Digitization and the Internet of Things are new buzzwords in the supply chain arena. But the key to applying these concepts to achieve business success is ensuring that digital innovations in supply chain operations are maximizing efficiency — and, by extension, profits — instead of just implementing “tech for tech’s sake.”
CFOs may not directly think of digital innovation as their purview, especially not as it concerns supply chain operations. However, when others in the company get swept up in the hype and start making the case for Big Digital, the CFO, who’ll have to write the Big Check that comes with that, might want to push for an alternative approach.
One proven approach includes what A.T. Kearney calls “digital sprints,” events similar in spirit to hackathons where supply chain, manufacturing, and project managers collaborate intensively in competition with other teams to brainstorm digital initiatives that will enhance an organization’s supply chain. We call them “digital sprints” to underline a bias toward quick actions and corresponding learning.
A number of organizations — both companies and universities — are conducting such events, but under different names. There are also broader initiatives aimed at fostering digital innovation within the manufacturing space, including, in the United States, the Internet of Things Consortium and the Industrial Internet Consortium.
While hackathons are well known by app developers and venture capitalists as ways to develop new software technology, digital sprints within the supply chain space seek to come up with working prototypes of new products, new manufacturing processes, etc., under a “start small, fail fast, iterate and pivot, and scale fast” model. Large organizations that are implementing these events, relying on both internal experts and collaboration with third parties like Internet consortia and government-sponsored organizations, are at the forefront of the digital industrial revolution.
Digital sprints are more efficient and cost-effective than other approaches that companies have been following in pursuit of digitization in the supply chain space. One common approach to the digital supply chain is to hire or appoint a Digital Czar (aka chief digital officer) to keep track of and study the most recent digital tools and trends and translate them into potential opportunities. Another traditional yet often ineffective approach includes having the IT department take the lead under the assumption that it first needs to “connect everything” before taking action.
Digital sprints, with their collaborative, action-oriented approach, are well suited to push through the hype and get to real, tangible outcomes without companies having to predict the future or, even more difficult, rewire their entire IT infrastructure.
Initiatives like the Internet of Things Consortium and the Industrial Internet Consortium seek to dramatically step up digitization in manufacturing through collaboration and brainstorming innovative ideas within the space. They promote “testbeds” for quick action — in essence digital sprints — that produce case studies and proof of concept for digital experiments that lead to improvements in safety, energy efficiency, overall operating efficiency, reduction in cycle times, etc.
General Electric and Cisco are combining resources to provide an end-to-end solution, from the machine interface to the cloud, that can be used for deploying GE’s Brilliant Manufacturing to introduce digital innovation to the supply chain and manufacturing space. GE has a new rapid innovation methodology branded “FastWorks” that is predicated on building imperfect early versions of new, digitally enabled products ranging from light bulbs to gas turbines to refrigerators, releasing them to customers to get feedback quickly, and then “pivoting” or adapting the products where necessary.
Digital sprints require a startup mentality, rather than the typical Lean Six Sigma mindset that is pervasive in supply chain. They benefit from a skunk works-like setup where a small group of people work together in a non-hierarchical, unconventional way with minimal management constraints and a high sense of urgency.
Four Steps to Successful Digital Sprints
Start small: Digital sprints involve a series of modest “experiments” that contribute to addressing earlier-identified pain points or opportunities and try to solve the problem in nonconventional ways. For example, companies can organize hackathons where informal yet focused teams work on well-defined problems over a pizza-fueled weekend and generate a range of solutions. These solutions are then evaluated against a set of clear criteria and metrics to objectively gauge whether digital solutions can be successfully deployed to address the pain points or opportunities.
This approach typically generates promising ideas or concepts that can then be further funded on a shoestring budget to generate proof of concept. They should be done, at least initially, outside of the legacy IT infrastructure, which is often ill-suited for digital applications. Google Ventures has adopted a similar concept, called “design sprints,” where several ideas are pressure tested within a week to determine viability.
Fail fast: Experimenting in a controlled manner can be a quite useful way to successfully prove or disprove the validity of certain digital concepts and approaches. Inevitably, some experiments will fail. But the key is to fail fast with minimal investments and to learn from the failures.
Take, for example, wearables, devices connected to the Internet or to other devices that are worn on the body and can be used to enhance communication to and from the users. Smart glasses, voice control headsets, fitness bands, smart watches, etc. are all “wearable” consumer applications that have genuine applicability in manufacturing, provided they are properly adapted (i.e., made more robust, explosion-free, down-featured, etc.) to work in industrial environments.
There aren’t yet many applications readily available on the market to be used in manufacturing plants, but manufacturers and potential vendors are experimenting with some of these devices to test their potential benefits. For example, wearables can provide traceability of parts, ingredients, and process steps, they can improve safety by monitoring air quality or temperature or even by communicating with robots and machines to avoid collisions, and they can allow you to track movements of operators, which you can use to optimize the location of their tools and parts.
Iterate and Pivot: Experiments typically require several iterations before definite conclusions can be reached. But at this stage enough should be known about the idea to commission pilots and validate the solution. Successful pilots can then be considered for “soft” integration with factory IT, if that is required to get them operational. GE’s FastWorks methodology is a good example of the “iterate and pivot” principle.
Scale Fast: Once the proposed digital solution has a quantified business case with successful validation in one or more pilot implementations, you can now make the decision to invest in enterprise rollout, using the learnings from the process to accelerate the execution and, if warranted and required, to selectively rewire legacy IT systems.
This approach prevents companies from getting overly enamored with “bright shiny things” that ultimately contribute little to the business. It also keeps them from making large-scale investments in company-wide rollout and/or IT integration before the benefits are clear and the investments can be justified, to skeptics and shareholders alike.
In summary, CFOs should look to promote and adopt digital sprints if they want to be at the forefront of the industrial revolution in supply chain.
Patrick Van den Bossche is the Americas’ lead partner and global coordinator of the operations practice at management consulting firm A.T. Kearney.