New Business Models, Big Opportunity: Technology / Manufacturing

According to a global survey of 297 executives, conducted by MIT Technology Review Insights, in partnership with Oracle, 80% are optimistic about their organizations’ end goals for 2021 and expect to thrive – for example, selling more products and services – or transforming – changing business models or methodology Sales or doing things differently.

Raj says the popular manufacturer of agricultural and construction equipment is building a new operating model for the company with technology as the key ingredient. For example, the tractors you sell today collect data about their operations and help farmers accurately complete jobs like farming. It is one of the big moves – new business models, mergers and acquisitions, and big technological changes such as large-scale automation – that organizations are making or planning in a landscape transformed by the pandemic.

A tale of two industries

Every industry has unique characteristics. This is certainly true of tech companies, which are by nature undergoing rapid transformation. Mike Saslavsky, Oracle’s senior director of high-tech industry strategy, says the industry tends to be the first to adopt the new technology. Most tech products have fast and short life cycles: “You have to keep up with the next generation of technology,” he adds. “If you are not transforming and developing your business, you are likely out of the market.” This hypothesis applies across a range of companies categorized as “technology”, from chip manufacturers to consumer devices to office equipment such as copiers.

Manufacturing has traditionally maintained a more complex relationship with technology. On the other hand, the industry is trying to be flexible and resilient under the current volatility, says John Parkus, Oracle’s vice president of industrial strategies. Geopolitical issues such as protectionism make it difficult to obtain the right materials for products, and lockdowns imposed during the pandemic have caused more problems in the supply chain. This has led manufacturers to more embrace cloud technologies to connect partners, track goods, and streamline operations.

On the other hand, the industry has a reputation for short-term thinking – “If it works today, I can wait until tomorrow to fix it,” says Barkus. Myopia is often understandably caused by cash flow problems and the risks associated with technology investing. “And then, suddenly, something new they weren’t ready for and they had to respond.”

There are bright examples of what manufacturers can do. For example, global auto parts maker Aptiv launched its powertrain business in 2017 to focus on high-growth areas such as advanced safety technology, connected services and autonomous driving, says David Liu, who until January 2020 was the company’s strategy director. (He is now Director of Corporate Development at General Motors.) In 2019, Aptiv founded Motional, a $ 4 billion autonomous driving joint venture with Hyundai to accelerate the development and commercialization of autonomous vehicles. Liu says the epidemic has forced the company to have financial discipline to endure the unpredictable “black swan” event, imagination and drive to do big things. In June 2020, for example, the company issued $ 4 billion in shares to support its future growth through potential investments and acquisitions. “The key for us is to strike a balance between operational focus and long-term strategic thinking.”

The motivation behind the plans

Of all survey respondents, the most common planned big moves were massively increased technology investments (60%) and migration to the cloud (46%), with more than a third of them working on business combination plans.

In the technology and manufacturing industries, there is a greater commitment to digitizing business, and organizations that did so before the pandemic were better prepared for the pandemic. For example, they have the technology in place to allow their workforce to work from home, Barcos points out. In fact, the crisis has accelerated those efforts. And whatever their progress, he says, “many, if not most, of them are looking now,” How do I prepare and thrive in this new environment? “

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

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