LEADING

TRANSFORMATION
IN MANUFACTURING
Case studies in technology-driven
innovation

Sponsored by
 Leading transformation in manufacturing
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Case studies in technology-driven innovation

Contents
2 Executive summary

3 Introduction

4 Manufacturing transformation in action

7 The roles of the transformational IT leader

10 Conclusion: Taking the leap

© The Economist Intelligence Unit Limited 2019

 Leading transformation in manufacturing
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Case studies in technology-driven innovation

Executive summary
The manufacturing industry has always been shaped by technology.
Today, the convergence of digital technologies with physical machinery
is the primary driver of technology-led change in the sector, but there
are signs that European manufacturers are slow on the uptake.

To examine the opportunities and challenges this convergence

presents, and to understand the role of technology executives in
leading the organisational transformation required to capitalise on it,
The Economist Intelligence Unit interviewed executives from three
manufacturers pursuing digital transformation:

• Juha Pankakoski, executive vice president of technology, Konecranes

• Andrea Roero, chief information officer, Celli Group

• Michael Johnson, EMEA chief information officer, Bridgestone

We also interviewed Ryan Martin, principal analyst at ABI Research, and
thank all our interviewees for their time and contribution.

This report presents insights and findings from the interviews. Key
findings include:

• The merging of operational technology (OT) and information

technology (IT) is one of the main roadblocks to transformation.
These two domains have traditionally been managed and led
separately, but the opportunities presented by digitisation require
concerted effort. Engineering teams may be able adopt IT without
the IT department’s involvement but this presents risks, so IT must
position itself to offer guidance and input.

• Advanced analytics capabilities are increasingly pivotal. All

three executives interviewed for this report are bolstering their
analytics capabilities in order to extract greater value from the data
collected over the course of the manufacturing process. The added
value typically derives from improving efficiency and maintenance,
but some companies are increasing customer value too.

• Digital transformation in manufacturing requires IT leaders

to play many roles. These include security advocates, radars for
emerging technologies and catalysts for agile innovation. A crucial
development is that IT leadership no longer has a monopoly on IT-
related decisions. This means their approach to driving change must
be more ‘collaborate and advise’ than ‘command and control’.

© The Economist Intelligence Unit Limited 2019

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Introduction
Manufacturing has a long history of transformation driven by wave after
wave of technology innovation. But incorporating today’s emerging
technologies may prove to be the sector’s toughest transition to date.

These technologies, which include advanced analytics, artificial

intelligence (AI), additive manufacturing, augmented and virtual reality
and digital prototyping, offer opportunities to become more agile, more
efficient and to create more value for customers.

But there are signs that manufacturers are dragging their feet.
Digitisation across the sector has so far been patchy according to a
2018 report from PwC1. In a survey of manufacturers, it found that
two-thirds have only just started—or not yet embarked upon—digital
transformation.

The study reveals that just 5% of manufacturers in Europe, the Middle

East and Africa are “digital champions”; the companies best-placed to
benefit from Industry 4.0. This compares to 11% in the Americas and
19% in Asia-Pacific.

One roadblock is the convergence of OT, which controls the machines

on the factory floor, with IT, which collects and analyses the data
needed for decision-making. Ryan Martin, principal analyst at ABI
Research, explains how, until recently, OT and IT co-existed as distinct
areas of responsibility. “But with increased collection and analysis of
data from previously unconnected plant-floor machinery, and more
pervasive use of digital technologies at the operational level, the lines
between the two are blurring fast,” he says.

The importance of data in this amalgamation means chief information

officers (CIOs) and their teams have an pivotal role to play. In fact, the
three executives interviewed for this report describe not one new role
for IT leadership but many. Many of these roles depend on the ability of
IT executives to steer technology strategy not through direct control
but through influence and guidance to peers. Those who adapt to this
style of leadership have greater opportunity to elevate IT’s contribution
to the manufacturing sector.

