There is a vibrant array of new companies emerging with digital and automation capabilities that are attempting to interact with traditional companies (suppliers and operators) in the resources/industrial sectors. However, frustration is high as progress is slower than anticipated, investment (physical and financial) is inefficient, and market participants can often work at cross purposes.
Some emerging companies are targeting full value stream (macro) optimisation – attempting to link each and every process step across the value chain. Their catch cry is that the next generation of operational improvement resides in optimizing the ‘white space’ between process steps. However, complexity of interfaces with numerous (and often time legacy) sub-systems, poor underlying process disciplines, and poor co-operation/control across the value chain is leading to less than expected improvement outcomes.
Other emerging companies are focused on digitising and automating particular process step – often led by specialist industry suppliers digitising and automating their industry contribution. Get immediate payback from best-in-class optimization of micro processes is their catch cry. However, the outcome is frequently non-integrated bespoke solutions that only serve to increase the complexity of across value chain optimisation.
So what can the industrial sector re-learn from the operating models of the likes of Uber and AirBnB – companies that seem to have built successful global digital and automation capabilities at (what seems like) the speed of light?
The answer lies in the crucial role of the sub-assembly – a solution drawn right out of Henry Ford’s rule book for efficient mass auto production over 100 years prior. The speed and success of companies like AirBnB and Uber is attributed to their integration of a manageable number of ‘pre-assembled’ off-the-shelf highly effective componentry such as a Paypal billing system, a Google GPS positioning system, a Box file management system, etc. Like pieces of lego a global and scalable digital operating system is constructed with speed and efficiency – allowing greater time and energy to improving the business model of how to efficiently meet customer needs.
So the opportunity exists in the industrial sectors for those that can lead the creation of meaningful ‘sub-assemblies’ – the much smaller number of integrated and open architecture componentry that can be combined flexibly in end-to-end value chain optimisation. The shift that needs to happen is greater consolidation of related capabilities across a value chain (i.e. creation of a digital sub-assembly) but is likely to fall short of attempting to deliver full value chain integration in one go. Due to differing industry applications and approaches, flexibility will be required in what and how sub-assemblies are combined to deliver the required capabilities to meet specific customer needs.
The prize – improved speed to benefits for customers and the emergence of the next generation of industry leaders.