Show notes
Augmented reveals the stories behind the new era of industrial operations, where technology will restore the agility of frontline workers. In episode 21 of the podcast @AugmentedPod, the topic is: "The Future of Digital in Manufacturing." Our guest is Çağlayan Arkan, VP of Manufacturing Industry at Microsoft (@Caglayan_Arkan). In this conversation, we talk about where manufacturing has been in the past, why manufacturing has been lacking a sense of urgency in the sense of industry 4.0 but how everything we know about manufacturing has changed. We also discuss workforce transformation, democratizing operational technology, and the future of industrial innovation.After listening to this episode, check out Microsoft's manufacturing approach as well as Çağlayan Arkan's social media profile:Microsoft Cloud for Manufacturing: https://www.microsoft.com/en-us/industry/manufacturing/microsoft-cloud-for-manufacturing Çağlayan Arkan: LinkedIn, Blog: https://aka.ms/CaglayanArkanBlogTrond's takeaway: The future of digital in manufacturing is enormously impactful. Yet, even deep digitalization will not make workers obsolete. Rather, the challenge seems to be achieving a dramatic workforce transformation which also entails empowerment, upskilling, and autonomy through augmentation of frontline operations.Thanks for listening. If you liked the show, subscribe at Augmentedpodcast.co or in your preferred podcast player, and rate us with five stars. If you liked this episode, you might also like episode 9, The Fourth Industrial Revolution post-COVID-19, episode 4, A Renaissance in Manufacturing or Episode 20, The Digitalization of Körber.Augmented--industrial conversations. Transcript: Augmented reveals the stories behind a new era of industrial operations, where technology will restore the agility of frontline workers. In Episode 21 of the podcast, the topic is The Future of Digital in Manufacturing. Our guest is Çağlayan Arkan, VP of Manufacturing Industry at Microsoft. In this conversation, we talk about where manufacturing has been in the past, why manufacturing has been lacking a sense of urgency in the sense of industry 4.0, but how everything we know about manufacturing has changed. We also discuss workforce transformation, democratizing operational technology, and the future of industrial innovation. Augmented is a podcast for leaders hosted by futurist, Trond Arne Undheim, presented by Tulip.co, the frontline operations platform, and associated with MFG.works, the manufacturing upskilling community launched at the World Economic Forum. Each episode dives deep into a contemporary topic of concern across the industry and airs at 9:00 a.m. U.S. Eastern Time every Wednesday. Augmented - the industry 4.0 podcast. Çağlayan, how are you today? ÇAĞLAYAN: I am very well. Great to be here. Thank you. TROND: So I am alerted to the fact that you're an outdoor person. And I wanted to cover that just because a technology discussion in manufacturing is not complete without a little bit of personality. And I think you said you are a backcountry skier. I was curious about this. ÇAĞLAYAN: I am. Skiing is my passion, one of them, but probably the one that makes me happiest, the one that I love the most. I like ski touring, and I like skiing the backcountry, the off-piste. I like climbing. I'm a very physical person. And on a similar note, I also am a cyclist. I'm a sailor, a windsurfer. I just love being out, and I love the wind on my face. TROND: So at some point in the future, when the pandemic is over and behind us, I think my next podcast with you we will simply go for a hike. ÇAĞLAYAN: Well, let's do it. But doing it with me has the following potential downside for you. The other piece of my outdoors work, or kind of world, if you will, is that I love miserable weather. I'm a winter person. I love my rain, my cold, my wind. [laughs] And people typically, even if they categorize themselves as outsiders, like outdoor people, they will just love fair weather, I don't. I'm not that person. I don't like the sun on my face. I don't like a lot of people out. I like trails to myself. I like mountains to myself. [laughs] If you're up for it, we'll do it together. TROND: Well, this is probably something you didn't realize. But I grew up in Norway, and there are no people. And we have plenty of bad weather. So admittedly, I don't live in Norway, so that could give you a clue. [laughter] But there is something there. ÇAĞLAYAN: All right, we're on. We're on. TROND: Yeah, we're on. Okay, so having settled that, I wanted to ask you this question. So we're going to talk about, I guess, the future and the current state, present state of manufacturing. But where has manufacturing been in the past? And by the way, when you think past, how far do you go back? I mean, is this just pre-COVID? Because I've heard you talk a little bit about manufacturing traditionally, and I want you to just give us a quick sense of where you think the industry was just a few moments ago. ÇAĞLAYAN: You started personally. Let me personalize manufacturing for me. I'm an industrial engineer with an MBA. And so, my whole education was in plants in the manufacturing environment. And