How not to Digitize Production? A Practical Guide. Part II

In the first article of this series, I wrote about typical mistakes that prevent the implementation of production digitization. I mentioned errors related to local perspective and focusing only on the interests of individual departments. I indicated that the most appropriate perspective is that of the CEO – one that allows you to look down on the entire enterprise. I also introduced a division into several types of companies. Let’s first look at what characterizes them and why their approach to digitization is simply inappropriate.

The first group consists of companies that digitize locally in an uncoordinated way. They have many scattered and specialized systems and technological solutions. Sometimes they improve the work of individual departments and solve local problems, though not always. In such companies, a large number of non-integrated tools producing huge amounts of local data, which are simultaneously not available in other parts of the company, causes numerous problems with information flow. Data transfer between departments often forces people working there to perform acrobatics, Excel heats up to red serving as a prosthetic connection between systems, employees drown in seas of reports, and the main challenge is obtaining information itself, not drawing conclusions from it. Excessive and chaotic digitization thus creates barriers instead of improvements, lack of synchronization between departments becomes a source of conflicts or unhealthy competition, creates room for shifting responsibility and does not promote improvements. We call this phenomenon silos. Silos of separate departments that function in a certain information bubble and are sometimes ready to conclude that they exist for themselves or forget about their role and place in the value stream.

The second group isn’t any better. Tons of paper, lack of efficient communication, dead phones are just the main but not the only problems faced by often large organizations that decided to develop their management systems based on so-called “people”, but in reality on papers and anachronistic solutions straight from art class, where markers, plasticine, and magnets dominate, and “people” simply perform a huge amount of unnecessary work. Don’t get me wrong, I’m not criticizing this approach entirely. For decades it worked perfectly well and could create a huge competitive advantage. This approach is also a key step before starting digitization. However, in the most competitive industries and where such systems are already developed, lack of digitization can quickly end up in loss of advantage if competition acts faster.

There is another approach unrelated to any of the above conclusions. These are companies that never went down either of these paths because they are in plain chaos. I don’t have good news for them. There is no shortcut and digitizing what they currently have is simply impossible because software is always a certain algorithm, or in other words, a scheme of action. If you do things differently each time and manage based on the manager’s mood, available resources, and biggest delays, no program will solve your problems. You need to start by getting organized to be able to determine what you actually expect from digitization.

Since I arbitrarily deemed the two “silo” and “human” approaches as wrong, and talking to the CEO as good, I should probably support this bold hypothesis with something. Let me start by saying that I don’t mean literally leaving digitization decisions to the CEO, conducting endless interviews with them, or entrusting them with the entire project (although if they have competencies in this area, why not). However, it’s worth adopting the CEO’s perspective to align all thinking about digitization with the company’s strategy, and these aspects are definitely worth asking about and aligning the entire plan with. Why?

Because the perspective from the very top of the pyramid is simple. It doesn’t drown in the nuances and operational details of each department, but sees a charmingly simple perspective: “the company exists to make money”. Of course, mission and vision are key to earning it, but if you compare the company to an athlete, while their mission might be winning a championship and their vision an innovative training program, money plays the role of air in this puzzle. Without it, the athlete would simply suffocate and… goodbye medals.

Money in a manufacturing company is earned through production. It’s not earned by the quality department, nor logistics, nor purchasing, nor any other corner which, although important in the whole process, plays a clear supporting role for production, not the other way around. If you work in a silo organization, you probably already feel at this point how easy it is to forget this perspective and start thinking that a given department exists for itself and its only goal is “doing its own KPIs”. In a manufacturing company, production should be “sacred” and “carried on hands” by other departments. If this isn’t the case in your company, you already know your biggest problem.

Now that we know the right perspective, let’s start arranging the digitization plan. We already know that we should start with the main process, namely production, because that’s where money “is created” for the company, from which both your salary is paid and funds for various improvements or innovations come from. But what exactly should be done in production? Where to start? Which data to collect?

If you want to get stuck at a dead end, go to gemba now and start asking people working there what they need. You’ll hear a million contradicting expectations and local improvement ideas in which you’ll drown and completely lose track. This is exactly one of the silos, and while this information will be very needed, it’s not time for it yet. Now you need to look from a global perspective, through the CEO’s eyes, and from there you can’t see all these nuances yet and won’t for a long time. The most important thing is to slowly descend with the perspective. So what is visible from the very top?

From the perspective of the entire enterprise and its business, you can’t see individual workstations, machines, or even lines. Instead, you see very large blocks: a black box, into which orders flow from one side, goods fall out from the other, and money from the third. And this is the appropriate view for organizing reality. At first, we should generally know whether we’re producing as much as the market wants and whether we have any unused capacity that can be used to sell more. Forgive me, romantics who believe that companies exist for some purpose other than selling.

To find out how much we produced and how much we could, you don’t need any complicated data. It’s enough to check what came in (orders), what could have come in (processing capacity), and what came out (finished products). Spoiler alert for technology maniacs: you don’t need to dig into the machine controller to count goods at the output. A simple photocell or button is enough. And at the beginning, a piece of paper and Excel.

I’ll play prophet now and make a bold hypothesis that you’re not using your potential fully and probably have a lot of unused production capacity. A truism? Then why is it so common? If you’re lucky enough that the market would be ready to buy more of your products, then recovering this capacity should be your business priority! Well, now that we know we could sell more, it’s time to go down one floor again and look for where the inefficiencies behind this state arise.