- For Your Industry
41 min read
Digital Technology Trends in Manufacturing
In the past, manufacturing technology was focused on improving equipment and tools. Now, the industry is shifting its priorities towards workforce enablement. How will the shift impact the future of industrial business?
Isaac Brown is an Associate Partner at Landmark Ventures and has worked with countless industrial companies to help evaluate and deploy new technology.
In the second episode of The Voices of Manufacturing, Brian talks with Isaac about how these digital technology trends are affecting buying processes and the benefits of seeking out tools that empower your workforce.
A full transcript along with additional resources are listed below.
- How AR Can (Actually) Shape the Future of Manufacturing| Forbes Technology Council
- 5 Ways to Get Wifi on the Factory Floor | Dozuki
- The Future of Work in Manufacturing | Deloitte
- How Digital Tools Enable Rapid Communication in Manufacturing | Dozuki
- Learn more about Isaac's work | Landmark Ventures
Episode 4: The Voices of Manufacturing
Brian Sallee: All right. Hey everyone. Welcome to the podcast. This is your host, Brian Sully. And today I'm excited to welcome Isaac Brown. Isaac is an associate partner at landmark ventures. Welcome to show Isaac, thanks for joining us.
Isaac Brown: Thanks for having me, Brian.
Brian Sallee: Excellent. Before we dive in love it if you could give us some background, what does Landmark Ventures do? It sounds like you guys do cool stuff. And then, your title, you're an Associate Partner there. So what is your role there?
Isaac Brown: Yeah. Landmark provides a few different services, really focused on enterprise technology startups.
We have an investment banking group where we help startups raise capital. We do some M & A work. We have an events business, so we host a lot of different kinds of events. That business has changed a lot over the last year. Now they are primarily virtual events.
And then we also have a service where we help enterprise tech startups with go- to market and business development. And so I do all of those things, but focused on the industrial tech sector. So all the companies that you know are under my portfolio are the different kinds of startups that have digital solutions for boosting productivity and performance within industrial operations.
Brian Sallee: Got it. And when you say industrial, that's quite a broad description. You're talking about everything from oil and gas to, traditional manufacturers, anything beyond that?
Isaac Brown: Good question. I think people use that term very differently. A lot of people, when they say industrial, they just mean manufacturing. When I say it, it covers everything. So manufacturing, supply chain, oil and gas, utilities, transportation and logistics, mining, construction, I guess the core theme, there would be any anybody that's got like physical stuff in the world that's important and needs to be operated properly.
Brian Sallee: Okay. I like that definition. So you're working with these, young kind of startup companies that are selling digital technology to industrial companies. In your role then, what exactly are you doing and who are you talking with?
Isaac Brown: So what we do is we're very methodical about leveraging our existing network of decision-makers at big industrial companies. You know, leveraging the existing network that we've built over the years to help uncover opportunities for our clients.
And then we're also really formulaic about how we go out to the market to build new relationships with those kinds of people, to just understand projects and figure out where we can align opportunities for the companies that we're helping with business development, the companies that we're helping with financing and M & A. And so really it's just a scientific approach to networking; is maybe the best way to think about it.
Brian Sallee: Great. And that that gives you access to a pretty large group of executives at these industrial companies. And you've really got your pulse on the industry, it seems like it. Especially when it comes to, digital technology.
One of the things I wanted to pick your brain on today is what are some of the trends that you're seeing? Especially. We went through a lot in the last year with the pandemic, we had plants that were shutting down. We had manufacturers that couldn't keep up with demand.
There are still these challenges around filling positions for a lot of industrial companies. So there's a lot going on, but what are some of the big shifts that you've seen?
Isaac Brown: Right. And it's completely cliche at this point, but it's hard to answer any question like that without framing it under the context of pandemic response. So actually I think one of the things is interesting enough. I'm like I'm writing another article on this right now. I think that we've moved out of urgent pandemic response territory towards what did we learn from the pandemic that we can start applying going forward?
It's still all centered around, like what happened in 2020? There's a lot of trends. I think one that we're seeing a lot and I'm writing a piece about, it's separate from what you guys do is just around predictive forecasting. It's like all these manufacturers either saw such massive spikes or drops in demand for their products and they had to do all these crazy things to meet demand or. Keep making money. That's one I think a space we've been looking at for years is predictive maintenance. And I think that unplanned downtime became even more expensive and more disruptive last year.
