HBK Industry 4.0 Journey

A team of IMD MBA students helped HBK understand what Industry 4.0 means for the company, and where to start for a successful transformation.

Hottinger Brüel & Kjær (HBK) is a German precision measurement expert and advanced instrument manufacturer recently formed after merging Brüel & Kjær Sound and Vibration (BKSV) and Hottinger Baldwin Messtechnik (HBM). The parent company Spectris and the newly appointed management have established a vision for HBK to create outstanding products in the digital world and a mission to drive the digital transformation of its industry. While delivering customer value is undoubtedly an essential key success factor, what can the company do in its in-house operations to remain relevant and ensure long-term growth? How can HBK prepare itself for the future with the digital transformation megatrend becoming a necessity while less than 30% of such efforts succeed?

HBK initially reached out to IMD with a proposal for the International Consulting Project MBA team to develop Industry 4.0 insights to improve HBK’s quality, accuracy, and speed execution while reducing its lead time. Lead time reduction has been the mandate and the initial scope for the team that embarked alongside the company on the project journey advised and coached by Prof. Ralf Seifert.

After paying a visit to HBK manufacturing facilities in Darmstadt, Germany, attending President’s Kaizen week, and looking at the customer’s pain points, the MBA team has noticed the red thread underpinning all its observations—data and technology. However, while Product Lifecycle Management (PLM), Enterprise Resource Planning (ERP), and Manufacturing Execution System (MES) are called “the holy trinity of manufacturing,” technologies supporting manufacturing and systems alone are neither the answer nor the solution, which became more and more evident as the team researched the subject. Two additional dimensions have emerged that helped the team build a framework to understand what Industry 4.0 entails: People & Culture and Governance & Leadership.

Interviews with industry players, benchmarking of manufacturing companies, and a couple of field trips were instrumental for the MBA team to understand the three dimensions of Industry 4.0. Using their own professional connections, the networks of the faculty director, alumni, and MBA classmates, the team managed to learn how various companies approached the digital transformation journey—the obstacles they faced, successful and less so initiatives, and how they managed to generate value in the end. Several common themes emerged during benchmarking and interviews.

A company should not underestimate the importance of having a solid foundation built on the practices of Lean Manufacturing, Total Productive Maintenance, and Loss Intelligence, which Industry 4.0 is an evolution of. The whole organization needs to agree on what constitutes a loss—otherwise, as the economist Ronald Coase said, “If you torture the data long enough, it will confess.” The foundational nature of such a transformation makes it challenging to calculate ROI—that comes later once the building blocks are in place, and quick wins achieved with Minimal Viable Products (MVPs) and Proof-of-Concepts (PoCs) become scalable—that is the only way substantial value can be created.

Moreover, all organizations the team interviewed faced similar hurdles. IT became a handicap since it is generally resistant to disruptive changes and incentivized to preserve the status quo—an effective way to collaborate is essential to invest in. Moreover, resistance can occur anywhere; hence, it is crucial to establish a vision, show what the future could look like, and achieve buy-in at all company levels. Once the mindset is there, dealing with data silos and non-integrated legacy systems by introducing strategy and governance and bridging the digital capabilities gap by upskilling the workforce and hiring digital natives creates considerably less tension.

Not only has the project been a fantastic learning opportunity for the team, but it has also certainly been a fun experience. While the team had to adapt to the realities of the new normal and adjust travel itineraries according to pandemic restrictions, it nevertheless managed to visit HBK manufacturing facilities twice and made a couple of trips to Denmark and Italy, learning from local manufacturing companies in the field, and engaging in team-building activities in between.

Throughout the project, the team has also looked into HBK and its internal operations—interviewed various stakeholders to understand the business and its pain points, synthesized all its findings and learnings from the company and other industry players on the digital transformation journey creating an Industry 4.0 roadmap tailored to HBK. The roadmap outlined the steps to follow, pitfalls to avoid, and the gaps to bridge in the coming years. The company has been highly supportive throughout the project, and every stakeholder the team has approached has shown genuine interest in the project’s outcome and a sincere desire for the company to improve. Working with HBK has been a true pleasure for the project team and certainly one of the major highlights of the MBA year at IMD.