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SMEs should scale using Digital & Industry 4.0 technologies

Problems during strong growth:

Small and mid size companies typically face a number of problems when it comes to scaling using technology. Everything works well when business is steady state. But during a steep economic upcycle like we have now, there is a hustle to rush production and suddenly they are unable to use data effectively to gain visibility; products don’t move out on time, WIP spikes due to problems, product development targets seem to have been missed, they lose customers to quality, they are unable to participate in bids on time. Once they grow beyond a certain size in turnover and people, it is harder to coordinate activities and align everyone’s effort in the same direction. Solution – implement robust systems so that data is collected and made sense of and actions taken based on data rather than on hearsay.

Use technology with care & diligence to scale up – Digital and Industry 4.0:

Up until now, companies may have used bits and pieces of legacy systems or hotch-potch solutions cobbled together in a hurry, whenever they had to respond quickly customer requirements, or worse – do some fire fighting. But today it is Industry 4.0 – we have a slew of new technologies, applications, devices, electronics and IoT solutions that larger companies are using stay ahead of the game. SMEs (Small and Mid-size Enterprises) lack the awareness of such solutions. It is impossible to have in house resources with time, skill and knowledge to evaluate such solutions. The talent in SMEs is typically hired for execution; they is always a hustle and an eternal constraint for bandwidth and time. Perhaps the owners or top leaders with insight across the organization may be in a position to evaluate the returns of implementing such solutions. But they are even more hard pressed to look into this level of detail. Evaluating these solutions requires a degree of knowledge to be able to compare available solutions, features required, marry internal processes with the technology solution, weigh in on cyber security and information security concerns, undertake cost benefit analysis, and most importantly implement all this without breaking the company. Silos within the company need to be broken, processes need to be reengineered and re designed, old ways of doing things have to be stopped, employees need to be trained, everything needs to be explained to them so that they can make sense the broad direction in which the company is headed. At the same time, as data becomes visible and there is more transparency into the process, employees get concerned about their incompetency and their relevance, so this needs to be addressed as well.

Large companies have fared much better in Industry 4.0 and digital:

Overtime, developments have happened in manufacturing, starting with mechanization, moving onto mass production, automation, and then in leveraging connectivity and information technology within the organization. Larger companies have been more effective in moving across these stages and the result –  they’ve been more productive and lower cost producers of goods. In today’s age with IoT and the onset of #industry40 , companies are having to use not only software but also integrate it with electronics and hardware to gain insight into data in real time; then use data analytics to makes sense of all this for decision making.

Larger companies are able to do this quite well. For example, #Asianpaints uses a lot of data analytics when they bring together disparate types of data in various formats (which is quite typical – we have data in so many formats produced by various departments), integrate and present it in the form of dashboards to top management so that decision making is quite fast. They also buy systems from MNC companies to help them control and integrate plant processes.  The information is made available to frontline employees so that decisions are taken swiftly lower down the organization itself. There are number of solutions which straddle electronics, software, process, production automation and quality systems. These solutions are provided by large MNCs in the form of typical operation management software and systems. 

Are the technology solutions feasible? How to go about it?

Many of these solutions are quite expensive and SMEs may not be able to justify the ROI for such technology. But a rapidly changing world and the corresponding disruption in the technology industry has made sure there are a number of start-ups and smaller companies providing solutions similar to the MNCs, and these should be tapped by SMEs in their #industry40 journey. However, this needs a degree of effort, knowledge and research to identify such solutions and marry what’s best for our organization. Technology can’t be plonked in lock stock and barrel; a careful rethink of systems needs to be done, since processes would now be quite different given the use of more data sensors and sense-making using analytics to take better/faster decisions. In a sense, this is no longer the time for jugaad solutions as was done before, but rather needs an application of mind to carefully think through process/systems towards transforming the business using new technologies. This has to aligned with overall strategy as well, so that other departments start to function differently. Only then will efforts be multiplicative rather than just additive. Feasibility of implementing technology and ROI is also important. So bring in the required competence probably in the form of external consultants to ignite efforts that help scale the organization using #digital & #industry40, and overcome difficulties of time, resource competence and knowledge of redesign and change management.

Hybrid Innovation Strategies

Innovation now needs Second wave technologies to be integrated

Digital is no longer about digitizing bits and pieces of workflow in the company to usher in automation and be productive. There is a more serious disruption at play involving innovation in products, business models to transform the entire business itself.  It’s not just using IT, but also adopting many second wave technologies like IOT, AI, AR, and machine learning across areas like product, training, customer support, you name it, to disruptively transform the company. Imagine the scale of transformation at Reliance from a Petro chemicals business to one where consumer/retail revenues started contributing significantly, to another innovative transformation involving Jio – using the power of Facebook, WhatsApp, Enterprise apps, ecommerce, financial payments etc. that is set to unfold (as I write this).

Internal Innovation

Until now innovation was mostly internally driven, where companies have their own R&D departments. The advantage is that such innovation provides a sharp differentiation with respect to the competition. But there is a limit to the talent and speed at which this can be done. It is also too expensive and impossible for smaller companies to embark on.

External Innovation

To keep up with the market, companies have been looking at external innovation with partners such as universities and start-ups and this is a kind of open innovation model. Many large companies adopt the model wherein they invest and allow a start up to innovate, and when successful, the start-up is acquired. There are some large companies that have specific teams scouting the world to meet and evaluate innovative start-ups and finally invest in a certain number of best bets every year.

For example, JLR, Fiat Chrysler and Renault Nissan tied up with Google’s Waymo for self-driving cars. But the product that comes out of something like this would essentially not provide any one company with a cutting edge. It will merely raise the bar for all of them to stay afloat. And, this certainly needs to be done or risk extinction.  We’ve also seen this happen in automobiles (say engines from fiat, chassis from ford), mobile phones (all about the screen/processor/GPU/camera sensor from say Samsung, Sony, Qualcomm) or even TVs. There is really nothing to differentiate many products around us.

Hybrid Innovation for Small-mid companies

Now, the time has come for smaller and mid-size companies to also be innovative and survive. It is impossible to have/fund all the required talent inhouse and innovate internally. Being stagnant and slow will put the entire company at risk. At the same time, it is also risky to partner with external technology providers. I’ve come across companies that rolled their idea into products by outsourcing to outside teams, only to get extorted financially towards the end.  Now-a-days there is a great need to use sensors, IOT, AI, a combination of electronics and firmware to transform processes and products. These are not skill sets that we all typically possess. So, we are forced to use external partners. But it should not so happen that the external partner offers this very same innovation to other competitors, thereby nullifying any advantage that was hoped for. Typically many small technology experts/start-ups look for a use case/ data from a brick-and-mortar company; they look forward to build a solution for the brick-mortar company and then spin it off into a full-fledged product at a later stage. This does not benefit the guinea pig. At the same time, the small external partner may feel short changed if the innovation succeeded and they were not part of the success.

Hence smaller companies need to adopt a hybrid approach. Evaluate your capability gaps, and map out the areas where external innovators will be brought in. Then build precise innovative governing models and metrics to monitor and control the partnership. Have in place an internal team that can absorb the innovation and take it forward from there. Smaller companies could explore a build-operate-transfer model. First transfer the capability and then the team.  Also incentivise external partners to be part of the continued success of the innovation once it succeeds in the market. That way, they will also have a stake in further innovation and support for the technology.

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