Human capital is the biggest enabler of digital transformation. Here’s how to enhance it
2021/06/23 Joanne Guo
Industry 4.0 (I4.0), otherwise known as the Fourth Industrial Revolution, refers to the digitalisation of industries. Fuelled by a rise in data availability and computational power, I4.0 is characterised by technologies in connectivity, advanced analytics, automation and advanced engineering.
Many businesses recognise the importance of digitalisation to remain competitive and future-ready, particularly with the advent of the COVID-19 pandemic that has forced many businesses to accelerate their adoption of digital solutions and technologies. Nevertheless, the successful implementation of I4.0 is not easy.
A recent global McKinsey survey found that 74 per cent of companies that piloted I4.0 technologies and solutions were not able to scale these technologies and solutions successfully, falling into what is known as the “pilot trap”. Businesses need to look at three key aspects– Business, Technology and Organisation – together for successful digital transformation:
- Business: The ability to prioritise operational issues, based on their impact to the business, for resolution.
- Technology: Having a clear understanding of the different technologies available and selecting the right technology to apply to the operational issue identified, so that productivity and efficiency can be maximised.
- Organisation: Effective management of human capital is key as successful technology implementation hinges on the capabilities and buy-in of employees into the new processes. Effective human capital management is often the blind spot in many I4.0 transformations.
Human capital: The heart of industry 4.0
Companies that have transformed successfully under I4.0 attest to the importance of placing people at the heart of their transformation efforts. Change management to get employee buy-in and involvement is crucial to keep the workforce motivated and engaged in embracing new ways of working.
Business leaders will need to:
- Foster understanding and conviction: Employees who believe in why the transformation is important and are clear on what the transformation requires from them will be more likely to support the change. There is also a need to dispel the fear and common misperception that digitalisation will lead to a loss of jobs while simultaneously assuring that the true mission of I4.0 is to foster environments where workers are enabled to take on higher value-added jobs augmented by technology. Technology allows mundane and repetitive tasks to be automated.
- Be a role model: When business leaders personally demonstrate open-mindedness and willingness to adopt new technologies and ways of working, it strengthens the transformation narrative. By nature, employees subconsciously mimic the leaders above them.
- Develop talent and skills: Ensure that employees are equipped with the necessary skills and opportunities to support the change.
- Reinforce with formal mechanisms: Business leaders are in the best position to catalyse transformation by removing the barriers to change, such as legacy processes and inefficient ways of working. Business leaders should also ensure that their companies’ human capital management practices are enhanced in tandem to support changes in workforce needs during the transformation.
Companies can bring their employees onboard the transformation by understanding and aligning with their career needs and moving from transactional human capital practices to strategic talent management. We further explore these two concepts below through the lens of job redesign and workforce upskilling.
As companies kick-start their I4.0 journeys, companies will need to examine the impact of technology on existing job roles and identify the skills necessary to support the change. Otherwise, companies run the risk of frustrating and demotivating their employees who struggle to adopt the new solution(s).
Job redesign complements technology implementation by exploring whether a different combination of tasks may be optimal, and how these tasks can be performed better through man-machine interactions.
For example, with digital technology, a Production Supervisor can track production in real-time using data collected by sensors on the shop floor. This added transparency will allow the supervisor to gain insights on production performance and capacity while eliminating the need to patrol the shop floor to monitor production.
With time freed, the supervisor can subsequently focus on higher value-added tasks such as cross-functional improvement initiatives to resolve production issues. The role of the Production Supervisor can therefore be redesigned to include strategic responsibilities such as data analytics and continuous improvement.
With job redesign, upskilling opportunities should be provided to help the incumbent manage the new areas of responsibility. An upskilled workforce that is continuously learning and well-equipped to perform the jobs of tomorrow lend a competitive edge to the company.
To upskill the workforce well, business leaders need to distil the technical and soft skills required by the redesigned jobs. Thereafter, skill gaps can be identified to determine each employees’ learning needs and the various Learning and Development interventions that can increase these employees’ capabilities.
Coupled with national learning resources such as SkillsFuture Singapore’s Training Exchange, on-the-job training and performance check-ins, Learning & Development can be a powerful tool to enhance and future-proof employees.
The IHCI enabler programme
Digital transformation can only be sustained when companies successfully synthesise the three aspects of Business, Technology, and Organisation. While it is important for companies to do their own “bottom-up” implementation of technology and job redesign, the Singapore Government plays a key role in setting up an ecosystem to enable broader, national-level initiatives to help companies transform successfully.
The Industry 4.0 Human Capital Initiative (IHCI) Enabler Programme is one such initiative. Run by the Singapore Business Federation and supported by Workforce Singapore, the IHCI Enabler Programme is targeted mainly at companies in the manufacturing and related sectors such as logistics and construction.
Under the programme, companies work with world-class experts from McKinsey & Company and Ernst & Young, over an eight-week period, to tackle the companies’ priority areas or biggest bottlenecks, install trial I4.0 solutions at the companies’ respective premises, and implement the human capital practices needed to sustain the I4.0 transformation.
Post-programme, the companies also gain access to an exclusive Community of Practice that aids them in scaling their I4.0 implementation and sustaining their transformations. This is done through both peer learning and curated learning and technology pathways.
Rolled out in March 2020, the IHCI Enabler Programme has since helped more than 65 companies to identify productivity improvements of up to 200 per cent and potentially uplift more than 1,000 jobs through job redesign and technology transformation.
The companies that participate in the programme include SMEs and large enterprises from industries such as Electronics, Precision Engineering, Food Manufacturing, Urban Solutions, Medical Technology, Logistics and Supply Chain Management.
Asia Enterprises, a materials distributor, that was looking to optimise its inventory levels, is an example of a company that participated in the IHCI Enabler Programme. Through the programme, the company was able to automate the process of setting scientific targets for its safety and cycle stock, which substantially lowered the amount of working capital needed to manage the company’s inventory. As a result, the company was able to reduce its inventory by 27 per cent.
Correspondingly, Asia Enterprises redesigned the job role of its Inventory Manager to reflect technology-enabled changes in managing inventory planning, procurement activities and identifying continuous improvement opportunities. Through a skills gap assessment, new competencies such as Data Analytics and Internet of Things Management were identified as learning needs for the incumbent to adopt the digital solution effectively.
To help the company sustain and capture more value, cross-functional roles, such as sales, warehouse, and management, that were also impacted by the I4.0 solution were likewise identified for job redesign and upskilling. More company success stories and information on the IHCI Enabler Programme can be found here.
As Singapore presses ahead with digital transformation, companies will need to actively evolve and embrace new technologies and bring their people with them. Business leaders play an important role in this journey.
Fortunately, business leaders need not traverse their transformation journeys alone and can leverage national initiatives to start their journey right and thereby position their company competitively in the post-pandemic landscape.