Looking back on 2023 – A writer’s perspective pt. 2

Leveling up from the more specific discussion from part 1 about the near-term challenges facing automotive and transportation companies, we can talk about a couple trends that have proven bigger than any single industry.

Cross industry discussion dominated by sustainability, workforce challenges

First is the swelling pressure for companies and other organizations to make sustainability a serious, central piece of their business strategies for the future. There are several sources of this pressure, some punitive and others incentive.

On the punitive side, companies in many countries can face significant fines for failing to comply with an array of regulations on carbon emissions, environmental claims in marketing, human rights, and more local impacts such as deforestation that may arise at stages in the supply chain. Companies are also being incentivized towards greener decisions and business strategies. The Inflation Reduction Act in the U.S., for example, provides incentives to companies seeking to develop clean energy technologies.

The overall message of these sort of regulations is that companies can’t treat sustainability as a branding exercise any longer. The future depends on companies of all types and sizes creating and, most importantly, executing on plans to reduce their carbon emissions, reduce consumption of natural resources like water, and prevent other negative externalities in the areas where they or their partners conduct business.

Internal turmoil – The challenges of workforce turnover

The second important shift in the industrial world is an acute turnover in engineering and production workforces. As described in a recent article by Dale Tutt, VP of Industry Strategy here at Siemens Digital Industries Software:

“While workforce turnover is a constant fact of doing business, there are three signs that indicate this process has accelerated in recent years:

1. Experienced employees are reaching retirement or moving into new roles, taking valuable knowledge as they move on.
2. Software and electronics engineering skills are growing in demand in modern engineering teams.
3. The next generation of engineers want to work for companies that can demonstrate sustainability, corporate responsibility and technological innovation.

In sum, as employees move on to new companies or roles, it is becoming more difficult to recruit and train new talent to replenish engineering teams.”

The ongoing workforce transition is leaving both engineering and production teams shorthanded of staff and experience at a time when the complexity of product designs and requirements is growing. This growth in complexity is the result of many factors, including the proliferation of software and electronics (such as we discussed before in the context of the A&T industries) and new sustainability requirements.

Moving faster and the power of digitalization

The race to develop the best products hasn’t slowed down even as companies contend with high turnover, sustainability, and demand for more advanced features. The result is that companies are engaged in a sort of organizational-scale hurdles event. The faster they can run and the better they can clear the obstacles in their path, the more likely they are to keep up, or if they are exceptionally fast and efficient at clearing hurdles, to build a gap over their competition.

It’s not enough to simply move really fast or to take a long time to develop solutions to your biggest problems. Indeed, an overriding theme I have encountered over the last year is that companies need to try and become both fast and flexible to win their respective races. So, how do they do that?

I asked the above question, in one form or another, many times and in conversation with many people both more knowledgeable and experienced than me. I can report that, without fail, the answer was digitalization. Also referred to as digital transformation, the goal of such an undertaking is to increase the availability of data around a company and subsequently maximize what is accomplished with that data.

But, don’t take it from me. I’ll leave you with an excellent summary of the benefits of digitalization from a blog from Magnus Edholm, Head of Marketing for Siemens Digital Enterprise:

“Through digital transformation, companies can take full advantage of their most precious resource—data. The result is greater transparency, traceability, and the ability to create a closed loop between product development, production, and optimization. It is how industrial companies can become more resilient to future disruptions while achieving greater agility in their processes to drive efficiency and flexibility. The result will be more innovative and sustainable products that will delight customers.”

Thanks for reading!