A global factory network shapes a roadmap for Industry 4.0 – McKinsey
Since 2018, the World Economic Forum, in collaboration with McKinsey, has sought to recognize, encourage, and accelerate the at-scale digital transformation of manufacturing by launching what is now called the Global Lighthouse Network (GLN). The GLN has become a community of manufacturers leading the way in the use of Fourth Industrial Revolution (4IR) technologies. The GLN’s 103 members, including manufacturers and other organizations along the value chain, represent a diverse range of industries that span the planet and generate a wealth of insights on achieving 4IR transformation.
In the current geopolitical context, local manufacturing and supply chain resilience are becoming increasingly important. At the same time, organizations face new obstacles as they strive to engage their workforces and sustain operations amid international unrest and economic headwinds. Furthermore, there are new pressures related to the need to maintain sustainability commitments and accelerate the transition toward renewable energy, while addressing more immediate energy market disruptions. These concurrent challenges call for innovation, leadership, and inspiration—indeed, manufacturers need a playbook now more than ever to guide responsible industry transformation.
The initial idea, four years ago, was that embracing digital technologies and new working modes would enable an evolution in manufacturing. Today, the GLN has made a compelling case for the ability of 4IR technology to boost productivity, growth, and sustainability.
Core enablers—innovative approaches driving successful 4IR transformation—have proved crucial as companies have endured unprecedented strains that have radically changed everyday experiences, including how people work. While companies have grappled with remote work, physical distancing, and attrition, they have also been affected by the social and emotional toll of such stressors. Lighthouses have addressed these difficulties by fostering community through a shared sense of purpose. They have invested in their people through learning and development, building a culture of empowerment and ownership among people who believe in what they are doing. In so doing, they have prioritized genuine workforce development—a true source of resiliency and a strategic advantage.
Yet even while confronting so many other trials, leading companies have responded, stepping forward to set new benchmarks and put innovation to work in the name of environmental sustainability. They have shown how responsible changes can boost eco-efficiency, yielding sustainability benefits while achieving business goals—and even realizing competitive advantages.
In September 2021, the GLN introduced a new designation—“sustainability lighthouse”—to recognize leaders in environmental responsibility. These lighthouses have achieved an impressive degree of eco-efficiency: their operations reap sustainability returns that are good for the planet and also realize important business goals. Six lighthouses have now met this rigorous new bar (Exhibit 1).
The 13 most recent GLN sites have confirmed the lessons of the early lighthouses, particularly through the increased number of successful use cases for the application of 4IR technologies. They are creating substantial value across a set of KPIs that encompass not only sustainability and productivity but also agility, speed to market, lower lot sizes, on-time delivery, and customization. The experience of the companies in this diverse network has shown what is possible through a digital transformation at scale. Their insights inform a new lighthouse playbook: a guide for organizations aiming to reach the future of manufacturing through responsible production that combines productivity, sustainability, and the active workforce engagement.
Proven approaches have endured powerful storms
The lessons that gave rise to this playbook were already materializing before the pandemic. first, two modes of scaling emerged—across production sites and along value streams—together with a comprehensive set of KPIs measuring a transformation’s impact. Second, the experience of the lighthouses revealed that six core enablers are essential for successful 4IR transformations: the agile approach, agile digital studios, the IIoT
stack, the IIoT academy, technology ecosystems, and transformation offices (Exhibit 2).
Despite the disruptive changes since COVID-19 emerged—and perhaps even more so because of it—these elements have continued to prove essential. The growing GLN network has reconfirmed the initial insights while detailing how they help businesses and promote responsible, sustainable growth.
A closer look at two key enablers
Two of the six core enablers—an agile approach and a transformation office—have proved particularly important across the lighthouses.
An agile transformation calls for small, specialized teams that rapidly develop experimental product iterations. Leaders establish a culture that trusts workers to experiment with creative solutions, giving them the freedom to “fail fast” and recalibrate by learning the lessons of these failures. This approach requires pragmatic workflows for iterative problem solving, as well as teams that develop designs for minimum viable products (MVPs). Priority management is essential, and frequent evaluations allow the tasks of teams and their members to shift with changing needs. The value of this agile approach includes boosted workforce engagement, focused training and skill development, creative problem solving, and the ability to scale up quickly.
Agility becomes even more powerful when paired with a strong transformation office, because effective leadership is critical for any substantial change—let alone one as comprehensive as a 4IR digital transformation. Agility calls for small, specialized teams that work in an organizational setup with clear objectives and effective collaboration. The smart-governance model of a transformation office makes it an internal change agency.
Such a transformation office defines roles and responsibilities, positioning people for success and ensuring that the necessary talents, skills, and abilities are in place through assignment, hiring, and skills development. It establishes a steering cadence, tracking progress and setting the agendas for project management meetings—and thus enabling structured reviews of the progress made by each value stream of work. And by using the latest digital resources, the office embeds new digital tool sets and new ways of working in the company’s operations.
A responsible transformation at scale
Undoubtedly, the world has changed drastically in the past two years. The resulting challenges, along with ambitious climate goals, have boosted the prominence of environmental, social, and governance (ESG) concerns. Companies have therefore redoubled their focus on environmental sustainability and on workforce engagement. Lighthouses have shown that responsible growth requires a transformation with these priorities front and center (Exhibit 3).
