New business models, great opportunity: technology / manufacturing

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MIT Technology Review

According to a global survey of 297 executives conducted by MIT Technology Review Insights in partnership with Oracle, 80% are optimistic about their company’s ultimate goals for 2021 and expect them to thrive – selling more products and services, for example – or transforming them – Change business models, sales methods or do other things differently.

The legendary manufacturer of agricultural and construction machinery is building a new operating model for the company that focuses on technology, says Raj. For example, the tractors that are sold today collect data about their operations and help farmers complete tasks like precise planting. This is one of the big steps – new business models, mergers and acquisitions, and big technology changes like widespread automation – companies are taking or planning to take in a pandemic-changed landscape.

A story of two industries

Every industry has unique characteristics. This certainly applies to technology companies that are naturally subject to rapid change. The industry is typically an early adopter of new technology, says Mike Saslavsky, senior director, high-tech industry strategy at Oracle. Most technology products have fast, short life cycles: “You have to keep up with the next generation of technology,” he adds. “If you don’t change and develop your business, you probably won’t be in the market anymore.” This premise applies to all companies classified as “technology”, from chip manufacturers to consumer devices to office equipment such as copiers.

Manufacturing has traditionally had a more complicated relationship with technology. On the one hand, the industry is trying to be resilient and flexible in a volatile world, said John Barcus, group vice president of Oracle’s industry strategy group. Geopolitical issues like protectionism are making it difficult to get the right materials for products, and the lockdowns imposed during the pandemic have created further problems in the supply chain. This has led manufacturers to increasingly use cloud technologies to connect partners, track goods and optimize processes.

On the other hand, the industry has a reputation for thinking in the short term, “If it works well today, I can wait until tomorrow to fix the problem,” says Barcus. This nearsightedness is often understandably caused by cash flow problems and risks associated with technical investments. “And then suddenly something new that you were not prepared for and that you have to react to.”

There are shining examples of what manufacturers could do. For example, global auto parts maker Aptiv spun off its powertrain business in 2017 to focus on high-growth areas like advanced safety technology, connected services and autonomous driving, says David Liu, who was director of corporate strategy until January 2020. (Today he is director of corporate development at General Motors.) In 2019, Aptiv founded Motional, an autonomous driving joint venture with Hyundai valued at $ 4 billion to accelerate the development and commercialization of autonomous vehicles. The pandemic forced the company to have both the financial discipline to withstand an unpredictable “Black Swan” event and the imagination and urge to do big things, Liu says. For example, in June 2020, the company made a $ 4 billion equity issue to support its future growth through investments and potential acquisitions. “The key for us is the balance between operational alignment and long-term strategic thinking.”

The ride behind the plans

Among all survey respondents, the most common big moves planned are significantly higher technology investments (60%) and cloud migrations (46%), with more than a third mentioning business combination plans.

There is greater commitment to digitizing business in the tech and manufacturing industries, and the organizations that did so before the pandemic were better prepared to cope. For example, they had the technology that would allow their employees to work from home, Barcus points out. Indeed, the crisis has accelerated these efforts. Whatever their progress, he says, “Many, if not most, of them are now looking at, ‘How do I prepare and thrive in this new environment?’

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This content was created by Insights, MIT Technology Review’s custom content area. It was not authored by the editorial staff of MIT Technology Review.

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