1
https://www.pwc.com/gx/en/industries/industry-4-0.html

© The Economist Intelligence Unit Limited 2019

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Manufacturing transformation in action

Konecranes raises its data advanced data science at our disposal, there’s
science capabilities a lot of room for us to move forward,” says
Mr Pankakoski. More sophisticated analytic
In March 2019 Konecranes, the €3.2bn Finnish approaches will open the door to closer
manufacturer of cranes and lifting equipment, monitoring, more precise diagnoses and,
announced plans to create a new data science ultimately, to machines and products “that
laboratory in Lyon, France. become increasingly smart at being able to
sense their own status and environment, as
According to the company’s executive vice
well as more autonomous in terms of making
president of technology, Juha Pankakoski,
decisions about their own operations.”
the move marks the latest step in the firm’s
ongoing initiative to apply advanced analytics At the same time, Konecranes is actively
both to data that flows from its own factory exploring a number of other emerging
floor and from the connected devices sold to technologies, such as digital prototyping its
its customers. own product development process. “This, for
us, is a very interesting concept altogether,
“It’s a significant investment for our company,
because if you’re able to develop a good, solid
but we believe it is what is required to take
digital twin of your planned product, then it
advanced analytics to the next level for
does allow you to test and develop that design
Konecranes,” he says.
in a virtual context, without having to build it
The company currently has 20,000 connected first,” Mr Pankakoski says.
devices across the world and digital lifecycle
By combining the 3D computer-aided design
records from over 600,000 customer assets.
(CAD) model of a proposed product with
These already provide a significant revenue
simulation software, Konecranes can test a
stream for the company, enabling it to monitor
crane’s behaviour in different environments
its products and provide customers with add-
and under different workloads to see
on services for maintenance and repair.
where it wears out and how it breaks down.
Investigations are already well underway in
partnership with a number of universities and
technology companies, he adds.

We believe that with more Celli Group weaves the

advanced data science at our digital thread
disposal, there’s a lot of room for us
At Celli Group, an Italian manufacturer of
to move forward.
drink dispensing equipment, the product
Juha Pankakoski, executive vice president of development stage is the start of the so-
technology, Konecranes called ‘digital thread’ – a continuous pipeline
of data that connects each stage of a
product’s lifecycle, from design through to
“But right now, we feel we’re only scratching manufacture and onwards to maintenance
the surface, and we believe that with more and repair. Once a physical machine is built

© The Economist Intelligence Unit Limited 2019

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from a digital prototype, the data used in create greater value for its customers. Firstly,
its creation evolves as a digital twin of that Celli Group used connected instrumentation
machine. By adding more data, such as its in its products to offer remote repair and
location, configuration and service history, maintenance services. More recently, it
manufacturers end up with a digital construct has started providing customers with
that knows everything about the design, build business insights, such as trends in customer
and servicing of the physical system. preferences, based on the data its products
produce.
At Celli Group, the starting point for the
application of advanced analytics is in the And increasingly, says Mr Roero, the
factory itself, explains CIO Andrea Roero. company’s Internet of Things (IoT) platform
“If we have a moulding machine that isn’t is home to data that ties augmented reality
performing properly, then that could result in devices into its operations. These are now
quality issues in finished products.” being used to provide factory workers and
field service employees with instructions for
But the company is now extending its building, installing, maintaining and repairing
analytical capabilities beyond the factory to its products. Wearing a head-mounted
display (HMD), they can see those instructions
superimposed over their view of the physical
machine in front of them. The data behind
those instructions, he adds, comes from the
digital thread that Celli Group has built which
now also informs product development and
prototyping at the company.

Bridgestone Europe’s smart

factory drive
In June 2019, Bridgestone Europe, the
European arm of the world’s largest tyre
and rubber company, announced plans to
invest €36m into digitising its manufacturing
operations. Eight existing European plants
across Poland, Hungary, Spain, Italy and
France will be transformed into smart factories
that use less energy, produce less waste and
achieve new levels of productivity. It’s an
ambitious undertaking, and one that demands
significant support from Michael Johnson,
Bridgestone’s EMEA CIO, and his team who are
working closely with the company’s heads of
manufacturing and R&D department.

