the design of the product, but also virtualizing how you’re manufacturing environment is going to be laid out and then virtualizing how the manufacturing environment performs. This is all being done before you physically go to put robots on a line, or before you go physically do things in a manufacturing environment.
Raj Batra: There are tremendous gains. We, today, showed a number of use cases and a number of videos and examples of companies that are doing it. From the paint industry, where they can make any variation of any product, to companies that are entering into the automobile industry, which is a very capital intensive business, but using digitalization capability, they saw that they can get a first mover advantage, better margins, better prices, and a better quality product.
Carman Pirie: Yeah. The case studies were incredibly powerful. One, a southeast Asian car manufacturer who just, I think, stood up their entire production facility in, what was it, 21 months?
Raj Batra: Yeah, they cut the development time in half and can produce any buildable combination of that product digitally. No line is purpose built just for one car. Any color, any variant. Cut the time in half. Cut the engineering time in half. For them, time to market becomes important. If you have a great product and you have great innovation around your product, and you can deliver it, you’re going to capitalize on better margins, a first mover advantage and that’s going to disrupt somebody else that’s in the industry. They can’t do it that fast.
Jeff White: Exactly. I found the stat that you had shared around the deluxe paint factory in Australia, I believe it was?
Raj Batra: Yes.
Jeff White: That 99.9999% quality. To almost zero defects, basically.
Raj Batra: Yeah. I think that was Dulux, so we can publicly talk about the names here, but Dulux used to produce a big batch of paint and then that paint was dispensed. Today, they’ve cut that batch in 1/50th of its proportion so they can produce any color, any variant, any combination. You can imagine how many pigments of colors there are when people order paint for their interior/exterior environments. They may not have to have a purpose built line for this, they can use the same line with a lot of advancements in technology and modeling, and simulation, to really make their manufacturing environment much more efficient.
Carman Pirie: I wonder if we might just talk about what might be standing in the way, or what are some of the barriers, I guess to embracing this. I mean, we’re talking about use cases in, to be fair, in southeast Asia and Australia.
Raj Batra: Yes, and Australia, yeah.
Carman Pirie: Arguably, a lot of similarities, maybe, in Australia’s economy in a more North American context, to be fair as well.
Raj Batra: Sure.
Carman Pirie: Let’s talk about it, just as we conclude our time together, around US manufacturing specifically and that approach. What is required and, maybe, how they ought to be thinking about it.
Raj Batra: Yeah. I think we have a unique construct in US manufacturing in that we don’t put up a lot of green fields of anything. I’m not going to say it doesn’t happen at all, but we have Teslas, we have good examples of companies that have put up chemical plants, but it’s just not the mainstream of what we do. Part of that, I would say, is manufacturing, historically, hasn’t really been strategic to the enterprise in the US. If you were a public company CEO and you were thinking about manufacturing goods, I mean, it was always in the back of your mind to find a low cost environment to do it. That was the metric of success in manufacturing. We lost, in my view, a number of years in development and innovations on the factory floor to be able to do that. 2008 and the crisis put us in a position where, even in the auto industry, we were building a lot of crux and we just couldn’t repurpose fast enough to produce small, fuel efficient vehicles. It created a big, big under absorption factor inside of US companies.
Raj Batra: I think generationally, we lost a few decades in innovations in manufacturing because we were moving things out to low cost countries. Fast forward to today, manufacturing has become a competitive weapon in the environment. That means if you can design your products the right way and manufacture it with high efficiency, which means when you control your design and you link your manufacturing process to that design and you do this all on a digital backbone, that means you can control the products, you can change variations, you can decide on what the ergonomics of the factory are going to look like, how you position things. You can do that by trial and error, but that’s a very expensive painful procedure.
Raj Batra: Today, technology lets us do that. I would say companies are realizing, in the quest to be more profitable, that they have to manufacture with great efficiency. High quality rates. Mass customizations in play, people want things now. Take a look at the apparel industry. I watched my son ordered a pair of Nike shoes and he just didn’t order what was in footlocker, he ordered what he wanted to order, he went online and customized it and had something embroidered on the back and that was going to be delivered to him in a few weeks.
Carman Pirie: His taste might change between now and the delivery.
