OEMs face the challenge of aligning their operations in such a way that they can react extremely quickly, flexibly and precisely to geopolitical, economic and technological shocks or the strategies of competitors.

This requirement has several implications. Firstly, it is no longer enough to wait until ideas, information and change requests have moved through the global chains link by link. And it's not enough just to steer the downstream link. It is necessary to open operational processes so that paralleled, joint work is enabled across different levels of the value chain and production cycles are accelerated. And a high degree of transparency is required to initiate changes on several levels at the same time, to leverage savings and to bundle intelligence, data and knowledge.

And it is also a question of radically new ways of distributing tasks. Distributed production, innovative logistics concepts and open innovation are just a few examples. There is a growing recognition that the deconstruction of value chains and the shared operations paradigm also require a differentiated view of competition – "co-opetiton" is indispensable in order to shoulder the enormous costs of disruptive industrial change and reduce development times. New integration and bidding platforms provide the foundation for this open, distributed and data-based form of collaboration. It would not be far-sighted to see them as just another class of IT applications. Their strategic importance lies in the fact that they form the vital infrastructure for future operations.

In a volatile, uncertain, complex and ambiguous - or VUCA - world, which is characterized by networked, mutually reinforcing dangers, we are increasingly unable to assess the risk profiles of the value chains. Hazards thus become risks that cause costs and complexity. Who supplies the supplier of our supplier? And who supplies us if our supplier gets into difficulties or changes to our competitor? Will our supply chains draw into the maelstrom of trade wars and political conflicts? Is the origin of our products seamlessly traceable? Often enough, we don’t know. Because the gates were always locked. The exponential increase in risks requires a fundamental re-engineering of networks. Simplicity, transparency, resilience, conscious integration of redundancies will be just as much on the future agenda as will be the focus on shared value creation and shortening the distance between supplier and customer. Here, businesses should keep in mind that it would be a dangerous simplification to measure this distance geographically alone, especially in a world where intangible goods and services account for an ever-larger share of world trade. Rather, it is about the intensity of the relationship, the possibilities of influencing and cooperating, and the sensitivity to weak signals. Thus, perfecting the supply chain always means shifting the reference point from a low cost to a best cost approach, which takes risk costs as well as the potentials of transparency, resilience and cooperation into account.

Digitalization has in many ways the same transformative effect on operations as electricity or steam power. This is reflected in an enormous rationalization and automation boost of existing processes and structures. This is particularly evident at the interfaces of the value chain, where efficiency, quality and speed losses have occurred over decades. IoT technologies which combine sensors, edge computing and connectivity are realizing a high level of transparency of processes in production facilities, warehouses and at the PoS, and ensure that goods and services can be monitored seamlessly throughout the entire logistics chain. Due to smart platform suppliers are no longer black boxes and can be integrated into overall performance and R&D initiatives.

The intensive use of data and powerful data analytics not only allow continuous optimization of processes, but also dramatically reduce operating costs and increase OEE thanks to approaches such as predictive maintenance. And new technologies such as face recognition, autonomous robotics, additive manufacturing, or blockchain-based smart contracts automate costly and human capital-intensive transactions and make individual service and production possible and affordable. The most important disruptor, however, is artificial intelligence. It brings the vision of a completely autonomous and highly efficient supply chain into the realm of the possible and is the connecting element between the pioneers of merciless customer orientation and ever increasing efficiency.

It is not surprising that these changes will also be reflected in a massive change in the role and structure of operations management. It has often been said that in the future it will be positioned as a function that will focus primarily on strategic issues, partner and customer relationships, integrated supply chain (cyber) security and the development of technological and analytical excellence. Operations will be a provider of business insights and business foresights.

This is more than true, and operational functions must work hard to find talent, qualify teams and create structures to meet this change. And we also need a cultural shift, a new mindset, to turn the paradigm of data democracy and decentralized, non-linear decision-making into the new normal. And yet this is only one side of the story. From a strategic perspective, it is particularly significant that answers can now be found to questions that could not even be asked before digitalization began. In the future, Operations Management will have the task of developing simulations and scenarios in a completely new way and with an almost unimaginable precision. The combination of digital twin technologies, high-performance VR solutions, data analytics and AI will allow products, services, solutions and technologies to be tested and developed in a hyper-realistic and dynamic virtual world. The more Operations will open up to customers and partners, the more valid and detailed such simulations and forecasts will become. And the faster the boundary between joint future forecasts and joint future design will become blurred.

Political tensions and uncertainties, emerging protectionism and the decoupling of global regulatory and contractual systems in favor of local approaches are the most acute and visible, but certainly not the most important driving forces behind globalization losing momentum and the worldwide supply chains "contracting" more and more.

Rather, it is the profound upheaval of the major paradigms that have fueled and accelerated globalization over decades. These include, for example, the global division of labor, which consisted primarily of the combination of Western industrial know-how and Asian manufacturing power and cheap labor and brought both actors increasing prosperity. This axiom quickly loses its validity. This is due on the one hand to the firm determination of China and other Asian, but also South American and Eastern European countries to increase their own value creation and to act as equal or even leading players in the knowledge economy. On the other hand, Asia's unprecedented economic rise manifests itself in serious structural challenges. These include rapidly rising wages and logistics costs, dramatic environmental damage, the rapid aging of the population and the concatenation of financial risks due to overheated and unstable financial systems.