© The Economist Intelligence Unit Limited 2019

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As part of this smart factory project, data had ‘IT projects’, that’s not the way we work
from tyre production will be analysed by anymore. It would be impossible,” he says.
Bridgestone engineers in Rome and Toyko “The convergence between engineering and
with a view to designing new and improved IT, between operational technology and
models. Following advanced analysis, updated information technology, is ever-growing, and
designs will be returned to plants in digital while it might be easy for operational teams
format, cutting the production time for the to adopt information technology without
first series of new tyres in half. involving IT, it’s widely recognised that this is
inefficient and comes with a lot of risk.”
AI, meanwhile, will also play a major role in
boosting production efficiency. Using data
collected from connected sensors on plant-
floor machinery, smart maintenance will soon
provide the capability to foresee potential
faults and suggest maintenance solutions Our approach in IT has to be one of a
even before outages occur. And smart partner and a guide.
tracking technologies will be introduced to Michael Johnson, EMEA CIO, Bridgestone
monitor the progress of prepared materials
and semi-finished products within plants,
aiding production planning and administrative
processes from mixing materials to “So our approach in IT has to be one of a
warehousing. partner and a guide , to be very much engaged
and involved in distributed, cross-functional
Cross-functional teams, including teams, working hand-in-hand with others in
representatives from IT, are already at work the business to drive adoption of emerging
on delivering the four-year project, Mr Johnson technologies. It’s about working together to
confirms. “There’s a large IT element to a find the best ways, the most agile ways of
project like this, but whereas in the past we making these things happen.”

© The Economist Intelligence Unit Limited 2019

 Leading transformation in manufacturing
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Case studies in technology-driven innovation

The roles of the transformational IT leader

Only companies with a clear digital vision, As Mr Roero of Celli Group puts it, “I don’t see
strategy and culture to support digital myself as a typical manufacturing CIO, because
transformation can truly hope to take I don’t think that is what is required any
advantage of it—and the technology leaders longer.” What is required, he adds, is a “change
of Konecranes, Celli Group and Bridgestone agent” who not only understands business
Europe all see themselves as playing a leading requirements through close collaboration with
role in helping their organisations to catalyse other senior executives, but can also come
the changes required. up with a workable roadmap for applying
emerging technologies to those needs.

Indeed, at manufacturing companies that

are making progress with technology-led
transformation, there are many new roles for
I don’t see myself as a typical the IT function and its leaders. These include:
manufacturing CIO, because I don’t
think that is what is required any Bridging the OT/IT divide
longer.
This is the role that fits most neatly with the
Andrea Roero, CIO, Celli Group CIO’s traditional concerns, but it is still sorely

© The Economist Intelligence Unit Limited 2019

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lacking at many manufacturing organisations. reach a sufficient maturity to be worth

According to a late 2018 report by consultants considering, and that sometimes takes time.”
at strategy firm McKinsey, many Industry
4.0 projects are still delayed or fail to scale Mr Roero of Celli Group agrees: “There
because the technical foundation required are a lot of new technologies out there
to collect data from complex, heterogenous and executives from disciplines across
manufacturing environments is not in place2. manufacturing companies are aware of
them, and excited by them, but even if they
“Fundamentally, delivering Industry 4.0 at understand that the world is changing, they
scale requires the ability to extract, interpret sometimes require a guide who can help them
and harmonise data from disparate systems cut through the hype and perhaps take a more
that were not designed to work together,” the realistic view.”
report explains. “Without this step, the best
analytic models will not have the data required IT security advocate
to deliver the value expected from them.”
When manufacturing operations start
When emerging technologies are introduced, implementing emerging technologies without
with all the associated risk they bring, there IT’s oversight “bad things can happen,” warns
is huge value to be had from IT firmly guiding Mr Martin of ABI Research. “It could be the
architecture decisions, says Mr Johnson of deployment on the factory floor of consumer-
Bridgestone Europe. “The business and the grade hardware, such as tablets and VR/AR
business objectives need to come first, but we headsets; it could be network related, when
can only build and grow a profitable business new integrations are introduced,” he says.
if concerns around integration, security and “There’s a very real risk here that valuable
operating technology at scale are addressed intellectual property gets exposed or falls into
first so that new technologies can be added the wrong hands in ways that could potentially
as components of a robust enterprise be extremely damaging to the business. I
architecture. So in the face of change, we still see that as a very real risk in organisations
feel very accountable for owning and steering where the IT function isn’t involved in these
the architecture decisions.” decisions.”