So there's renewed interest in that space, but one of the big trends, and we've talked about this, Brian. We saw this interesting kind of shift and, from how do we optimize our machinery? How do we reduce scrap, improve quality from an equipment and process perspective into how do we leverage digital technologies to improve the productivity of our people, to keep them healthy and safe? To make sure that they're trained and skilled properly and quickly.
That's just where we've seen a lot of the renewed interest going again. It was happening before the pandemic started. Like it was a trend we were already tracking, but just with reductions in staffing and the need to ensure that you have the right people at the right places who could do the right things last year, it really became a major focus area.
And I think there was a lot more investment in those technologies due to the pandemic and we'll be going forward.
Brian Sallee: Yeah. And just to go back a little bit, some of those trends you've seen, when you were starting to get when you first got into the industry, a lot of stuff around predictive analytics and machine monitoring and things like that.
Those are still important to companies but have you noticed a lot of companies have already implemented solutions for that and now they're onto the next thing, and that's why they're starting to focus on enabling these frontline workers? Or is it just been the shift as we've seen with the pandemic and the struggle to fill positions, that's leading them to look at these new solutions for enabling frontline workers.
Isaac Brown: There's probably a lot of reasons for it. And I think one of them, is what you said, right? People started, when the term industrial IOT really got hot, six years ago, the first use case every big industrial company looked at was predictive maintenance, just because it made sense. It was easy to justify spending money on, cause it was easy to calculate the return on it. And it just was a thing that it was like, one person could own the decision. So I think it was easier to invest in that.
So I think a lot of companies had already made those investments and moved forward with that part of their agenda. And now that frees up space to focus on workforce enablement, but there are plenty of companies that aren't even doing that. That never moved forward with remote monitoring and predictive maintenance solutions that, skip that and are looking more at workforce enablement.
I think it's tricky to figure out exactly why it is. There's probably a lot of different reasons. I just think that overall it's pretty clear that people and skills are a value generator.
I think another part of the trend is this notion that we've talked about this too, is the retiring workforce. Depending on whose research you read, something like half of the workforce in this country and manufacturing is basically ready to retire and the problem just keeps getting more exacerbated as you don't have young or new talent in the places where manufacturing is. And then you really do have a lot of people who are ready to retire and manufacturers have used these incredibly archaic techniques to solve this problem.
The main technique is just getting people to work longer. It's convincing people who are ready to retire. "Oh, well we'll give you better benefits or we'll give you this new ergonomic capability that makes it easier for you to work - even if you haven't a condition or an injury or something." So I think that's coming to a head more. And I also just think that people are starting to see the ROI and the value of investing in workforce enablement solutions. So it's a lot of things.
Brian Sallee: Got it. Yeah. And that, I think that one's really interesting. Cause you mentioned this a minute ago, the ROI is easy to calculate on, say I'm going to do machine monitoring or something like that. You mentioned it as well. Like it's one person, a few people making a decision easy to calculate the ROI. But as you move into trying to implement a digital solution, workforce enablement, which you may, maybe that's around training, maybe that's around what we do, which is more like the work guidance side of things.
It's difficult to calculate the ROI on that, and you have to change the way a large group of people operates. And so those are two key reasons why it's been slow maybe for a lot of companies to adopt.
What are you seeing now though, when it comes to these executives, as they're thinking about empowering their frontline and enabling them, how are they justifying it? And really what's motivating them, aside from this workforce that's retiring? What's motivating them to get something in place?
Isaac Brown: So aside from the retired workforce, I just think, last year was a good case study of what happens when staffing is reduced or you don't have the right skills on the job, or it takes people really long to train. I think people felt a lot more pain from that than they used to. And I just think that there is a more mature approach to calculating ROI from digital solutions in general.
I think that's something that's plagued the industry outside of workforce enablement solutions. Everybody thought that we'd be operating these super digitized, connected factories where everybody's wearing heads-up displays and we're not, right? That's not happening in the world because I just think that a lot of the operational leaders in big industrial companies just didn't fully buy into the ROI story. And so I think across the entire category of digital technologies for manufacturing and supply chain, people increasingly are believing the ROI story, getting more comfortable with digital and data and all that.
