Dear Puan Aarifa,
It is unfortunate that we fired our top talent, Sonia. At least this is what I’d call her for the purpose of this letter. She dubbed herself as “Albert Einstein”—a nomenclature she derived from the last company she’d been in.
She had been the lead developer and architect of our software projects, and had brought with her a culture of doing things that is isolated and siloed. She had not let anybody understand what she had built.
However, she didn’t need anything anybody else built. She built everything she needed from scratch because she thought it was infinitely more superior than what the team had created. She stopped attending meetings and closed her door, because there was just too much to do, too much to code.
Of course, bugs were popping up in old tools she’d built. Too much bugs sapped her attention from meeting commitments on new product development. By the time we needed a team to help debug, no one could understand her system. At the end of a project cycle year, production-readiness was two years late!
We believe it’s the best decision. We may have lost hundreds of hours of Sonia’s contribution, but it also removed thousands of hours of technical debt.
Harry S, HR Director, ACME Software Pte Ltd
Have you had a similar experience as Harry S? In the new economy 4.0, a key solution is to find talent from outside the company, and this could disrupt your corporate culture and your core values that led you to success thus far. How does this story affect the way you hire, especially if the talent is high-potential and hard to find?
[above photo: McKinsey (2018) reports 7 disruptors that redefine how we work]
96% of ASEAN CEOs believe Industry 4.0 will transform business models
In a recent McKinsey survey (2018) of more than 200 business leaders throughout the 10 countries that make up the Association of Southeast Asian Nations (ASEAN), the transformative potential of Industry 4.0 was clearly confirmed.
Almost all of the respondents, 96 percent, believed Industry 4.0 will bring new business models to their industries and, slightly less, 90 percent, said improved performance will be one of the main benefits from these new technologies.
Additionally, in manufacturing-based economies such as Indonesia, Thailand, and Vietnam, respondents were generally optimistic about prospects of Industry 4.0.
[above photos: From manual checking to predictive maintenance, McKinsey (2018) maps Future of Work]
How are the business models changing in the new economy?
Many global manufacturers are already capturing significant value from Industry 4.0 technologies.
The venerable manufacturer Rolls-Royce, for instance, has overturned its model for jet-engine sales. The company today sells most of its airline engines at a loss, recouping the shortfall by selling real-time diagnostics and maintenance of the engine through its fee-based TotalCare program. It constantly collects data from thousands of in-service engines, helping it predict maintenance needs, improve performance, and amass an irreplicable knowledge base. TotalCare fees account for more than half the engine maker’s revenues.
In another example, Statoil, the Norwegian oil and gas company, says it will invest $200 million by 2020 to introduce digital technologies broadly. Through the transformation, the company expects to boost its performance and improve its margins by offering solutions such as advanced analytics on geological models and predictive maintenance of offshore assets.
[photo above: Industries attending HR Talk Show 2018 are adopters]
No industry is immune to the disruptions brought by digital technologies. Are you opening up to a value transformation and HR process to succeed in the new economy?
We all know about Eastman Kodak, once a giant in analog photography, failed to grasp the significance of digital technology and filed for bankruptcy in 2012.
Blockbuster, which built its rental business around the new technology of home videotape players, was crippled by Netflix and other streaming services, and in 2010 the master of video rentals declared bankruptcy.
Even the darling of Fourth Industrial Revolution in transportation, Uber, which reached a market value of more than $60 billion in just eight years, that also pushed aside the centuries-old cab business, isn’t immune to disruption. Uber has been pushed out of Southeast Asia by competitor, GrabTaxi. And Lyft is slowly winning in the US versus Uber.
While media, telecommunications, and banking have been among the first to feel the full brunt of these new technologies, manufacturing is now coming into the crosshairs.
Globally, many manufacturers, especially those in advanced economies, have been looking for ways to exploit digital technologies. These efforts, generally dubbed “Industry 4.0,” are at a point where greater reliability and lower costs, largely attributable to improved storage and computing capacities, are fueling their rapid adoption over a variety of industry applications.
However, even as they acknowledged the potential, respondents showed slow adoption. Only 13 percent said their companies had begun an Industry 4.0 transformation. ASEAN manufacturers cannot risk failing to capture the large opportunities made possible by these new technologies. By embracing Industry 4.0, ASEAN manufacturers can become the next leaders in their fields.
What if YOU are the reason your company’s growth is stunted? How would you execute mindfulness to transform?
How much ASEAN manufacturers will lose without transforming for Digital 4.0 Economy? Up to $627 billion.
In recent decades, ASEAN manufacturing, once seen as a global phenomenon, has been overshadowed by the meteoric rise of Chinese factories. The digital technologies associated with Industry 4.0 can help ASEAN manufacturers overcome relatively low productivity rates to regain their stature as factories to the world.
Industry 4.0 is the confluence of disruptive digital technologies that together carry the potential to change the manufacturing sector beyond recognition. The movement has gained critical momentum as a number of factors have come together: an astonishing rise in data volume, computing power, and connectivity; the emergence of advanced data analytics and business-intelligence capabilities; new forms of human—machine interaction, such as touch interfaces and augmented-reality systems; and improvements in how digital outcomes are transferred to the physical world, for instance through advanced robotics and 3-D printing.
