Richard Hill, Head of Automotive and Manufacturing at the Royal Bank of Scotland, explores how businesses should make the most of technological change.
Next week, I’ll be welcoming people from across the manufacturing sector in Scotland to the Royal Bank of Scotland’s Gogarburn headquarters for the SMAS Future Manufacturing Conference 2017. To me, the key sentiment is the future. Today, Scotland’s manufacturing sector delivers 52% of the country’s exports and accounts for 54% of business expenditure on research and development, according to figures from the Scottish Government. But it’s the prospect of what those numbers could be tomorrow that is the important question.
Businesses from across the sector – whether small-scale or large, automated or labour-driven – will be well used to the technologies mooted for tomorrow. The usual suspects include additive manufacturing, big data, AI, VR, the Internet of Things and, of course, robots. Yes, these are usually mooted in the context of the shop floor, but other parts of the business stand to benefit from them too, including marketing, accounts and customer services. To the cautious mind this presents a problem: the future, it seems, offers a complex choice of possibilities in what to invest in, and why.
I won’t predict what technologies manufacturers will use, or how and where – we have futurologists for that – but I am confident of how businesses need to approach technological change in order to get the most from the opportunities. Learning from the businesses I speak to across Scotland, and the results from the bank’s own Future Fit programme which is propelling British manufacturing, there are three magic elements that manufacturers need in the long term.
The first is strategy. Those cautious minds perplexed by the different technologies to explore will find calm with a sound vision of where they are going, how they fit in to the supply chain and what markets are right for them. This means the usual rigmarole of researching the competition, exploring new markets, taking into account the changing role of regulation. But it also means having a strong sense of tactics – those day-to-day activities that are being used to deliver the wider strategy, and which might benefit from new technologies. Will technological advances present your company with the means to grow the top line, or do they present opportunities to do things more efficiently, and save costs?
Secondly, there is investment. In the UK, the narrative has been one of manufacturers failing to invest in machinery – with falling productivity the inevitable result. At the heart of the solution are the wonderful technologies and machines that change how a company operates. Yes, this will mean smart investment – avoiding the wrong technologies as much as investing in the right – but it also means investing long term in skills and talent. A rise in productivity almost certainly means machines doing some of the tasks that humans currently do, but workers skilled in robot maintenance, programming and STEM subjects will be needed in far higher numbers than in the past.
The third is leadership, and it’s no surprise that quality leadership is a priority in the Scottish government’s Manufacturing Action Plan. At last year’s conference, delegates heard Colin Robertson, CEO of Alexander Dennis, talk about the role this plays within his company, delivering a clear, practical vision that all parts of the organisation can deliver. In future, as much as in the past, strategy and investment will only work with a strong sense of leadership and communication. Given the revolutionary changes presented by innovation and change, being able to take people with you and convince them of the strategy will be key, whether that’s investors, supply chain partners or workers on the shop floor. Thankfully, the robots won’t need any pep talks, yet.
The local picture
In Scotland, the environment for manufacturers is particularly encouraging, as they receive unrivalled support compared with peers elsewhere in the UK. This incorporates the Manufacturing Action Plan, which is complemented by the UK’s new industrial policy strategy. Lest we forget that England’s Manufacturing Advisory Service closed in 2016, but Scotland’s equivalent – the Scottish Manufacturing Advisory Service – remains vital in the support structure of local businesses. Together with Scottish Enterprise, Highlands and Islands Enterprise, academic institutions and Catapult centres across the UK, manufacturers are enjoying a level of support that they need to exploit.
At RBS, we’re committed to seeing this happen. In hosting this conference at our headquarters, I encourage people to joins us to hear about enduring issues facing our sector, whether that’s new business models, data analytics or, of course, the march of technology.