And I just think that overall there's more maturity around the way that people buy and the way that people calculate return on investment. I was talking with one of the people on your team last week, Brian, and they were scoping out a pilot with a customer. And that customer, who's in the metals industry, there's a machine that they have to set up every day and just setting it up wrong, one time, costs like a million dollars. And so the discussion was if we buy like a platform for work instructions that can eliminate just one, one time. If one time that we would have set up that machine the wrong way we wouldn't, it would justify that platform forever.
So I think people are a little bit more mature about the way that they calculate the cost of failures, or the cost of quality issues, or safety issues. And it's motivated more spend on these technologies.
Brian Sallee: Yeah. And I want to dig deeper into this ROI topic because this is really interesting to me. I've been thinking about this a lot as well, and software's new in manufacturing, right? There's not a lot of software solutions that especially their frontline workers are using. But there's just not a lot of software. There's not a lot of people purchasing software.
And so how do I analyze the return on investment? I'm going to analyze it just like I analyze maybe the return on investment of a piece of equipment. And it seems like that's where it breaks down. Is, I've noticed with digital, there's a lot of side benefits or secondary benefits of implementing a digital solution.
I think one of them is, people get comfortable using digital solutions and that could lead to you being able to implement other solutions down the road, or increasing the skill level of your employees. What are some changes that you think manufacturers need to be making to the way they analyze these ROI decisions?
Isaac Brown: Yeah. I think that you hit one of the key themes, which is just this move away from a CapEx purchasing mindset. So like almost all the companies we work with sell SaaS and there are certain industrial companies that just hate buying SaaS, no matter what.
Like power plants hate buying SAS, right? They're I think one of the most rigid in terms of the way they run their books. They buy a gas turbine. It costs this much. It depreciates this rate. It lasts this long. This is the payback period. This is exactly how much we'll profit from this purchase. That's a mindset that's still surprisingly prevalent in manufacturing too.
I think it's regionally dependent. It's industry dependent. And I think there's just some kind of randomness to which companies haven't come around to buying things differently. But I think we need to change this paradigm of 'capital purchasing' and move towards you know, one of the things that we see a lot is digital business models for equipment, right?
Like the whole, everybody calls it the power by the hour model. Like instead of selling you this machine, I'm going to give it to you and charge you for its utilization. And so that's becoming more prevalent with industrial buying and I think it applies to buying digital solutions too. I think that there's more comfort with SaaS models. I think there's more comfort with value-based pricing. I think a lot of companies hate it.
I think a lot of companies like it. Like I'm going to sell you a knowledge management platform and I'm going to reduce your training time by this amount. And that costs you this much. And I just want to take a cut of the amount of money that you save by using my product
. And I think that as you increase this awareness of the cost of training time, quality issues, safety issues. And when you can really start to pin down how much those things cost that makes purchasing digital workforce solutions a lot easier.
Brian Sallee: Absolutely with executives, in particular, you've got executives who have different motivations. Some executives, they're new to a company, they want to make a splash. Some executives have been there a while. They want to see change because they know it's going to improve the company. When it comes to the way that these folks are thinking about ROI, what are some of the trends you're seeing there? In terms of, " Hey, I could see us justifying the cost of this software in this way." What are some of the trends you're seeing there?
Isaac Brown: Everybody wants it to be too quick, right? Like it might take a few years to get a reasonable payback on something. And I think everybody wants, especially in big public companies, to show it in a quarter. Which is just not realistic. I do think that there's this increasing digital awareness, but just people understanding that this is something they should do for competitive reasons.
So yeah, I think new people, new companies It and digital increasingly having a voice within industrial operations is useful, even though I think sometimes they don't actually understand the problems that they're trying to buy stuff to solve for.
I remember I was at a conference like six years ago and we were talking about using digital tech in healthcare manufacturing. And the guy was like an operational leader and he said, "The problem we have at my company is we're making a lot of money," right? Like, "All of us have been in this job, making a lot of money, and it's been very profitable for a lot of years. And we know that if we just keep doing things the same way, we're going to keep making money. Why would I take a risk? Why would I try something different at the risk of losing my job when I've got this cushy job where I make a lot of money?"
I heard people say that a lot for years. And I feel like I hear people say it less now. I think people are just coming around to this idea that they get that they have to invest in digital technologies.
