Debate concerning the inevitable decline or imminent resurrection of western manufacturing has raged for years. The continuing search for long-term solutions to the vast, shifting market dynamics has left a litter of change projects behind. There may be short-term gains in productivity, but long-term transformation still eludes most. 

Two mega-trends now impacting manufacturing have created a new urgency that firms are struggling to harness in tandem, making transformation efforts even more disjointed and difficult to implement. First: the connected environment of the smart factory, with unprecedented levels of communication and collaboration between machines, products and people. Second: the transformation towards a connected company, which creates the underpinning networked, collaborative infrastructure needed to serve a connected world. To create connected products and services for your customers, you must be a connected manufacturer. Silos, hierarchy, traditional strategy, planning & budgeting cycles are all at odds with the speed and agility that are the foundation of the connected world. 

Why a lack of progress? (And what to do about it)

Most analysis of the future of manufacturing focuses on the area of new technologies, new products and the associated supply chain. While these are hugely important for manufacturing firms, the stalled progress we find in manufacturing organisations is caused by deeper, more systemic barriers. The root cause sits in the ‘weak core’ – that is, the very structure and fabric of the organisation, rather than the factory floor and the way products are manufactured. 

Leadership requires diversity and mastery of the network

To quote my colleague Christine Overby: 

“The idea that a small group of senior leaders can understand every area of a complex business and make all key decisions themselves seems unlikely. Tomorrow, it will seem ridiculous”. 

For large, decentralised manufacturers, however, this approach still prevails. And it becomes a common starting point for digital transformation efforts, which often create a detailed future target operating model, make a top-down plan for change, and task a central team to own and manage the journey towards the model.

Board-level leadership in manufacturing is also amongst the most homogenous. Although a problem in many sectors, manufacturing organisations come with a history of promoting engineers to leadership positions, leaving women and minorities with fewer opportunities and fewer role models. With the focus on boosting women and people of colour in STEM, we expect to see this change in committed companies. Lacking diversity in a leadership team can lead to groupthink, self-sealing logic and a lack of creativity when problem-solving – and transformation requires creativity, original thinking and an ability to work across internal and external silos. Leading in the digital age requires a new set of leadership capabilities, that for many are incompatible with their experience and their way of thinking. When the benefits of transformation will be seen after of the tenure of leaders, a higher level of courage is needed.

Favi is a successful automotive component supplier with 500+ employees in self-organising teams, which do not have budgets or targets. When CEO Jean-François Zobrist took over in 1983 he removed the hierarchy, managers and the personnel department. Zobrist did so because he believes that he does not have the expertise to evaluate most of the associates’ work, instead his skills are to set the vision and lead the company. 

Organisations are further hampered by the traditional process of identifying future leaders, which looks for future leaders using the attributes and role model of current leaders. Instead of leading from the front, visionary future leaders need to engage the whole organisation in a dialogue about the future. To lead is to master the network.  

To read more Post*Shift thinking on leadership, click here

Structure must enable innovation in connected products and services

The structure of manufacturing organisations is playing catch up, it needs to be consistent with the changing nature of products and services offered. Conway’s law says that every organisation is pre-destined to produce products and services that reflect its internal communication structure. So if you are hierarchical or internally divided into functional silos, your services will reflect that. In contrast, technology-enabled products and AI require a more lateral orientation and a connected view of how to deliver value to clients. Creating a connected world on the outside is impossible if you are not connected on the inside. Creating connected vehicles, homes or products is orders of magnitude more difficult if dealing with pre-existing silos between hardware, software, data and user experience.

There are (nearly) always small islands in the business who have cracked new more agile structures. But to protect themselves against the pre-existing antibodies in the organisations, they turn themselves into protected spaces under fearless leaders, making it hard for the wider organisation to learn lessons and leverage their knowledge to change faster. Good examples are software development teams running agile at scale, or R&D departments working at the cross-roads of dozens of fields to produce ground-breaking, cutting edge products. But at the coal-face of the organisation, silos and hierarchies dominate because of the inherent power of existing structures, leaders, cost codes and services. All wrapped in bureaucracy, inside a department of disengaged employees. Morning Star’s flat structure and self-management philosophy is designed to directly combat over-bureaucratisation. It fosters innovation and continuous improvement throughout the organisation. While many companies reserve modern management principles to knowledge workers, at Morning Star this applies to all workers, both permanent and seasonal.

Enter the platform business model. We encounter platforms in our lives every day. Think of your phone, or, more specifically, it’s operating system. Your iOS or Android platform supports your apps with location, security, and access services. In the same way, we believe that firms will embed their policies, procedures, rules and workflows into internal platforms to support customer-facing teams and innovation.

To read more Post*Shift thinking on organisation structures, click here.

Building a culture of autonomy and agility

I once quipped in a workshop that if you took away all of the company-wide policies from a particular manufacturing organisation, nothing would change — people were so committed to following the rules, that they would all keep working in exactly the way that they are right now. This has become the kernel of DNA at the centre of many manufacturing teams that has bred a culture that is no longer fit for purpose. Large business process improvement projects aimed are streamlining working procedures and breaking tasks down too far so that no one individual on the line understands the full picture has left a legacy of disengagement.

We need to create a culture that enables autonomous teams, able to take a strategic goal and decide who to work with and how to deliver on the goal. We must empower team leaders to provide direction, passion, purpose and alignment rather than continue to enable team managers, whose only focus is tasking and performance monitoring. 

WL Gore has no traditional managers, titles or budgets and shuns the concept of economies of scale. It is characterised by a firmly-held belief that the individual autonomy they grant workers enables fast decision-making and diverse perspectives. 

Research carried out at Cornell University’s Centre for Advanced Human Resource Studies highlighted the need for higher levels of self-awareness to enable better performance. The more often a team Worked Out Loud, narrating their work and communicating their roles, the more effective they were. 

“As team members gain awareness of the team’s purpose and their individual roles and responsibilities, they achieve higher performance and are better equipped to respond to evolving demands.” 

To read more Post*Shift thinking on culture, click here.

Who’s getting it right?

One of the most fascinating transformations in manufacturing has been the Chinese white goods company, Haier. Following a radical re-think on org structure and ways of leadership, the new model appears to be a set of open entrepreneurial platforms that can support an ecosystem of hundreds of micro-enterprises that compete for funding and resources. The CEO, Zhang Rumin has introduced management techniques designed to harness competitiveness internally, ensuring constant evolution is at the heart of every new micro-business on the Haier platform. 

Where next for western Manufacturing?

A shake up of this magnitude is a bold step for western manufacturers, who are still at the stage of piloting potential enabling components, such as new team ways of working, new leadership capabilities or new team structures. To truly excel, it is time for a radical step change, and one driven by visionary leaders, unafraid of allowing the distributed organisation to set the evolutionary direction.

Interested in understanding more about the challenges your organisation is facing in approaching digital transformation? Take our Quantified Org Diagnostic and receive a personalised report on your progress with recommendations for how to improve.