Cases of Digital Transformation in the Manufacturing Industry

In the early days when Digital Transformation became a hot topic, everyone was curious about which companies were doing Digital Transformation well and what the specific cases were. Similar-looking terms such as Smart Factory, 4th Industrial Revolution, and Industry 4.0 were used in various ways, and because the concepts weren't well-established, people tried to infer the meaning of these terms by looking at concrete examples.

 

I first encountered the term Digital Transformation because of GE. While researching Smart Factory, I learned about an IIoT platform called Predix developed by GE, and coincidentally, in 2016, KBS aired a special broadcast about Digital Transformation featuring GE's engine data analysis business, which created a significant response among companies. It became even more famous when Chairman Immelt visited Korea in 2017 and 2018, and many companies made various attempts to collaborate with GE.

 

While collaborating with GE Digital, I benchmarked 'Bently Nevada', one of GE's affiliates, the 'Smart Signal' team in Chicago, and the MultiModal factory in Pune, India. What I learned from benchmarking was that established manufacturing leaders didn't just stop at selling their products but collected and analyzed data generated from these products after sale to provide new insights as services to customers. This created additional revenue streams, which is why it was called Digital Transformation and became a major topic worldwide.

 

Digital Transformation Cases

 

In Europe, Siemens was promoting Digital Transformation with its IIoT platform called 'MindSphere' just as effectively as GE. There were so many companies worldwide wanting to learn from them that it was very difficult to schedule benchmarking visits. In the end, I couldn't benchmark the 'Amberg' factory in Germany, which is considered the holy ground of Smart Factory, but instead visited the Siemens factory in Chengdu, China, which was built on the Amberg concept. I heard from officials that the Chengdu factory was actually better than the Amberg factory.

 

Siemens has a very broad business scope, including manufacturing products used in factories such as PLCs. Due to designing many diverse products, they developed and sell their own PLM (Product Lifecycle Management) software, and are pursuing process optimization by utilizing data collected from equipment and processes. They also developed an IIoT platform called 'MindSphere' using large-scale data management technology, and are actively expanding their software business with it.

 

Siemens was originally a company with manufacturing history and expertise, but has now expanded into software and digital business. Rather than purchasing software needed for manufacturing, they strengthened their software capabilities by developing suitable software themselves. These developed software programs improved to the level where they could be sold to other companies, leading to expansion into the software business. Going a step further, they expanded to an IIoT platform needed for collecting and managing large amounts of data generated in the field, and to Digital Twin business utilizing that platform. Siemens is a good example of Digital Transformation, as they transcended the boundaries of manufacturing to transition into businesses utilizing systems and data used in factories.

 

After Chairman Immelt's retirement, GE's situation deteriorated, and not only GE Digital but also their existing businesses are no longer in the spotlight as before. Since then, it has been difficult to find notable achievements in the field of Digital Transformation. I think this is a case that clearly shows how difficult it is for a traditional smokestack company to transform using digital technology. However, Siemens continues to steadily produce results, and 'MindSphere' was selected as a 'Visionary' in Gartner's 2021 Magic Quadrant.

 

What differences exist between GE and Siemens that led to such opposite results? In my opinion, GE has mainly been involved in heavy industries such as turbines, engines, and aviation, and is more familiar with hardware than software. Rather than preparing for the software business over a long period, they acquired companies through M&A and recruited IT personnel from external sources like IBM, Dell, SAP, MS, etc., in a short time to form organizations and push business forward, which might have caused various difficulties.

 

While Siemens also has a long history in hardware business, a major difference appears to be that their software development level improved while managing precise products used in factories such as PLCs, and they pursued solutions based on that experience. Solutions like PLM and Digital Twin are examples of this, and securing experienced IT personnel during the development process seems to have been a significant advantage.

 

BASF is the largest company among global petrochemical companies. As a German company with a long history, it can be understood as a leader in the global chemical industry without much exaggeration. BASF is a company that is creating results through Digital Transformation in areas such as process optimization, customer acquisition, internal and external SCM integration, and data integration.

 

The desk Edison used

 

Although BASF didn't expand into new business models utilizing Digital Transformation like GE or Siemens, it's considered a good example of achieving internal innovation by introducing new digital technologies. In the petrochemical industry, there is an increasing demand for DT projects such as predictive maintenance and process optimization through data analysis, and there is a lot of interest in data-based decision making.

 

I requested benchmarking visits to BASF two or three times but was politely declined, so I've never actually been there. It would have been very helpful if I could have seen how they lead the industry, which is quite regrettable. Instead, I monitored what innovations they were pursuing through information gathered from various channels.

 

Besides the three companies mentioned above, various other companies are pursuing Digital Transformation. The cases of 'John Deere', 'Cargill', 'Domino's Pizza', and 'Goldman Sachs' are also worth examining. In the case of Domino's Pizza, they're evaluated as utilizing digital so well that it's unclear whether they're a pizza company or an IT company.

 

Looking at companies that have successfully pursued Digital Transformation, although each company's approach to Digital Transformation differs, I think the common implications are: setting clear direction and goals for DT, working to build capabilities to execute DT, improving efficiency by applying digital technology to processes, and creating new businesses with accumulated digital capabilities.

 

I expect that companies pursuing business model development through Digital Transformation will continue to increase, and that there will be more companies achieving results in more advanced and diverse forms than now.

 

<My book 'Next Digital' has been published. The content posted on the blog is described in detail in the book>

 

 

넥스트 디지털 - 예스24

 

Haejin Jeong TV, 정해진TV