Along with the businesses they lead, C-suites have changed to keep up with the disruptions coming at the corporation from all angles: the pace and scope of technological advances, globalization and its impact on the competitive playing field, and social shifts that change the way we live and work. C-suites have added functional specialists with deep technical expertise to oversee complex change processes that are key to maintaining competitiveness. Some have even added a new role: the Chief Automation Officer.
The C-suite needs to understand automation – and how it applies to business strategy
The total number of Chief Automation Officers (CAO) active is still small. Nonetheless, we find it interesting that dozens of companies have in fact already established such roles. While CAOs are rare, the new title reflects a development that is much more commonplace: automation has become a C-suite discipline.
Whether the company actually employs a CAO is not the point. What matters is that more and more corporations approach production automation from a strategic perspective that is bigger than that of any single function or department. This is exactly what we see happening at Qubiqa.
Factory automation used to be the exclusive domain of engineering and production managers. If engineers could see a way to get a machine to do something faster, cheaper or more reliably than a worker, this was rarely something the CEO or CFO were involved in. As automation evolved, however, and has become smarter, more complex and more widespread, its competitive importance has grown.
Automation has become a strategic tool that impacts the way the corporation organizes itself, operates and competes. Like any other strategic initiative, C-suite buy-in is essential to the success of major automation programs. This doesn’t mean that C-suite members need to have deep technical expertise on every aspect of automation – this is still up to engineering and production departments. But they do need to understand the basics, and more importantly, how automation impacts strategic business decisions.
Supply Chain Management Officers and automation
Supply Chain Management Officer (SCMO) is a relatively recent title that describes a new role. Previously, a variety of people handled a range of siloed disciplines that included manufacturing, procurement, logistics, warehousing and planning. Now, the SCMO role collects all of this under one hat to improve the focus on operational efficiencies and competitiveness.
It is the SCMO who typically champions factory automation within the C-Suite. One of the SCMO’s key concerns here is determining whether and how any automation relates to the corporation’s core competencies. This, in turn, affects subsequent make-buy and HR decisions. If the automation project concerns production processes that don’t constitute a key competitive success factor, then the organization will be less likely to treat automation as a core competence and more likely to outsource it.
Another supply chain concern has to do with the organizaton’s global footprint. Everything else being equal, the corporation will place production facilities in or near major markets. Labor and transportation costs affect such decisions, as we’ve seen in the last few decades, but so does automation. Automating production processes in high-cost labor countries can level the playing field in terms of COGS, and at the same time increase the corporation’s market responsiveness and the flexibility of its product mix.
In our experience, more and more SCMOs are realizing that automation of many production processes is not a core competence as such. Apple iPhones are famously “Designed in California” but manufactured (in highly automated processes) in China. In the production of glass fiber insulation, for example, manufacturers treat processes within “the warm end” as core competences, but increasingly turn to specialist partners for “the cold end”, including everything from design to implementation and maintenance of automation equipment.
Chief Financial Officers and factory automation
The role of the Chief Financial Officer (CFO) has changed, too. The CFO now helps CEOs discover new opportunities, evaluate overall corporate strategies and performance, and make decisions concerning the financial merits and risk management implications of practically all strategic initiatives – including automation.
The CFO’s concern with factory automation goes beyond cap-ex budgets and payback time. CFOs are now involved in financial discussions concerning automation’s Total Cost of Ownership in the short to medium terms. They also consider the consequences of make-buy decisions and strategic vendor relationships in the long term. Along with Chief Information Officers and SCMOs, CFOs also have a vested interest in capturing the huge number of data points that modern, automated production processes also produce, and transforming this data in to information that can improve everything from QA to product profitability and customer relations.
Chief Human Resources Officers and factory automation
The role of Chief Human Resource Officer (CHRO) has likewise transformed from the administrative to the strategic. CHROs are also at the forefront of change management throughout the organization – also those brought on by automation, which disrupts the HR status quo and raises a range of questions that demand answers:
How should the C-suite make decisions on automation?
Automation cuts across multiple strategy areas. So for strategic automation initiatives to be successful, all of these must be considered systemically. The best way for the C-suite to approach automation is to think beyond the usual functional silos and align a variety of sustainable strategies (within supply chain, HR and finance) in a coherent way.
When they do this, C-suite members must also consider the corporation’s core competences: how do these relate to the automation initiative, and how can automation enhance the company’s ability to safeguard and develop them?
Finally, the C-suite must remember the many networks within the corporation, formal and not least informal, that automation can affect. Yes, C-suite buy-in is essential for automation initiatives to be successful – but so is organizational buy-in. Strategic automation projects work best when these informal networks are recognized, and their ability to ensure smooth adaptation of the automation project is included in overall planning.