Next Generation Leadership part four: Strategic outlooks on Industry 4.0

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Next Generation Leadership part three: Generation C wild cards and 3F feedback
4th July 2016
Industry 4.0 consortium announces findings
24th November 2016
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Next Generation Leadership part four: Strategic outlooks on Industry 4.0

next generation leadership industry 4.0 strategy EIIL blog post image

In the previous part of this series, Steve Price, Executive Director of the EIIL, talked about digging deeper into the Retaining Generation C Study and the need for new leadership skills in the current workplace. In this final entry he concludes with a discussion of possible courses of action, and their consequences, for owner-operators as Industry 4.0 takes shape.

Bringing this right up to date, the hot topic of 2016 is Industry 4.0 – the Internet of Things in Industry. Our study of the same name is currently looking at the changing marketplace for owner-operators. Likely responses to increased automation by them and their supply chain (including EPC contractors) provides yet another emphasis change, and series of new skills needed by future leaders, as their companies take different responsive positions to marketplace changes.

Increasing automation has the tendency to commoditise some core competencies, especially those that can be codified. Investment in increased automation releases resources from the steady state. The main strategic decision is whether to embrace technology; to use these resources to concentrate on developing core competencies further, to create new services and to change the business model, or whether to pursue competitiveness in the existing business model through technology-enabled efficiency gains and headcount reduction.

The decision to maintain and develop core competencies and investigate how these can be applied to change the business model takes two forms. Companies can either be disruptive themselves by pushing into new markets or be more competitive with a new business model in existing markets. Either approach requires leadership skills to analyse the market and build partnerships with experts in new technologies. These technologies and skills include data acquisition, analytics and exploitation; strategic thinking; creativity, which includes considering creativity as a skill that can be improved; the ability to socialise ideas effectively, to be brave and think outside business as usual as well as understanding the different cultures of new business partners and how new markets might behave.

If a company instead chooses the route towards greater efficiency then as more core competencies are codified it becomes cheaper to buy them in rather than maintain an in-house capability. Outsourcing is pursued to achieve cost reductions to stay competitive since someone else has codified the competence and can deliver it at a lower cost. Competitiveness comes from managing contracts and contractors more effectively than your competition by taking cost out of the procurement and performance-monitoring and -management processes.

Possible steps to take include clever procurement to ensure motivating or incentivising contract terms, which can be easily monitored, and are flexible to allow supplier-led changes to deliver continuous improvement. Industry 4.0 automation and visibility of data will allow intelligent purchasers to monitor supplier/partner performance much more effectively than today. This will encourage longer term-contracts to reduce costs of the pre-contract phase, and eliminate the waste of disputes at the contractual boundary.

Leadership skills will be needed to ensure supply partners pursue agreed and aligned common purposes and that this continues despite changes in contractor’s personnel. Leaders will need to ensure their teams perform to encourage partnership as distinct from today’s often adversarial contractual relationships. Above this, leaders will need to ensure that whatever processes they adopt are robust so as to maintain their own corporate values and reputation.

Our business as usual case assumes that adoption of ICT and automation of professional level jobs has to be done otherwise we will not stay competitive. You need to get there quicker than your competition and prepare yourselves for the issues once you’re there.

As far as possible, expertise needs to be codified and fewer experts used to cover those areas which are problematic. Regional experts become global experts until eventually your expertise is concentrated in fewer and fewer people spread across a wider and wider geographical area. With less necessary fat – that is, fewer resources to effect changes to the steady state – the remaining in-house leaders will need an entrepreneurial skill-set to effect change.

If a business’ core competences become commoditised, and new entrants codify these first, they can become new industry participants with vastly different cost bases often changing the name of the game. Uber codified how taxi companies find customers and they now control that process without owning a single taxi. Google’s self-driving car is causing disruption amongst automotive OEMs. The business as usual response to Industry 4.0 has a high risk of allowing this to happen, causing us to move unwittingly towards, as Charles Handy once described it, Davy’s Bar.

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So, in summary – yes, there are new, particularly communication related, leadership skills required to engage the Connected Generation. We also need to develop retention skills in our current leaders to deliver on the recruitment promise, especially as it becomes more difficult to offer the variety of experience required for an attractive career. As Industry 4.0 inevitably hits it is imperative that an eye is kept on developments in automation and codification of what we currently consider our core competences, and develop our future leader’s skills to lead effectively whichever new strategic direction we choose.

This article is the last in a four part series, adapted from a presentation given by Steve Price for the ECI earlier this year. Click to read part 1, part 2 and part 3.

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