Brian Sallee: Yeah. So it's becoming more of a no-brainer. Of course, we want our operators to have tablets or some sort of device that can support them. "Why wouldn't we give them that?" Is the mindset you're starting to see?
Isaac Brown: Yeah, it is that. And then some of that goes back to just some of the surprisingly basic things. Like a lot of manufacturing plants don't even have wifi. A lot of them are still literally printing out work orders on a printer and then handing pieces of paper out to people on the shop floor. I always assumed that was a problem that went away in the eighties. It has not. So there's just some, there's some of it's a cultural approach, probably more of it's cultural, but there are also these basic technology infrastructure issues that continue to, I mean, we have companies that want to do a project, some of them in modern areas of North America and they don't have connectivity to the plant and they have to 4G hotspots in the facility to get data out. And that, that always blows my mind. But that happens everywhere.
Brian Sallee: Yeah. That's interesting. I think one of the things I'm curious about is, what's going to happen over the next 10 years? It seems like these two paths, these companies that aren't investing in any technology, they don't even have wifi. Operators don't have email addresses. If they don't change in the next 10 years, what's going to happen to them? Have you thought about that? What the future holds for the adopters versus the not- adopters?
Isaac Brown: Yeah. And I can tell you one thing, that's not going to happen. You're not going to see a lot of factories that are lit up with 5g. No matter how many people tell you that's going to happen, it's not going to happen, yeah. I think the companies that do adopt technology in their factories in the right way are obviously going to operate at a competitive advantage, both in terms of increasing productivity and cutting costs. But I think it's important to do it thoughtfully.
Another thing that we saw when the IoT bubble happened, like five, six years ago It was a lot of industrial companies just started saying, okay, I'm just going to have my IT department connect everything they can to the internet. We saw OEMs start selling connected machines that didn't solve problems. There was a lot of waste. And then a lot of technical debt. And then a lot of disillusionment around whether it made sense to invest in those things.
So I do think that as these companies move forward with their digital agendas, it really needs to be value-driven right. You need to be really identifying the high-value use-cases, working with your operational leaders, working with your customers, to understand what do we actually need to do with technology, as opposed to just doing it for the hell of it, right?
Brian Sallee: Yeah. And that brings me to this next point where, if you're an executive or whatever role you're in, you're a leader at an industrial company. You're trying to figure out where to start. There's a lot of options and, you work with a lot of digital solutions right now. How do you help someone like that? They're not just going to go implement one of these solutions, right? They've got to take baby steps along the way. What are you seeing from companies that are allowing them to evaluate solutions? Figure out where the value is? And maybe some of the roadblocks that are going to come up as they try to implement those solutions.
Isaac Brown: So I think so the guidance for that question, like, "where do I start?" Overwhelmingly, these companies are getting the answer to that question from IT research firms and strategy consulting shops that are really just trying to get them to buy an expensive consulting project or trying to resell some solution that they're going to get a big cut from reselling. So I think there's a lot of misguided people trying to help answer that question. So I think it depends on who you ask at the organization. And I think increasingly there's this like chief digital officer who does have this responsibility for like digital operations at industrial companies.
But if you ask a plant manager. Like where are we losing money? They know. That person, like the person who's actually in charge of the P and L for a site and is on the ground. They probably have a pretty good idea of exactly where there could be an investment that would help them. So I think it's a question of just getting down to the right level of the org chart.
If you talk to the global VP of manufacturing, That person might know, but if you talk to somebody at the site level who has a really good understanding of, what happened yesterday, that costs me money or shut down productivity, they generally know. So I think it's just finding the right spot on the org chart and talking to the right people.
Brian Sallee: Yeah, that makes a lot of sense. Well transition here, we talked a little bit about this, workforce enablement. I wanted to go back to that. It seems like a pretty broad category. Training, whatever you want to call it, work guidance as we do at Dozuki here. What's your definition of workforce enablement?