I studied from operations research to metallurgical engineering, to electrical engineering, to construction, to electrical. You just name it. And so that has been something that I really really liked, the system's thinking, the optimization. I've done a lot in OR back in the day, linear and multiple. So maybe too much detail for now. But where is manufacturing? Manufacturing has been mostly manual siloed with a separation between information technology and the data estate that that brings to the table and operations technology that that brings to the table. Technology has never really been, particularly from an IT standpoint, top of mind. Digital transformation has not really been a sense of urgency in manufacturing because things worked. Yet people at the shop floor and things were working until the pandemic hit. So pandemic question, slap on the face for manufacturers. Business continuity none. You can't send people to the shop floor. You cannot operate. You don't see your inventory. You can't see your suppliers. You don't even know whether they're surviving or not, financially or otherwise. So it was a huge, huge, huge problem. But the silver lining of all of this is now there's acceleration into the transformation of manufacturing. Look, why is manufacturing important? Let's spend a minute on that. Manufacturing, unlike many other industries (And I kind of make fun of my peer industry leaders at Microsoft as well.), manufacturing is very real. Manufacturing creates employment. Manufacturing creates growth, builds the economy, builds capacity. Manufacturing is about innovation. Manufacturing is about competitiveness. So it is core to populations, countries. It's core to politicians, to business leaders, and it's just phenomenal. And so if you do things right in manufacturing, things work, including climate change, and sustainability, and a lot of other stuff. And if you do things wrong, you could see a lot of damage done. It collapses economies. It collapses, grids and stops, and creates a lot of disruption. So it is very real. And so I'm sorry I'm providing a long answer, but you can tell I'm passionate about it. It's very personal for me. But by and large, I'm actually excited about where we are. We are at an inflection point. And we'll see a lot of acceleration coming out of the pandemic, the crisis. And stuff we're working on is actually to ensure business continuity and resiliency. Those are the things that are the conversations going forward. TROND: Çağlayan, you took me in an interesting direction. I was just thinking as you were speaking, right before we go to the inflection, it's actually not just a little bit surprising but actually quite surprising that there haven't been any reported massive disruptions due to the pandemic. If you think about all of these mission-critical systems that we have around the world, in every manufacturing-related industry, how do you explain because, as you were saying, historically...and some of these silos are sort of still there, although obviously, we are at this inflection point so somehow already transitioned. But how do you explain that we haven't had more horror stories? And by horror stories, I guess I mean operations completely collapsing, or I guess grids falling apart, or that one manual worker couldn't go in. So X happened that they had never, never thought about. Why haven't we heard anything like that? Are those stories going to come out, do you think, or did nothing seriously happen? ÇAĞLAYAN: Well, it happened. I know for a fact because once this started, I started calling down on my customers, like, "How are you doing? What do you need?" For one, I think that from a table stakes standpoint, we've seen massive teams deployment because people wanted to communicate. They wanted continuity in terms of being able to talk to one another, being able to work, and then work from home, of course, because they couldn't go to their plants or to their offices. So there was a lot of pain. There was a lot of disruption. I talked to some of my customers, and they were like, billions of dollars are tied in inventory, and we have no idea where that sits. Again, they're disconnected from suppliers as well as their customers, and so there was disruption. But luckily, we've had some leaders actually having foreseen what is to come, or they were disruptors or at least early adopters. And they have taken pre-COVID pre-crisis steps for digital transformation. And I love my examples and partnerships where Erickson had started work pre-COVID in terms of digital manufacturing, Outokumpu, a leader in steel manufacturing, significant progress including during the pandemic, Airbus, Unilever. I mean, those are leading examples, only some of them. But you look at the World Economic Forum Global Lighthouse Network; there are so many lighthouse factories that are just like literally lighthouses for people to look at and look up to. That work started years ago. So there are some extremely encouraging examples. There are some very, very dark stories in terms of complete stoppage and horror stories. But by large, we are at a good place in terms of we understand the issues and we understand how to