Herbert Pesch: 0:03

they have this high speed cameras, high resolution cameras, which take a picture of those wheels continuously. They measure what the, the, the quality or the, the, the uses of the wheels are, and they predict, uh, their breakdown risks. And then they, uh, organize the way that those who are predicted as being high risk are being replaced in a scenario where there's little usage of the whole platform.

Tom Raftery: 0:27

Good morning, good afternoon, or good evening, wherever you are in the world. This is the Digital Supply Chain podcast, the number one podcast focusing on the digitization of supply chain, and I'm your host, Tom Raftery. Hi everyone. And welcome to episode 306 of the digital supply chain podcast. My name is Tom Raftery, and I am delighted to be here with you today, sharing the latest insights and trends in the supply chain. Before we kick off today's show. I want to take a quick second to express my gratitude to all of this podcast's amazing supporters. Your support has been instrumental in keeping this podcast going. And I am truly grateful for each and every one of you. If you're not already a supporter, I'd like to encourage you to consider joining our community of like-minded individuals who are passionate about supply chain. Supporting the podcast is easy and affordable with option starting as low as just three euros or dollars a month. That's less than the cost of a cup of coffee and your support will make a huge difference in keeping this show going strong. To become a supporter, simply click on the support link in the show notes of this and every episode. Or visit tiny url.com/n D S C pod. Now without further ado, I'd like to introduce today's special guest on the podcast Herbert. Herbert, welcome to the podcast. Would you like to introduce yourself?

Herbert Pesch: 1:57

Hi Tom. Well, finally, great to join your famous show. Um, I've been trying to get in for years now, so thank you for inviting me, No, I love it, by the way. And, uh, yeah, let's talk b2b. That's, uh, by the way, my, uh, core activity. I'm Managing Director of Valtech B2B, which is within Valtech, you might know, is a large global consultancy um, helping big brands, a big company with a digital transformation. But I am within Valtech, co-responsible of growing the B2B activities within this, uh, great company. So that's my focus. Industrial manufacturing, b2b, that's what I'd like to talk.

Tom Raftery: 2:37

Fantastic. And I'm just looking here. Herbert, you guys have just launched your Voice of Digital Leaders report for 2023. Do you wanna give us a quick highlight of that report?

Herbert Pesch: 2:51

Yeah. Um, thanks for asking. Yeah, it's, uh, it's an initiative we launched a couple of years ago, uh, because what we see in B2B in general, but especially also in industrial manufacturing, there's so many things happening, so many adventures and uncertainties here, especially the last couple of years or so, we're challenging. Uh, so it is super important to learn from each other. So we created that platform, the Voice of Digital Leaders for those leaders to speak out to opinionate on, uh, on the relevant topics in the market that we are able to bring together and share it again with the market. And that's, uh, was quite successful, I think.

Tom Raftery: 3:31

Okay. And it was like 60 people that you interviewed for it, if I remember correctly.

Herbert Pesch: 3:36

Yeah. This is, uh, filtered out. So only does responsible for digital at large industrial manufacturers. So, uh, this is an exclusive group, uh, where we not only ask them to give out numbers and yes or no questions, but also to, uh, uh, illustrate it with their own findings and tips and. the risks they see. So, uh, anybody who's watching or listening here, I would really recommend to download that, survey.

Tom Raftery: 4:05

Okay. And can you give us an idea just for a bit of context, what is it that Valtech does and therefore, who are these people who you have surveyed?

Herbert Pesch: 4:16

Yes. well, what we are doing within, in B2B is helping these large, global, uh, active companies in industrial manufacturing with their digital transformation. So there's mostly three. There's lots of stuff we do, but three main topics is helping them on the B2B marketing side, you know. Addressing the market, finding leads in an efficient and high quality way. And then the next phase is e-commerce. So how to facilitate transactions not only in products and spare parts, but also services. And the third one, which is I think a very relevant development now is the customer portal environment where these big manufacturers bring together services around the e-commerce activities. So marketing, e-commerce, and uh, customer portals. That is what we, within Valtech, B2B do.

Tom Raftery: 5:07

Okay. And so the people that you interviewed, tell me a little bit more about them, kind of from a, from a, a helicopter view. Who typically are they?

