Digital Transformations in the Manufacturing Sector
Most examples of business model transformations come from B2C or the service industry. Whether you think of Uber, Airbnb, Netflix, or Amazon, it is often difficult to draw parallels with the manufacturing industry, especially for small and medium-sized enterprises.
In this special Strategies report, we will present examples of transformations from the manufacturing sector to guide you in your strategic thinking. You will be able to rethink your source of competitive advantage by taking into account new technologies, preparing better for the future.
John Deere, a More Than Century-Old Manufacturing Company
We all know John Deere tractors with their bright green and yellow colors. The company, in business for over 185 years, has built its reputation on reliable, durable, and high-quality products. Its competitive advantage primarily came from its manufacturing system, in other words, its ability to build more powerful tractors at the lowest cost.
A Business Model Transformation
In 2022, the century-old company decided to embark on a large-scale digital transformation with the goal of propelling the agricultural industry into the fourth industrial revolution. This plan, named “Leap Ambitions”, is based on the integration of cutting-edge technologies such as artificial intelligence (AI) and the Internet of Things (IoT).
John Deere’s vision is to move from managing agricultural land to a future where each plant receives personalized treatment, optimizing crop yields while minimizing environmental impacts, such as overuse of fertilizers.
The Challenge of Integrating Artificial Intelligence
Despite an inspiring vision, John Deere faces significant challenges. Many farmers, accustomed to traditional methods, are wary of the heavy investments required for high-tech machinery, especially since commodity markets are volatile.
Additionally, the integration of AI-based tools requires access to vast amounts of agricultural data, raising concerns about the control and use of this data by equipment manufacturers. John Deere must address these concerns and demonstrate clear value for both large operations and small farmers to meet its ambitious goals of generating 10% of its global revenue from software and subscriptions by 2030.
A Shared Vision Supported by a Well-Articulated Strategy
A strong point of John Deere’s transformation is its simple and clear vision: Moving from managing an entire agricultural land to optimizing each plant. It is an inspiring vision that has been shared not only with their employees but also with all their stakeholders.
This communication is essential because it not only engages employees but also helps hold the organization accountable for delivering results.
Triba’s Tips for an Engaging Vision
Here are some tips for building an engaging vision for your transformation.
- Be clear and concise: Formulate your vision in a simple and easy-to-understand way.
- Inspire emotion: Create a vision that sparks excitement and passion.
- Align with values: Ensure your vision reflects the core values of the organization.
- Project into the future: Describe an ambitious but realistic future to motivate the team.
- Involve stakeholders: Seek input and perspectives from different members of the organization.
An Innovation Culture Attuned to New Trends
Instead of focusing solely on optimizing its product, John Deere followed global mega-trends to incorporate them into its strategy. The company considered the impact of land shortages, labor shortages, and climate change on their industry. This external orientation allows them to position themselves in the face of these issues and clearly state how they intend to address them.
Triba’s Tips for Staying on Top of Industry Trends
- Consult your partners, such as your customers and suppliers. What are their projections for the future? What actions have they taken to address them?
- Attend events organized by professional or industry associations where you operate, but also in related industries. For example, the development of autonomous cars inspired John Deere to create autonomous agricultural machinery.
- Consult platforms like LinkedIn and Google, where you can set up alerts to get information on industry trends.
- Study job postings from your competitors, customers, or suppliers. The types of positions they are recruiting for can be indicators of their future strategy. Is your competitor hiring data scientists or machine learning experts? They are certainly embarking on AI projects!
A Bold but Realistic Technology Strategy
John Deere’s technology strategy focuses on integrating cutting-edge technologies to transform traditional agriculture into precision agriculture. The company uses technologies such as artificial intelligence (AI), machine learning, computer vision, and the Internet of Things (IoT).
To strengthen its capabilities in these areas, John Deere has made several strategic acquisitions. In 2017, the company acquired Blue River Technology, a company specializing in machine learning and computer vision, to develop precision spraying systems. In 2021, Deere acquired Bear Flag Robotics, which focuses on autonomous driving technologies for tractors, and in 2023, the company acquired SparkAI, which provides real-time assistance solutions for agricultural robots. These acquisitions demonstrate John Deere’s commitment to becoming a leader in smart agriculture.
Digital transformation is 80% strategy and 20% technology – Forbes1
Triba’s Tips for an Effective Technology Strategy
- Establish a set of criteria for choosing your technology partner and consider several alternatives.
- De-risk your strategy by taking a phased approach.
- Clearly identify the skills you need for your digital transformation and how you will acquire them. For example, John Deere now employs more software engineers than mechanical engineers.
What About SMEs?
In fact, being a small or medium-sized enterprise can become a competitive advantage. Indeed, the smaller the company, the more agile it is in making changes and adopting new technologies.
Indeed, in SME organizations, respondents are 2.7 times more likely to report a successful digital transformation compared to those from organizations with over 50,000 employees.2
Conclusion
John Deere’s digital transformation perfectly illustrates how a century-old manufacturing company can reinvent itself in the digital age. By adopting a clear vision, a culture of innovation, and a bold technological strategy, John Deere is leading the way toward precision agriculture. This transformation is not without challenges, but it offers valuable lessons for all companies, including SMEs, that seek to remain competitive in an ever-evolving world. John Deere’s example reminds us that digital transformation is primarily about strategy, vision, and adaptation, rather than just the adoption of technology.
- Kevin O’Marah, John Deere And Prose: Digital Transformation Is 80% Strategy And 20% Technology, https://www.forbes.com/sites/kevinomarah/2022/12/08/john-deere-and-prose-digital-transformation-is-80-strategy-and-20-technology/, Forbes, 8 décembre 2022. ↩︎
- “Unlocking success in digital transformations”, McKinsey.com, 29 octobre 2018, The keys to a successful digital transformation | McKinsey. ↩︎