A radar for emerging technologies

At Konecranes, Mr Pankakoski sees his team
as the eyes and ears of the company when
it comes to emerging technologies as they
There’s a very real risk here that
tend to have expert contacts updating them
on new developments. The trick here is
valuable intellectual property gets
communicating this to other executives in exposed or falls into the wrong
a way that manages expectations, he says. hands... in organisations where the
“We don’t just keep an eye on emerging IT function isn’t involved in these
technologies, but also on their development decisions.
cycles, so that we can communicate to the
organisation when those technologies might Ryan Martin, principal analyst, ABI Research

2
https://www.mckinsey.com/business-functions/operations/our-insights/operations-blog/its-the-last-it-ot-mile-that-matters-in-avoiding-industry-
40s-pilot-purgatory

© The Economist Intelligence Unit Limited 2019

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Catalyst for agile innovation manufacturing employees worldwide will

require significant reskilling by 20223; the
Pilot projects for emerging technologies call European Commission estimates that
for cross-functional teams comprised of IT, around 37% of workers in Europe don’t have
operations and digital and analytics experts. even basic digital skills, let alone the more
This plays to the IT department’s strength, specialised, advanced skills companies will
says Mr Martin of ABI Research. Traditionally need to successfully adopt new technologies4.
IT has assembled such teams and adopted
‘fail fast’ methodologies throughout processes The CIO and their team, long-used to
such as software development. The CIO, recruiting and developing technical skills,
with their cross-company contacts, is often have a contribution to make in articulating the
best-placed to help senior colleagues identify human needs of digital transformation. An
which use cases have most potential value important element of Bridgestone Europe’s
and which might be easier to implement. As smart factory initiative, for example, is the
such, CIOs are often the driving force behind upskilling of EMEA employees to work with
the adoption of emerging technology, Martin new technologies, and here Mr Johnson
explains. expects to play a leading role. “We’re building
our people’s skillsets as we’re building the
At Bridgestone Europe, says Mr Johnson, the
technology, so it’s introduced to them in a way
initial stages of the smart factory project
that is relevant to their day-to-day work. And
have closely followed agile principles and
in some cases, we’re looking to bring in new
will continue to do so. “Our goal here was to
people with the skills to help us accelerate.”
demonstrate and prove that the smart factory
It’s vital that IT advises here, he adds, since
architecture we’ve devised will generate
it often has the clearest view of the types of
the results included in the business case. So
digital skills needed.
we’re staggering the rollout, starting with this
one plant, which is where we’ll do a proof
of concept and identify a minimum viable Engaging with external innovation
product (MVP) approach that works so that
External collaboration with universities
other plants and other leaders can see that
and research organisations is a vital part of
happening and get on board. Success breeds
the innovation picture at Konecranes, says
success.”
Mr Pankakoski. “We can’t be expected to
understand every aspect of the ‘art of the
Digital skills advisor
possible’, which is why we work with experts
As manufacturing becomes more digital, elsewhere.” In recent years, this has included
companies need to determine the types of tie-ups with researchers at Finland-based
workers and skills that will be required to Aalto University on digital twin technology
get the most out of emerging technologies. and with the University of Lyon on AI and
Many manufacturing organisations already machine learning. The company also has an
face significant skills shortages, and an office at Finland’s largest start-up incubator
influx of emerging technologies will bring and holds hackathons to collaborate with
that issue to the fore. The World Economic external developers on concepts for new
Forum estimates that more than half of applications.

3
https://www.weforum.org/reports/the-future-of-jobs-report-2018
4
https://ec.europa.eu/digital-single-market/en/digital-skills-jobs-coalition

© The Economist Intelligence Unit Limited 2019

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Conclusion: Taking the leap

The digitisation of manufacturing offers companies a number of

opportunities to create and extract greater value from their operations,
from straightforward benefits such as close and detailed monitoring
of system performance to more advanced activities such as digital
prototyping.

But while digital transformation may be on the agenda of manufacturing

companies around the world, as PwC warns, “most business leaders have
still not come to terms with the challenges and opportunities of digital
transformation or the conceptual leap it represents”.

The leap for manufacturing IT leaders, our interviewees suggest, is to go

from having direct command over a siloed technology estate to becoming
one of many influences on a shared technology infrastructure that crosses
multiple functions and interest groups.

This should not be seen as a loss of control, however, so much as change in

the way in which IT leaders exert their influence. If they can catalyse their
organisation’s technology-led transformation, it is a valuable opportunity
to increase IT’s strategic contribution.

© The Economist Intelligence Unit Limited 2019

While every effort has been taken to verify the accuracy of this
information, The Economist Intelligence Unit Ltd. cannot accept any
responsibility or liability for reliance by any person on this report or
any of the information, opinions or conclusions set out in this report.
The findings and views expressed in the report do not necessarily
reflect the views of the sponsor.
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