Herbert Pesch: 5:18

Yeah. Well, the, it's a good question because if, if you see who is responsible nowadays within these companies for digital. There is many different, persons and, and mostly there's three profiles, um actively involved within these digital transformation programs. It is, of course, uh, the CIO. IT is very, very relevant. It's the business, uh, more and more because it's not only about, uh, services and, and marketing. It's, it's really about also driving the business and transforming the business. And the third is the specialist. The chief digital officer or something like that. So mostly it's those three parties represented within the client that we talk about. But in this survey it can be, uh, those responsible for the whole digital journey that can be from IT perspective or business or, uh, from the digital transformation perspective.

Tom Raftery: 6:13

Okay. And we're in kind of a strange time, at least in the technology sector. We're in a strange time. There's been a bit, a bit of a downturn, lots of people being laid off. What's the market like in the industrial manufacturing sector?

Herbert Pesch: 6:27

Well, there is of course, uh, uncertainty. Some businesses are thriving, by the way. If you look at the oil and gas and, uh, pipelines and pumping stations, stuff like that, weapons manufacturers.. Yeah, yeah, yeah. But also we have clients that work for, for, uh, in the aviation, um, uh, airports and stuff like that. So that was quite a challenging period during, uh, covid. And logistics, of course. Yeah. You, you see that there was a big boost and now the, the brakes are a bit on, so it is a diverse situation for many of these industrial manufacturers. But on the whole, what we see also in the survey, is if you look at the investment part, they are still investing, uh, but the growth of the investments is slowing down a bit. Uh, and if you look at the, sort of the, the ambition of the, the companies, they tend to. Become a bit more realistic. A couple of years ago it was growth and ambition and go for it all the way. Now it's more focused on, okay, yes, it is important, we are going to invest, but what is the short, short term business value? So they're now more focused on cost reduction, uh, uh, adding new revenue, uh, efficiency, stuff like that, uh, more than uh, uh, one or two years ago.

Tom Raftery: 7:51

Okay. So I'm guessing if they're focused on things like that, that means there's a bigger focus on digital, because digital obviously enables greater efficiencies and newer business models as well, right?

Herbert Pesch: 8:03

Yes. and that is also, um, difficult to generalize, but most companies now have this, put digital seriously on the agenda, but still in, in the classic manufacturing environment, you can be surprised that yes, it is on the agenda but not really adopted, and that is also one of the elements, which is very clear also in this survey, that if you do not really have the C level support, if management doesn't truly understand the impact of digital throughout the organization, then projects can become not successful. So, uh, yes, many are really investing and, and, and growing the digital, uh, impact on their businesses. But still many are also challenged by finding the right way, the right momentum to really change.

Tom Raftery: 8:58

And, I gotta think as well, one of the other challenges facing organizations in this space on their digitalization journey is finding the right skill set amongst, you know, either people that they bring in or people that they already have within their own workforce.

Herbert Pesch: 9:15

Yeah. that is also one of the organizational change challenges many of these companies have. Are they going to centralize it? Are they going to form a team within their IT company or are they going to, uh, depend on external agencies to helping them? Mostly is of course a hybrid situation where companies like ours, like Valtech, uh, come in to bring in a lot of digital knowhow on the business side, on the IT side, et cetera. And then we help those companies grow their own digital skillset, by forming, for example, hybrid teams and stuff like that. So, um, uh, what we see in the market is that companies, uh, try out help and we need, uh, digital expertise to, to drive this change within the organization. And then that is an opportunity of working really as a partner together with these companies, providing the skill set and helping them grow their digital maturity internally. But it is a challenge.

Tom Raftery: 10:12

Yeah. And are there any kind of investments they can make to help them on that journey as well?