Raj Batra: Exactly. Yeah, which they probably will, so he has to reorder. That just shows you it’s something very simple in a consumer environment how the preferences are changing so fast. To be able to respond to that and adapt to it, you have to have the capability of personalizing and mass customization. The only way to do that is more advanced technology in the manufacturing floor. That’s certainly apparel. Cars, automobiles, you know, when you order certain cars, it’s a set of millions buildable combinations that you order. You don’t just take what’s off the lot. That’s changing with this next generation that buys. I think all of these and then the current political administration, I mean, there’s the corporate tax rate cut, there’s a lot more impotence to manufacturing state side. To do that, we want to manufacture high value, high technology goods. I think those environments really require substantial investments in manufacturing. We have to catch up the few decades that we lost.
Carman Pirie: Yeah. It’s interesting to me, I think I may have mentioned this just before we hit record on this brief segment, but the thought experiment that keeps going on in my head is can they move fast enough? Can they, in some way, the cautious build-as-you-go, see some return, invest more, et cetera, can that compete with those markets that are more green field in nature? That’s certainly a significant head wind, but as you mentioned, there’s a lot of pressure, conversely, to manufacture goods where they are consumed, et cetera.
Raj Batra: Yeah. Just the other big factor and we shouldn’t underestimate how important the workforce is in adopting all this and making it happen. We have an aging asset base, we have an aging population, we have, I don’t know, what’s the stat that I talked about today, 10,000 boomers that are eligible for retirement everyday. We’re going to have a few million people that leave the workforce that had tribal knowledge that put it all together, and the next gen coming in may not need all that tribal knowledge because they do things a bit differently. For them, it’s very innate to use digital technologies and they haven’t known a world without an iPhone or the Internet, or virtual design. People always ask me, “Are you really worried that you have this workforce leaving?” I say, “Well, I’m not really worried because I think what you’re going to get is you’re going to get a next generational worker that really is going to want to do things differently, much more efficient using technology, as they do in their everyday life. They probably won’t adopt 30 year old practices that were used.”
Raj Batra: That, in itself, could really spur manufacturing much faster here in the country. You’re going to find companies that start with a very strong, strategic direction because they know what they are to the posiblists. They know that if they benchmarked and if they looked at facilities that were best in class and how they digitized end to end and they saw the gains out of it, then you start working backwards to integrate that into your framework. You’ll find companies, and they may not be all the classic ones, they may be smaller ones that come out and start dominating in goods. You see it everyday. You see it in the consumer environment everyday. Look at all the disruptions you’ve seen. Smart speakers, wireless speakers. You know, your classic speaker manufacturers somehow just got disrupted. You don’t see the classic guy selling wired speakers anymore. They just weren’t fast enough to adopt their strong position into what the consumers wanted now.
Raj Batra: You see it in the consumer environment very rampantly and it’s finding its way into the manufacturing environment very quickly. It’s all about margins. Companies want to make more money, they want to capitalize on their IP, they want to capitalize on getting their goods to market faster. I think these are all the dynamics, in my view, that are supporting more advancements in digitalization.
Jeff White: It’s also obviously driving a significant increase in the requirement for software developers, CX/UX designers bringing those things together with hardware products that previously required no software.
Raj Batra: Right.
Jeff White: It’s changing the work environment as well as the services that we end up buying.
Raj Batra: Yeah. The value contribution of software in development of products has grown exponentially over the past decade. When we think about designing plants and designing products and using digital tools to do it and using digitalization, people couldn’t have imagined a decade ago what value software would play in making that happen. Today, you see it, it’s rampant everywhere. Now you can go into the cloud, you can do a lot of data analytics in the cloud, you can analyze assets on the floor, you can look at predictive behaviors when something is going to fail, you can really optimize processes at another level without a lot of manual intervention. I think these are all going to manifest themselves, now. They’re coming into play and they’ll drive very substantial productivity gains in manufacturing in the US.
Carman Pirie: I think we should end the episode there. It just seems like, frankly, you can hear enough doom and gloom, sometimes, about skill shortages and things of that nature and I like Raj’s manufacturing renaissance.
Jeff White: Optimism approach.
Carman Pirie: Optimism, yes. Thank you for sharing that.
Raj Batra: Thank you. It’s good to be here.
Carman Pirie: A pleasure.
Jeff White: Thanks a lot.
Raj Batra: Thanks.
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