Isaac Brown: So it's a good question. I would say anything that enables employees to be more productive, reliable, and increasingly focused on being safe and healthy. I remember working for a research and consulting firm five years ago, running their IoT and digital programs focused on industrial companies. And every time we had a new client, we would sit down with them and say " Okay, what are the top priorities that we can help you with? We'll put together a little package for you." A hundred percent of them said, "safety." And zero of them spent any money on safety, right? It was just like, it was the thing you had to talk about. But I think in the last year or two, we've seen a ton of spend on safety technologies. And not just there was this little window at the beginning of the pandemic when people were selling distancing hardware. Watches and stuff, and they made a lot of money, and that it was like a month later, there were a thousand free apps that did that on your phone.
So I don't mean just like distancing apps. I mean like analytical tools and platforms for avoiding injuries. And then, a huge focus on knowledge now. Especially as a lot of that knowledge is going out the door because people are retiring. I think knowledge is a big piece of it. Competency and skills management, collaboration tools; there's a lot that kind of falls into that portfolio. But really the bottom line is anything that helps people be safe, productive, reliable, do quality work.
I might even put retention under that category. I've seen a lot of surveys recently around digital transformation and one of the things they talk a lot about is using digital technology to improve employee satisfaction and retention. And that helps give you a more competitive workforce. I might not throw hiring under there.
We've seen some hiring and staffing tools that are a little bit more focused on industrial operations that help you source people based on the equipment that they're familiar with or, things like that. So it's a lot of different things that can fall under that. And it probably differs depending on who you talk to, but that's how I would frame it.
Brian Sallee: Yeah, that's really interesting on the retention side. I'm curious what are your views on how can a solution, a digital solution, or multiple solutions, help a company retain people? Because I know, for a lot of our audience turnover is a big challenge. A lot of manufacturers have, 50% turnover or higher over the course of 12 months. And pertaining people would save them a lot of money. So what are some ways that digital technology can help retain folks?
Isaac Brown: Yeah, that's a good question. And you're right, cause retention solves a lot of the other problems in this category. I think a lot of it is just understanding how your employees feel. Like digital touchpoints, both with employees and with customers, get you better feedback. If there was just a checkpoint every day that said, "How'd you feel at work today? Good or bad?" Like even something as rudimentary as that would probably be useful to figure out where you had risks of turnover. So just any types of digital touchpoints that can get you more in touch with your employees or your customers, right? The same techniques are applied to customer churn. That's just a basic starting point. But if you're making people feel like they're safer doing their job, or you're empowering them to do a job of higher quality, or you're helping get them up-skilled for their next career move more quickly. All of those are features of digital solutions being used for workforce enablement that contribute to increased retention.
Brian Sallee: Yeah, I like what you're saying there, you mentioned, feeling safer, feeling empowered, and then challenging people to grow. All things that these digital enablement solutions can do. That's really interesting to think about As you think about really the next five years, it's interesting because before, workforce enablement has picked up some steam in the last couple of years, but before that we had, this allure to virtual reality, augmented reality; there was a lot of hype about that. And that didn't really go quite the route we thought it would. Where are the next five years going to go? Do you anticipate folks walking around with wearables on and then they need to look up how to do something? They're going to have some smart glasses on that are going to show them the way, or do you think it's maybe a little more practical than that.
Isaac Brown: I think augmented and virtual reality solutions are part of the portfolio. And I think that they're useful. I think there are a lot harder to use than people give them credit for. So I don't think they're going to solve all the problems. I think you're going to still need other sources of knowledge and training and work instructions that aren't AR solutions. I still think the dominant device in all digital industrial roll-outs is always going to be this is what people have. They have a cell phone, everyone almost everyone's got a cell phone. So I think every tool is going to be native to the cell phone. Just because we talked to a lot of companies that are trying out AR solutions and it's they have four HoloLens devices, for a 30,000 person workforce. And they're not about to go buy 30,000 of them. That's not how it works. So I think it's always going to be cellphone-native. I think we'll continue to see more and more focus on people as opposed to just equipment and processes. I think the real thing that's going to happen in the next five years, just scale for digital industrial technologies. Like a lot of this stuff is still in pilot mode, right? Or a lot of it is still, maybe you won a deal at one site or one business unit. How do you scale that across the enterprise?