Herbert Pesch: 10:18

Well, you see sometimes these big traditional companies, for them sometimes in a regional setting, you know, they're not really on the digital hotspot kind of locations, uh, in the big cities. So it's difficult to find and, and, and keep the talent. So what sometimes they do is, they, they build up teams and, and give them nice names like the Digital Service Factory of the Digital Hub or, other, other creative names. And then they form a sort of team close to the more, uh, digital, uh, hotspots within Europe, uh, to drive their organization. But again, what is maybe also interesting that Covid brought is those locations are getting a little bit less important. So what you also see is that in digital, there's dispersed teams, uh, over the globe in, in different countries, different time zones, working together as one team. So every company has to find a little bit of their own, uh, best solution to, to work out this challenge of growing digital within your company. Mm-hmm.. Tom Raftery: And what are some of the more being rolled out to help organizations? Uh, if you look at manufacturing, there's, there's lots of stuff happening, uh, from, from IoT, uh, related to predictive maintenance and stuff like that. Um, there's many great, great examples, but if you look more from a helicopter perspective, I think what is an interesting change is the, the composable IT strategy. Um, so that is, a new movement, a bit away from the monolithic, uh, big platforms, uh, giving, providing one big solution for big questions, but componentizing, uh, a little bit, uh, finding best of breed solutions for specific, um, functionalities. And then bringing them together. Connecting them in an easy way. So the composable landscape, the composable strategy is getting more and more attention within the survey, by the way, it's. 45, 43 ish, where the composable solution is getting more popular popularity now. But that is really a movement. This is, uh, super interesting and relevant also in the, in the digital manufacturing, uh, environment.. Tom Raftery: Okay. What about things like the rise of e-commerce, for example, and servitization is another topic. Both of those are seeming to rise up in amongst the ranks at least of, popularity in the broad press, people are becoming more aware of those trends. Are they bubbling down into manufacturing? Yes, of course. Uh, um, Yes. Uh, they, they are, but still there is a big difference with, with b2c, right? Many, uh, companies who sell complex, uh, machines, you know, uh, weighing 10,000 tons worth 5 million or whatever, it's a different transaction all the way than of course buying some sneakers. So you have to have, you have super, you have many stakeholders in the process of selling such a product is, is very long, and you have to really use the digital channel in different ways along this, uh, buying and selling cycle. And afterwards you've got the maintenance part, which is mostly super relevant, uh, higher margins and, and, and longer sustainable, uh, revenue lines. So, uh, helping digital plugging in there along this complex journey in facilitating the transaction. It's not just as simple as an e-commerce engine with X percent of revenue. But still yes, uh, using digital for transactions on spares and consumables and even, uh, like quite large projects is growing more and more. The interesting is also that sometimes exactly comparable companies have, if you look at their aftermarket sales in spares, some really all are already growing to 30 or 40% of their business, um, almost completely supported by digital. Some are only lagging, like two, three or 4%. And, uh, the reason why these big differences still are, uh, internally is, is, is of course the organizational change. Is the local customer center worldwide, is it supporting change? Are they looking at it as a threat? Many sales reps still, uh, say, okay, are we going to digital? What does it mean for my job? Uh, so they see it sometimes as a risk, uh, instead of an opportunity, uh, to grow their own services towards the clients. So yes, this is, is growing in importance, E-commerce, it is, um, getting also more and more, uh, revenue through digital channels, but it is not as simple as, as b2c. It's always connected with personal, uh, sales with, with specialist, uh, uh, supporting, uh, the selling, uh, process or the maintenance process. So it is always, it's not, uh, it's, it's not a simple question to that answer.

Tom Raftery: 15:55

Sure. Sure. And what, what's driving the move towards servitization, amongst manufacturers? I mean, I know what's driving it from a consumer perspective, you know? Mm-hmm., the idea of not having to pay upfront, the, you know, the, the, there's so many advantages for consumers, uh, or for customers, but for manufacturers, are there advantages? Is it just that that's what the consumer is demanding, or are there actual advantages that manufacturers see in it.

Herbert Pesch: 16:19

Yeah. We, we look, we see a concrete shift towards servitization, but it is not like from, from the one side to the, to the other side. It's, it's more a process of making steps. So what we mostly see is companies selling a product and then, uh, that can be a big installation or a big machine and then adding services towards it. So then you have a product combined with services. You've got some, uh, services on maintenance, for example, that are, uh, based on, on on on man monthly fees and then sometimes the whole, uh, selling of programs or products get transfers to services. But still, that is a small part of the market, like, you know, power by the minute, or air pressure or climate, climate control, uh, by the degree, uh, it's, it's difficult to make this big trans transitions, but it is happening, but mostly from combining different services with the products or solutions you're selling, and then moving forward a little bit towards this true servitization trend.

Tom Raftery: 17:27

Okay. Is it seen by manufacturers as a way of boosting their sustainability story, or not yet? Because to my mind, and I could be wrong on this, but to my mind, I see it as a sustainability story because if you are manufacturing, uh, something for a servitization sale as opposed to a product sale, then you engineer out any obsolescence, you make sure that it lasts as long as possible. Uh, and that is definitely a sustainability win, no?