deal with them. And I think most importantly, that notion of time to value is accelerated in manufacturing. And we're coming from prohibitively expensive, I mean, we're talking hundreds of millions of dollars of IT projects that never end to now negligible cost and like 10-12 weeks, a couple of months, and then you stand up a digital factory capability. You have visibility into your supply chain by standing up a control tower. And then, in the case of Airbus or Alstom, you can have your 2,000 engineers still keep doing design and engineering work from home; examples go on. But we understand the issues. We have a very quick ability to build capability, to show that stuff works and you can operate remotely, et cetera, et cetera. TROND: But would you say that this is the definite end to, I guess what you were alluding to is kind of this pilot purgatory? Is COVID the definite end to pilot purgatory? Or is it just that this particular situation was so serious that everybody kind of scrambled, and most of them got it right? Or would you say that...I guess possibly because once you have made this transition, that is the hard work. Do you think that these pilots that everyone was waiting for will that problem disappear because people have learned that this is not the way to introduce technology? You sort of learned it the hard way. ÇAĞLAYAN: Oh, well, my view is if you take a step back, Trond, here's how I see it. One hundred years ago, we were by and large an agricultural society, and we had like 50% of the workforce in agriculture. Today we are by and large an industrial society. And we have like 2% of the workforce in agriculture, and we brought everyone along in terms of The Industrial Age. Today we are at the next junction; some call it industry 4.0, some call it other names. But we as a society assume...like humanity, we're moving from industrial to digital. So that's the higher order. Now, what's the role of the pandemic in this? I think it's that of acceleration. So in any major shift, there are behaviors and categories of actors or players. There are the disruptors. There are those who go and make a market, build a trend. And we have seen those, and we're still seeing them. They are the early adopters. We talked about some of them as well. And then there's going to be the slower adopters and the laggards. And then some of the laggards will not see the light of day or will not maybe exist after we transition to the new reality, new realm, or that notion of digital society. So what I'm saying is it was going to happen, those pilots or people's way, like, slow adopters' way of touching it, putting their toes in the water. For some, it's proving value and acceleration. Pandemic, again, that kind of disruption is going to accelerate and bring more to the table. But it certainly has a role to play. But the higher-level order is we are moving to a very, very different reality for manufacturers and supply chains and even as a society. TROND: Super interesting. Çağlayan, I've heard you talk earlier. And I guess we talked a little bit in the prep about whether this is a different wave of technology because I know you have some views on the democratization of basically operational technology because there are different waves of technology in manufacturing. And traditionally, like you said, the industry has been siloed. But one of the reasons the industry was siloed is that the technology then also turned into silos, arguably. And what is it about the technology these days? Is it getting simpler? Are you, for instance, in Microsoft spending more time on user interfaces than you were before? Or I guess even the introduction of your company so deeply into manufacturing is in and of itself a bit of a novelty. The tech players that weren't specialists are now going deep, deep into industry segments. Give me a sense of why this is happening. And what exactly is this democratization? Gartner calls it citizen developers. ÇAĞLAYAN: Yeah, that's one aspect of it. The way I see it is, very shortly, technology now works. TROND: [laughs] ÇAĞLAYAN: Honestly, I don't know, like five years ago, it just didn't. It was so hard for implementations, for integration, et cetera. It now works. There's virtually nothing technology cannot deliver today. It's up to the leader's vision, leader's ability to execute, and magic happens. There's so much at play right now, that's one. Secondly, technology is the business right now. I mean, technology was isolated. Trond, you will remember those days not too distant past. We had our own language. The CIO, it's like they were from Mars in the organization. [laughter] And they were not mainstream as an executive in the company. Company did their work, and CIO did stuff that nobody really understood. Now, technology is the business. I mean, if you look at any research, you will see that the mainstream business leader, whether it's the CMO, the Chief, Marketing Officer, Chief Digital Officer, Chief Financial Officer, whatever those may be, they're making more technology decisions and have bigger technology budgets than the technology people themselves. So that's t…
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