IT buying patterns, a lot or a lot of them are enterprise-wide because it's a corporate function that controls that and buys it out and rolls it to the rest of the business. Buying industrial technology is not really like that. Cause you're going in at the site level or you're going in regionally. So I think that uniting the buying center for digital industrial technologies is something that still hasn't fully happened yet. I think there's a lot of categories of technologies where nobody's even sure whose product it is. Is this an IT product? Is it an HR product? Is it an EHS product? Is it a manufacturing product? Who has to pay for it? Who gets in trouble if it doesn't work? So I think we have this issue uniting cross-functional buying centers. And I think the appointment of the chief digital officer at industrial companies is trying to solve that problem. But I think in most companies, that's still a person that doesn't really even have a budget or authority to do stuff in the factories or in industrial environments. So I just, I think that the buying center question is the big one that will evolve over the next five years and just make it easier for vendors to sell into the space and make it easier for industrial companies to buy the stuff that they actually want to buy.
Brian Sallee: Yeah. So it's more over the next five years if we see this kind of I think what's the term for it. I've heard of de-centralized it where all the decisions are made at the plant level. So it's the opposite of that. Obviously centralizing it within that IT group or that Chief Digital Officer. That's going to be the change that's going to potentially fast track deployment of a lot of these solutions to where they're going from plant-by-plant to a more enterprise-wide type of approach.
Isaac Brown: I think that's, that is a big piece of it is the decentralized buying patterns slow these deals down, they prohibit scale. I think the space that we've been working in that illustrates it really well is industrial cybersecurity solutions. We've been in that space for five years. It's cybersecurity tools for protecting like the industrial control systems and the industrial devices and networks on the shop floor. Those are things that IT knows nothing about, right? Like nothing about it. But if they get hacked the CEO yells at the CIO and the CSO who have no idea how that stuff works.
So five years ago, those things were really mostly purchased by OT, by manufacturing, by industrial control systems, engineering groups. And that's almost completely shifted now, to being a corporate buying decision. That's under the chief information security officer. So like we've seen that one shift and that was really driven by in 2017, there were a couple of really big hacks that hit industrial control systems all over the world. And it just became a high priority. When there's a painful issue, it drives progress forward.
I don't know if there's going to be something like that drives the knowledge and competence and skills space forward. But that one was just very illustrative of how something that was decentralized and fragmented and decided at the plant level, it became a corporate decision where a corporate technology leader would make a decision that would cover all the plants.
Brian Sallee: Well, Great. This is, this has been good. I want to transition I've got a couple of questions to ask you before we wrap up. The first one is, what is your favorite industry or business quote?
Isaac Brown: Okay. I love, “Science is magic that works,” by Kurt Vonnegut. I just love the idea of thinking scientifically about how to solve industrial engineering and business problems. And some of the stuff that we see our clients deploy, it actually looks like magic when it works.
Brian Sallee: That's cool. I like that one. And then, based on our conversation today, I think you've given a lot of great tips and things for people to think about. What is some tactical advice that you could leave with the audience today that they might be able to apply to their role, their business?
Isaac Brown: Good question. So I guess I would break it up into a few categories. If you are an industrial technology vendor trying to sell solutions into industrial operations the most important thing for you is your ROI story, right? Like you got to have case studies that show it, you gotta have it all over your website. It should be at the very top of the website. And if it's hard to calculate, I don't want to say fudge it. I would just say, honestly extrapolate to the best that you can do to come up with a good ROI story.
Brian Sallee: Yeah. And that, that feedback that would apply to someone who's trying to get buy-in for a solution at their company as well, right? If you're a plant manager, like you mentioned earlier, your ROI story is what really matters and trying to get that internal buy-in for a solution.
Isaac Brown: Absolutely. If you're trying to get buy-in, or if you don't need buy-in because you are the decision-maker for a certain unit you should still be basing those decisions around ROI. There are a hundred different categories of digital technology solutions. You can buy and roll out in a factory, and you're going to want to triage those in terms of the ROI and the amount of resources that you're going to have to invest.
So if it's a safety-related solution, how much does your average injury cost you, both financially and from a productivity perspective? How much does the solution that claims it can prevent it cost? And what's the payback period, right? So I think. All of these decisions need to be ROI-driven, whether you're buying or selling something.
Brian Sallee: Yeah. Very practical advice. Isaac, appreciate that. Thank you today for joining us on the podcast. And look forward to speaking with you again in the future, Isaac.
Isaac Brown: Yeah. Thanks for having me, Brian. It was fun.
Written by Dozuki
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