Tuesday, September 26, 2023

New Economic Models, Big Opportunity: Tech / Manufacturing

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According to a global survey of 297 executives, conducted by MIT Technology Review Insights, in association with Oracle, 80% feel optimistic about their organization’s ultimate goals for 2021, hoping to thrive – for example, selling more products and services – or transform – change business models, sales methodology or do things differently.

The iconic farm and construction equipment manufacturer is building a new operating model for the company with technology as the centerpiece, Raj says. For example, the tractors it sells today collect data on their operations and help farmers perform tasks such as planting accurately. It’s one of the big moves – new business models, mergers and acquisitions, and big technological changes such as widespread automation – that organizations are making or planning in a landscape transformed by the pandemic.

The story of two industries

Each industry has unique characteristics. This is certainly true for technology companies, which by their nature are undergoing rapid transformation. Industry tends to be the early adopters of new technology, says Mike Saslavsky, senior director of high-tech industry strategy at Oracle. Most technology products have short and fast life cycles: “You have to stay on top of the next generation of technology,” he adds. “If you don’t transform and scale your business, you will likely be out of the market.” This premise applies to the whole gamut of businesses that fall under the “technology” category, from chipmakers and consumer devices to office equipment such as copiers.

Manufacturing has traditionally maintained a more complicated relationship with technology. On the one hand, the industry is trying to be resilient and flexible in a volatile present, says John Barcus, vice president of Oracle’s industrial strategy group. Geopolitical issues such as protectionism make it harder to deliver the right materials for products, and lockdowns imposed during the pandemic have caused other supply chain problems. This has led manufacturers to greater adoption of cloud technologies to connect partners, track goods, and streamline processes.

On the other hand, the industry has a reputation for thinking short-term – “If it works well today, I can wait until tomorrow to fix it,” says Barcus. This myopia is caused, often understandably, by cash flow issues and the risks associated with investing in technology. “And then all of a sudden something new happens that they weren’t prepared for and they have to react.

There are shining examples of what manufacturers could do. For example, global auto parts maker Aptiv split its powertrain business in 2017 to focus on high-growth areas such as advanced safety technologies, connected services and autonomous driving, said David Liu, who was until January 2020 Director of Corporate Strategy. (He is now Director of Corporate Development at General Motors.) In 2019, Aptiv formed Motional, a $ 4 billion autonomous driving joint venture with Hyundai to accelerate the development and commercialization of autonomous vehicles. The pandemic has forced the company to have both the financial discipline to withstand an unpredictable “black swan” event and the imagination and will to do great things, Liu says. In June 2020, for example, the company proceeded with a $ 4 billion share issue to support its future growth through investments and possible acquisitions. “The key for us is to balance operational focus and long-term strategic thinking.”

The motivation behind the plans

Among all survey respondents, the most common big planned changes are a substantial increase in technology investments (60%) and cloud migrations (46%), with more than a third acting on merger plans companies.

In the tech and manufacturing sectors, there is more commitment to digitizing businesses, and organizations that did so before the pandemic were better prepared to deal with it. For example, they had the technology in place to allow their staff to work from home, says Barcus. In fact, the crisis has accelerated these efforts. Regardless of their progress, he said, “A lot of them, if not most, are now wondering, ‘How do I prepare and thrive in this new environment?’

Download the full report.

This content was produced by Insights, the personalized content arm of MIT Technology Review. It was not written by the editorial staff of MIT Technology Review.


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