Herbert Pesch: 18:01

Yes, I totally agree. And, uh, uh, it is on the agenda to not only see this as a business model change with the sort of continuous revenue, which is predictable, but it is also the sustainability drive push that, that, uh, could provide as well. And it's not only, the selling arguments for themselves, but it's also more and more demanded by the customers further up in the value chain. So what is your contribution to sustainability? I think through all the whole value chain people are searching for more efficiency using energy, using products, in the most efficient way, not only to drive your business, but also to improve the, sustainability of this planet we are living on.

Tom Raftery: 18:43

Hmm. Yeah. Yeah. And of course the shift to

Herbert Pesch: 18:46

server design, by the way, in, within, within in websites, for example. recently I saw a survey where, uh, uh, websites are built by by us, were compared with others. And then see how efficient, uh, they were built. So how much energy does an average page visit or search, uh, conducted on this, this website, uh, how much energy does it consume? And then you can measure the differences. And it's also a really nice, uh, development, uh, I think, and that also it's, it's a knife that cuts both ways, right? If it's super efficient, very fast and very smooth, then it's happy for the, the, the ones using the website. But it's also good for the planet.

Tom Raftery: 19:27

Nice. Yeah, yeah, yeah, yeah. No, there's a lot of initiatives happening there in what's called the, the green IT space, and it's, it's, it's nice to track those and see how those are doing. But coming back to the, by the way,

Herbert Pesch: 19:39

just, uh, small side step, but, uh, uh, we as, uh, as a Voltech B2B, uh, are, one of our main offices is Utrecht, but this completely constructed out of wood. So it's, it's, it's, that is also a combination where the, the, the carbon is, uh, is, uh, you know, how say accumulated into the wood. Uh, we've got solar panels on it and it's great to work in. It looks beautiful. So this, uh, you know, you can find solution where. The, the knife cuts maybe three edges. People are happy. Uh, the costs are low and the planet smiles.

Tom Raftery: 20:14

The, the the triple bottom line. The next time I'm in yeah. Utrecht, next time I'm in Utrecht, I'll definitely have to call in and check it.

Herbert Pesch: 20:20

Yeah, you have to, you have to Tom.

Tom Raftery: 20:21

So, but talking about servitization, to go down that route to servitization, you really have to be at the, kind of the, almost the end of your digital transformation journey. It's not an easy one to get to cuz you have to have everything smart and connected right the way through. For organizations who are embarking on that kind of digital transformation journey, what are kind of biggest hurdles for them and and how are they overcoming them?

Herbert Pesch: 20:52

In in general? Um. Many, many of these big companies are super successful, right? They are already, you know, sometimes a hundred years or maybe, maybe even more, they're doing their stuff. They're super technically oriented. Uh, they have these big machines and, uh, implementations and factories. It's, it's difficult to change that mindset in selling these big things in one transaction and, and transferring it into services. It's also risky. how do you, how do you provide these services, how do you measure them? If the, for example, the usage goes down and your system is standing there, it's still costing a lot of, money. But if you pay it, in the way it's getting used how do you handle if the usage is ramping down and if it's, market developments So there's, there's many, many challenges you have to face, but I think what the important thing is, is that you look further up the value chain and together decide what the best is for both parties. So not only from your own perspective, but take also the position for your client and find out in what scenarios, uh, this servitization, um, model works. And then if there are risks, try to find a way to mitigate it from both perspective. So super transparent, super open. You are connected more and more through your services and through your installations, but the business model sometimes is difficult to find and evenly divide the, the risks also connected to it.

Tom Raftery: 22:23

Fair enough, fair enough. And what are kind of some of the more common mistakes that manufacturers make when embarking on these kind of journeys and, and how do they avoid doing that?

Herbert Pesch: 22:34

Oof, also, there um, good question. A complex, uh answer. What I think is, is important that companies, first of all understand that embarking this journey means you have to overcome the silos, breaking down the silos. You have to be able to have the business, the IT, the client, having the view over the value chain and within your organization over departments have them connected to be able to deliver these complex service. So, uh, it's not going to be IT, it's not going to be product sales, not going to be services. So the aftermarket, now it's going to be one journey. How to connect these, uh, together to be able to provide these services. That's, uh, understanding that you have to, uh, move that way and finding the best solution, fitting your organization. I think that's the most important challenge to, uh, to overcome while embarking on this journey. It is, it is not smart to you know, is set up a small speedboat or, uh, only build a small dedicated digital team that does innovations, you know, put, uh, one small market and, and, and, uh, and, and concentrate on that. Now you have to really transform your organization as a whole. And of course you have to start small. You have to start learning. You have to start engaging, uh, the technology, your clients, et cetera, to, to learn, but understand it is going to impact your whole organization.

