The right digital transformation strategy turns recessionary pressures into competitive advantages

Businesses continued to respond to new, challenging and ongoing changes in 2022, and to no one’s surprise, this won’t slow down in 2023. While still addressing challenges such as elevated energy costs, supply chain disruptions, and others, a new question is top of mind for discrete manufacturers – the recession – will we or won’t we, are we or aren’t we?

Source: Bloomberg

We could speculate about the recession's length, and interesting data is available to help understand the current thinking. According to IDC’s Market Perspective, “Implications of Inflation and Potential Recession on the Manufacturing Industry,” IT executives were surveyed in September 2022 and there is a majority sentiment (72%) that a recession is likely to occur within the next year, and a significant minority in North America (40%) believe that we're already there. At the same time, a majority also expect the recession to be both shallow (24% say mild; 55% say moderate) and relatively short lived, as illustrated:

How can you respond?

In our recent webinar, “Transformative Business Opportunities During Recessionary Trends” we polled the attendees on how they intend to address global challenges:

Interestingly, 50% are focusing on small, targeted investments for growth. This is good news and aligns with a key trend integral to our customers’ success: Iterative Digital Transformation, an agile digital transformation strategy. This involves investing in smaller, proactive projects to improve the organization continually. The old approach of “big bang” transformation does not align with the current economic climate, so it’s time to change. Innovation is still critical to remain competitive and investing in the right projects can lead you to become a leader in your space or maintain your leadership while growing in turbulent times.

A great example of Iterative Digital Transformation can be found here – learn how Tamturbo evolved their product offerings into an Air as a Service model, creating a stronger connection and more visibility into their customers’ needs.

Investing for business resilience

How well-equipped is your organization’s ability to respond to business disruption? Can you adapt to changing compliance and evolving business conditions? The reality is that we now all work with a distributed workforce and keeping up with security standards and business expectations is difficult. The goal of business resilience is ensuring your business systems are compliant AND connected, which is internally focused. But you also have to look at addressing and conforming quickly to outside pressures, for example sustainability policies, and government regulations. This includes emerging technologies that you may not even know you need yet but should be prepared to leverage when the time comes.

Our second attendee poll question asked how organizations are doing this today:

Clearly, the answers span the gamut of how to approach this. But adding more tools to address gaps should be avoided, especially in lean times. It creates a high risk, temporary solution, while increasing technical debt. The right answer is looking for evergreen solutions that mold to your current needs and change – at low cost – to emerging business requirements.

A great customer example of this is Ottobock, who use PLM to quickly adapt to evolving needs.

Continue mitigating supply chain disruptions

Supply chain! There is no indication supply chain issues are going away anytime soon, in fact, it could be a good thing if we keep supply chain top of mind and look for creative ways to address the many aspects of supply chain mitigation. The past two years have shown us that we rested on our laurels when it came to our supply chain, thinking of it as a one-way street where we press our suppliers for cost effective parts, fast, on-time delivery, and blame them when it doesn’t happen. 

There are myriad opportunities to move static supply chains to dynamic ones, while creating a competitive advantage for the product. It starts with increasing the visibility by connecting your suppliers and customers to your supply chain processes – across the full product lifecycle.

Our last poll question asked just how connected discrete manufacturing networks are:

It’s not a surprise that this is a work in progress, but the good news is how much of an opportunity there is for improvement! And that this opportunity can directly result in improved product availability and competitive advantage. One way to bolster your supply chain is through a systems engineering approach to identify multiple ways to implement the functions of a product. Another is getting the right visibility to alternate sources of components EARLY in the engineering cycle – all too often we are reactionary here, costing time and delay in product manufacturing and delivery. 

But don’t take our word for it, a great example of harnessing the power of connectivity is told by our customer Microsoft.

To get started, it’s time to evaluate your position against your peers

When you are under recessionary pressure, it’s important to take stock as to what is possible based on the position you are in when comparing yourself to your peers.  Here is a good framework to use in thinking about evaluating yourself and others, and what actions to take during difficult times.

Many manufacturers use this framework to determine the focus of resources, what their organization is good at, and more importantly how to invest to become more competitive and set up the organization to emerge as a leader as economic times improve. 

The case has been made to prepare for a slowdown – no matter where you reside.  In these stressful times it’s important to be mindful that this is an opportunity for discrete manufacturers to invest in the right things, leading to future success.

Learn more about trends and opportunities during recessionary times – watch the webinar