Industry 4.0 is expected to drive productivity increases comparable to those generated by the introduction of the steam engine in the Industrial Revolution. Globally, it is expected to deliver between $1.2 trillion and $3.7 trillion in gains (Exhibit 2). Of this, ASEAN, whose member economies have significant manufacturing components, has the potential to capture productivity gains worth $216 billion to $627 billion.
Are you letting go of legacy processes to grow? Or are you getting in your own way? What are the critical success points that you may have overlooked?
[above photo: Percentage of ASEAN companies saying yes to upgrading to Industry 4.0]
How are ASEAN companies responding to meet the Industry 4.0 requirements?
ASEAN companies are exploring Industry 4.0 by introducing elements of these new technologies into their business models and are deriving value, such as:
Infineon Technologies, a semiconductor company with a large presence in ASEAN countries, plans to invest more than $84 million in a smart factory in Singapore to test these technologies. The company expects to cut cycle times in half, increase productivity by 10 percent, and save $1 million a year in energy costs through the initiative.
Other ASEAN companies, such as Malaysian energy group Petronas and Indonesian mining- equipment maker PT Trakindo Utama, have launched efforts to digitize their operations and customer offerings.
Similarly, OMRON, an automation-solution provider, has opened a $10 million Automation Center (ATC) in Singapore to help its local clients deploy their automation solutions. OMRON expects the large manufacturing base in ASEAN to migrate to more automated processes.
What’s the most critical innovation that will affect your business? What are the data you can’t live without?
[above photo: ASEAN will lose up to $650 billion in revenues to disruption without upgrading to meet IR4.0]
ASEAN Manufacturers, you are no stranger to technology-inspired disruptions.
In the 18th century, manufacturing was upended by the machines and steam engines of the Industrial Revolution.
In recent decades, robotics have eliminated human errors in many processes, triggering vast improvements in quality and efficiency.
Now, digital technologies wrapped under the label “Industry 4.0” are sweeping through the manufacturing sector.
Whether through advanced analytics or innovative interfaces, these technologies are boosting asset and labor productivity, accelerating time to market, and unleashing other efficiencies.
Manufacturers in developed markets are eager to explore the potential of Industry 4.0, but ASEAN companies have been slower to climb aboard.
You as a people leader of an ASEAN manufacturer cannot ignore the coming of age of these new technologies and must actively work to understand how they are altering business models and improving operations in ways that were hard to imagine just a few years back.
Is your business model still relevant? Is your process to recruit and retain critical talent keeping with the new era? What use cases can you customize for success?
[above photo: Significant shortage in Talent 4.0 in ASEAN requires accelerated learning]
Finding that scarce talent you ever need
As you adopt Industry 4.0 technologies, you will also have to adopt new processes and new roles will emerge. These changes will require capabilities that are likely alien to you right now as traditional manufacturers, such as data-mining and machine-intelligence expertise.
Like Harry S story above, bringing in these skills from outside the company can be a quick way to acquire needed capabilities, but a large influx of new hires can disrupt the corporate culture and dampen employee motivation.
Developing these capabilities internally may avoid morale or culture disturbances, but it prolongs the transformation, giving competitors a chance to jump ahead.
The middle ground is a delicate balance between external hires and internal development. External hires can be role models for change, while existing staff energized by the potential improvements can form a strong support network for new hires. In our experience, companies typically fill 50 to 80 percent of the new roles required by Industry 4.0 through external hiring.
- Wouldn’t it be great to build a fully balanced strategy of talent development as you shift to higher value products and services?
- Wouldn’t it be great if you can overcome the barriers of implementation to higher value 4.0 services with higher level awareness?
- Wouldn’t it be great if you can initiate internal collaborations, local alliances and global partnerships to leverage advanced capabilities?
Get linked by joining HR Talk Show 2018 live!
It’s tough when almost every aspect of our lives will be touched: jobs, business models, industrial structures, social interactions, systems of governance. The Fourth Industrial Revolution will even challenge the very concept of what it means to be human.
75% of 1600 CEOs in 19 countries surveyed convey that their organizations aren’t ready for the Fourth Industrial Revolution economy. (Deloitte, January 2018)
2018 is the moment of great reset, threatening the incumbent market leaders, and rapidly advancing challengers.
Attend the HR Talk Show 2018, on September 5, 2018, in Kuala Lumpur, Malaysia and gain higher level leadership consciousness, human capital tools and regional-global links to reimagine and boldly reinvent your future, as you embark in the Fourth Industrial Revolution.
[above photo: BBC Anchor Veronica Pedrosa, hosting HR Talk Show 2011]
Established in 2007, the HR Talk Show series is a high-impact interactive platform bridging the gap between government and business initiatives to drive human capital best practices and actionable insights into talent, technology and strategic HR. In a unique talk show format, CEOs, HR Directors, CIOs/CTOs and their CFOs from ASEAN’s and the world’s most admired companies will be working with 400 participants to interactively walk through the most current human capital challenges in fast-growing economies to ensure that the most important leaders in businesses and public organizations can:
• Stay superior and thrive in the Industry 4.0 economy
• Drive agility in learning, upskilling and leadership
• Cast off accident-prone legacy strategies for talent management
• Build digital awareness and evolve with fresh HR technology and services
• Leapfrog into disruptive roles with greater clarity of thought and vision