Tom Raftery: 24:01

Fair enough. Okay, cool. What are some of the big trends that are happening now in manufacturing and how are they going to impact digital transformations? You know, and I'm talking now, not in 2023. I'm talking out to 2025, 2030.

Herbert Pesch: 24:18

Yeah. I'd say, it is sort of the, the integration part so that, uh, I think most of the big industrial manufacturers are now understanding that, okay, we have an e-commerce environment and we have services there. We've got here some R&D stuff. We have to connect that and bring that together. How are we going to do that? I think so that, that is a trend where, where we see lots of stuff happenning. And where also so great, great examples. Like, uh, one of our, our clients, they, uh, I can't zoom in too much in detail because of confidentiality, but there is, you know, sort of, uh, vehicles with wheels running through a, an installation. When those wheels break down, the whole system break down, which costs enormously lots of money as well for the customer. As, as for the, the, the manufacturer of these systems. So they have this high speed cameras, high resolution cameras, which take a picture of those wheels continuously. They measure what the, the, the quality or the, the, the uses of the wheels are, and they predict, uh, their breakdown risks. And then they, uh, organize the way that those who are predicted as being high risk are being replaced in a scenario where there's little usage of the whole platform That is really nice and bringing that in a nice environment where the client can, can zoom in a whole installation, see in a very user-friendly way where there's a high risk of maintenance, planning that, buying spare parts, uh, having the services planned in the most efficient way. That is, uh, that is great. That's, uh, really nice puzzle to solve and it makes everybody happy. So, wow. That is going to be integrating all these different initiatives, uh, in one seamless customer journey for your customers, through one digital channel that is, uh, that's going to be super important, the upcoming period.

Tom Raftery: 26:13

Fascinating. Fascinating. We're coming towards the end of the podcast now, Herbert.

Herbert Pesch: 26:18

Oh my God. Is there already, Tom time flies when talking to you.

Tom Raftery: 26:26

Is there, is there any question that I haven't asked that you wish I had or any aspect of this we haven't covered that you think it's important for people to think about?

Herbert Pesch: 26:36

I think, well, this, uh, we, we, I think we touched most of the more, more important parts. Um, maybe, uh, when are you going to ski with your teams? Namely tomorrow? Yeah. No, that's, uh, I think well, um, maybe also that is, uh, how. No, no, I did, no, I don't have a, an exact question now for the moment, , I was going the wrong direction.

Tom Raftery: 27:05

No worries, no worries, no worries. That's great. Okay, well, Herbert, if people would like to know more about yourself or about any of the things we talked about on the podcast today, where would you have me direct them?

Herbert Pesch: 27:17

Uh, well visit Valtech.com, uh, or go to the, uh, Let's Talk B2B LinkedIn network, which is, uh, the network we created only accessible for, people representing the B2B. So no sales stuff there. It's only sharing information. And also contacted me, of course, Herbert Pesch through whatever means, uh, possible, but especially go to Valtech.com. Uh, look for the Voice of Digital Leaders report and download it there. It's for free. So it's, it is to share. And if you have an opinion on it or you would like to contribute, uh, feel free to, uh, to contact us.

Tom Raftery: 27:55

Okay, superb. And uh, if you send me a link for that report, Herbert, I'll put the link into the show notes of the podcast and that way people can find it pretty easily.

Herbert Pesch: 28:03

Yep, will do.

Tom Raftery: 28:05

Superb. Okay, great. Herbert, thanks a million for coming on the podcast today.

Herbert Pesch: 28:09

Hey, thank you for being here.

Tom Raftery: 28:12

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, simply drop me an email to TomRaftery@outlook.com If you like the show, please don't forget to click Follow on it in your podcast application of choice to be sure to get new episodes as soon as they're published Also, please don't forget to rate and review the podcast. It really does help new people to find a show. Thanks, catch you all next time.