Now—with more lighthouses, more use cases, and more data points than ever—the network’s insights are even more compelling, for they show how companies can transform themselves at scale in a responsible way that prioritizes the planet and its people.
Manufacturing is a resource-heavy undertaking across the globe. A September 2021 paper from the GLN and McKinsey, Global Lighthouse Network: Unlocking Sustainability through Fourth Industrial Revolution Technologies, explores how the climate crisis has pushed environmental responsibility higher than ever on the list of industrial priorities. The paper shows how lighthouse organizations are setting the bar for environmental stewardship through pragmatic, effective, future-focused sustainability efforts. The core of eco-sustainability is a commitment to—and the implementation of—measures that reduce energy consumption, the use of water, carbon emissions, and waste.
The central lesson is that the lighthouses are defying the conventional wisdom that environmental responsibility is inherently at odds with productivity and, by extension, with profitability. Even as these front-runners embrace green technologies and other breakthroughs, they are also revealing how the 4IR transformation can simultaneously augment green measures and bolster production efficiency. In this way, they are achieving eco-efficiency, which makes sustainability and competitiveness not only compatible but also interwoven.
A company can have the best tools, the newest technology, and tremendous resources at its disposal—but if it lacks genuine workforce engagement, it will be unlikely to scale up a 4IR transformation successfully. In the past two years, the workforce engagement that lighthouses have achieved has been a critical element of their success. They have shown just how vital it is that companies put their workers at the heart of their efforts by creating a community of involved, committed people who have the support that helps companies meet the challenge of their evolving labor needs—for instance, those stemming from the labor shortages exacerbated by the pandemic.
A company can have the best tools, the newest technology, and tremendous resources at its disposal—but if it lacks genuine workforce engagement, it will be unlikely to scale up a 4IR transformation successfully.
As people leave jobs in record numbers, the front-runners are distinguished by the resilience gained from a concerted focus on their people—on the social element of ESG. The lighthouse playbook calls for a new understanding of the very nature of work itself and, accordingly, for the realization of new structures and approaches for work. For starters, companies can rethink their training and skill development pathways, beginning with a knowledge of the size and impact of the labor opportunities across operations. From there, they can design structural changes that mitigate the risks of labor demand they cannot meet, while also creating opportunities for reskilling and upskilling.
These shifts mean moving away from a hierarchical, top-down culture of micromanagement and toward an empowerment and ownership culture that fosters creative solutions. Results-oriented steering encourages people to make decisions in a space that allows experimentation and learning. Siloed teams and homogenous ways of working yield to interdisciplinary teams that collaborate across functions. Such teams create networks within and beyond the organization while facilitating cooperation with customers, suppliers, and partners.
Digitization plays an important role in reinforcing these changes, while accelerating workforce engagement by reducing repetitive tasks and involving workers directly in higher-level activities. Advanced technologies, including augmented or mixed reality, artificial intelligence, and low- to no-code software development platforms, are empowering people in offices and on the shop floor—often with limited technical backgrounds—to come up with creative digital solutions to daily problems, increasing their productivity.
Lighthouse companies further engage their workforces across five major attributes: learning and development, empowerment and ownership, collaboration and connections, impact and recognition, and the voice of the worker. They recognize and celebrate their people and products while reinforcing the organization’s culture and values (Exhibit 4). These people leaders promote and encourage learning-focused employees who create and develop new ideas. They show that by prioritizing the worker’s voice and listening to their people (for instance, through digital channels and big data), they can understand their employees’ needs—even those that aren’t immediately apparent—better than traditional companies do.
In short, lighthouses have shown that when people are engaged, they work together to grow, change, and adapt. In this way, they see their companies through the toughest of times.
Continuing the journey and expanding the lighthouse playbook
As the playbook continues to evolve with more data, more evidence, and more valuable insights, it not only makes a compelling case for embarking on a 4IR transformation journey but also shows how to maintain a steady course even in the face of the most turbulent storms. Now, in light of all the changes the world has experienced over the past two years, leaders have even more opportunities to help manufacturing organizations and their ecosystems accelerate a responsible transformation and the scaling up of innovations.
Manufacturers face pressing climate imperatives, and environmental sustainability is no longer optional (Exhibit 5). The global mandate for responsible manufacturing is clear: organizations have little choice but to grow in a way that prioritizes the planet and its people. Recent disruptions have affected daily routines, relationships, and modes of working. These challenges make it all the more important for companies to keep workers front of mind and activity by acting to help them become more genuinely engaged with their work.
The dual challenge of sustainability and economic performance requires creativity and commitment across the value chain. The Global Lighthouse Network challenges industrial companies to continue focusing on the six core enablers that the lighthouses have shown to be essential for a successful transformation at scale, as well as on sustainability and workforce engagement. Lighthouses show the way, and the playbook helps to chart the course. The global manufacturing community can learn from and be inspired by these advanced facilities—and then set forth, with courage and hope, on a transformational journey toward the sustainable future of manufacturing.
Companies eager to learn from others while contributing to the evolution of manufacturing for the new century are encouraged to apply for membership in the GLN. All of the network’s members, whether newly recognized or existing, are eligible to be considered for designation as sustainability lighthouses. Interested forward-thinking companies are invited to learn more by emailing [email protected]
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