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The Onin Group | A Productivity and Innovation Gap
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A Productivity and Innovation Gap

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20 Sep A Productivity and Innovation Gap

A Productivity and Innovation Gap

By Klaus Holzhauser

Ask the vast majority of manufacturing executives what keeps them awake at night, and the answer will be how to improve productivity and innovation.

Stagnant productivity has been a problem in major economies for more than a decade. And in the digital age, accelerating the speed of innovation is critical, not just to the success of manufacturers, but to their basic survival. Consider the ever-lengthening list of one-time market leaders who failed to adapt to changing market conditions or to the competitive landscape: Kodak, Saab, Polaroid, Nokia and Blackberry.

Both productivity and innovation start on the shop floor, and the workforce needs to have the right technology and environment to maximize its potential. It is no coincidence that some of the biggest success stories in manufacturing in recent years were built on a re-imagining of the workplace environment – be it Lego’s creative hubs or Adidas’ Speedfactory concept.

But some new research based on interviews with manufacturing organizations has found that today’s workplace approach is holding them back.

 

A productivity and innovation gap

PAC recently partnered with Fujitsu to interview more than 200 senior business and IT decision-makers at manufacturers in Europe, ANZ and the US to understand the challenges they face in optimizing and modernizing their workplace.

 

The problems start at a policy level.

More than three quarters (76%) of manufacturing executives admit that their current working hours and practices are not flexible enough to get the best out of the workforce. This may be a factor contributing to high staff attrition, which is seen as a challenge to productivity by 82% of participants.

But perhaps the biggest issue is that today’s workplace technology is hindering rather than helping the workplace. A huge 89% of participants cite the complexity of current workplace technology as a barrier to workplace productivity, while 84% view interoperability with outdated technology as an obstacle.

One basic challenge that clearly needs to be addressed is that very few manufacturers truly understand how productive their current workplace approach actually is. Just 20% use analytics tools across the organization to measure workplace productivity, with the majority of those that do having only a partial view.

With innovation so critical to the success of the business, it is also concerning to hear that current workplace technology is also failing to support it entirely. Only a quarter or those interviewed said that their workplace approach has a highly positive effect on their ability to engage and innovate with external partners, while just 27% say that it truly helps them to accelerate time-to-market for new products and services.

 

A rapid response

So how are manufacturers adapting their workplace strategy to enhance both productivity and innovation?

Encouragingly, change is happening at a fundamental level. More than two-thirds of manufacturers are adapting their policies to drive a better work/life balance.  Nissan’s “Happy Friday” and Porsche’s move to block out-of-working-hours emails are two recent initiatives.

More than two thirds (68%) of manufacturers are also planning to change their current policies to create a more agile and compelling workplace experience. This is being underpinned by short-term investment in areas such as digital virtual assistants (51% plan to deploy in the next two years) and social enterprise platforms (41%).

Current approaches to cybersecurity were highlighted as one big barrier to workplace productivity in the study, with multiple layers of identity and access management technology holding workers back from accessing corporate data and systems. In order to strike a better balance between compliance and user experience, manufacturers have implemented or are about to implement biometric technology (97%), behavioral analytics (66%) and contextual analytics (58%).

 

But what are they doing to enhance innovation?

A key part of the strategy will be to tap into insight and knowledge that sits outside the walls of their own organization. Some 44% of manufacturers are looking to provide access to tools and platforms to create and share innovation with a wider ecosystem.

In many areas, manufacturers have led the charge in opening the doors to external collaboration. Over the last five years, automotive manufacturers have built far-reaching and diverse partner ecosystems to put together the skills they need to push forward with connected vehicle initiatives. Ford recently announced that it was working with technology partner Autonomic to create a platform to support connected vehicle networks, and it is inviting other automakers to get onboard.

Open innovation and crowdsourcing are emerging as two of the most important ways to engage with partner ecosystems, and 59% of manufacturers have either implemented or plan to implement them as a way to generate new ideas and products.

Current advocates of crowdsourcing and open innovation include General Electric, Apple, and Lego, and while its adoption remains in an early stage in many other businesses, the addition of artificial intelligence to help target and involve much more specific and relevant groups of participants and experts will significantly enhance its potential.

 

Some final thoughts

The study revealed that manufacturers have work to do to ensure that the right workplace policies, technology and environment are in place for the workforce to unleash its full potential.

These changes will need to happen quickly, as the gap will only widen as the makeup of the workforce changes (polarized between millennial and Gen Z entrants and a lengthening tail of more experienced staff) and pressure from competition forces them to innovate at greater speed.

The manufacturing sector stands to be hit with possibly the greatest impact from the rise of intelligent automation. Beyond the production line, it will also play a key role in providing a more personalized and compelling workplace experience for manufacturing employees.

But as we have seen with the rise of partner ecosystems, manufacturers are increasingly looking for external help. Almost two thirds (65%) of manufacturers view a lack of relevant internal expertise as a barrier to implementing their digital workplace strategy, while 86% state they would welcome support from a partner in overhauling their workplace cyber strategy.
Klaus Holzhauser is the Group Head of Digital & IoT, at industry analyst group CXP (www.pac-online.com)

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