These developments meet three other trends in Western countries. First, the role of product price in consumers' purchasing decisions is declining sharply. Not that the price is unimportant. But the social and ecological sustainability of the production footprint and the framework conditions for production are increasingly becoming hygiene criteria. At the same time, real-time availability and individualization are expected for more and more products and services, and the early involvement of customers in the production process in B2B and B2C markets is the new normal. This is difficult to achieve across thousands of miles, time zones, language barriers and cultural differences. Finally, the automation, digitization and rationalization of production, together with the overall cost increases in the former low-cost countries, lead to a higher competitiveness of local production.

As a result, new approaches are needed for the construction of value-added networks. There is much to suggest that closely networked, intensively collaborating regional clusters will emerge in the future, combining the advantages of local and global sourcing and production. This will not bring globalization to a standstill - but it will much more likely lead to regionalization in which truly global supply chains will be the clearly defined and well-founded exception rather than the rule. These structures will be more effective and resilient in many ways, as they will not be exposed to the concatenation of global risks and tensions. But they will not be less complex and easier to manage.

On the one hand, it will require intensive collaboration and organization in order to meet the high demands of customers for quality, individuality and availability of products from the network and to optimally distribute tasks within the network. And on the other hand, it will take serious effort to make up for the no longer favorable production costs from the golden age of globalization.

Industry-specific disruptions and the blossoming of digital technologies create immense pressure on existing structures and processes. It's the end game in many ways - our industries and organizations will have a whole new shape once this transformation is completed. In this game, it is not the cost of digital technologies that is proving to be the limiting factor, but the ability to adapt and the speed of learning.

As electricity completely redefined operations, so do digital technologies today. The movement is away from batch processing and towards continuous replenishment, away from management monopolies and towards distributed intelligence, away from linear structures and towards ecosystems, away from expert power towards a data-based knowledge democracy, away from globalized mass production fueled by economies of scale and low labor costs towards smart, individual and highly automated local manufacturing. Dealing with these changes must be learned as well as dealing with mixed teams of people and artificial intelligences that are not necessarily led by people.

In this game the winner is the one who can learn the fastest. And that's why operations must open up to partners, customers, disruptive start-ups and even competitors and integrate their knowledge to accelerate the production and proliferation of ideas and innovations and massively shorten adaptation cycles.

The level of adaptiveness achieved by operations is strongly correlated to that achieved in the Innovation Management and Engineering functions.

That’s because Innovation Management and Engineering are upstream functions, compared to operations: In Innovation Management, ideas spark for ways to meet future customer requirements; in Engineering, the technological opportunities that have become visible can then be designed, prototyped and tested.

One way the functions can become more adaptive is with Next Level Engineering . It enables companies to speed up and improve the process of product and service development with technologies such as artificial intelligence, robotic process automation (RPA), digital twins in engineering and virtual reality.

All these digital technologies add additional layers of adaptiveness to the functions. With them, Innovation Management and Engineering can improve the success rate of product and service innovation and engineering, as well as save time and money.

Procurement is the function in a company with the most internal and external interfaces. As such, it is well-positioned to identify trends and innovation that can shape a company’s product and service offerings, whether those trends originate from customers, suppliers or the competition.

But procurement can do more than just gather information about what the enterprise needs to be doing to stay adaptive. It should also analyze that information through precise questioning to provide the business with data-backed advice about methods, as well as options for emerging scenarios. With the introduction of technologies such as artificial intelligence and RPA , procurement is doing this in increasingly sophisticated ways.

Given its deep network of relationships and its position on the front lines, if procurement is set up and equipped properly, it can support Adaptive Operations by providing strategic insight and foresight to help the business define its priorities.

Production is a key area in which companies must be adaptive: They must respond to market and technology trends by quickly and effectively incorporating them into Production in the appropriate way.

It is in Production that ideas and innovation become concrete when they are manifested into a product or service. But Production is also the place where products and services must remain “fluid” so that they can adapt to the next change that is right around the next corner.

To make Production adaptive , companies need to ensure an operational system that can change its structure and cost basis quickly, for instance with a modular setup, through scalable manufacturing capabilities, or with human and bot workforces that can be quickly ramped up or sent in new directions.

Adaptive Operations in Production helps make it possible to improve on a continuous basis, for instance through machine learning or other opportunities in Industry 4.0 .

Since Supply Chains enable operations in the first place, they also determine to a large degree a company’s ability to adapt.

As the interface between functions, suppliers, customers, and partners, Supply Chains are a web that gathers and processes information that can be beneficial to the whole organism.

Supply Chains must be adaptive to respond to rapidly changing scenarios, and their level of adaptiveness depends on how well the network collects and stores information and turns that into knowledge by applying it.

By nature, Supply Chain Management and Logistics are cross-functional: They balance individual functional interests and demand/supply conflicts, and they do that internally as well as externally. As such, adaptive Supply Chain Management and Logistics are a pre-requisite for Adaptive Operations.

Service and After Sales operations are resource-intensive, but Service can play an important part in sustainable profitability because it is independent of business cycles. Service is also a function that can "pre-sense" customer and market behavior, since it works together directly with customers.

Adaptive Operations in Service and After Sales has two aspects. Companies can seek to gain efficiency in Service to increase or maintain profits. They can also grow the revenue and profit potential of Services by improving reach into the installed base of a company, or even expanding to other elements of the customer value chain.

Adaptive Operations in Service is something companies need for their own offerings, and a greater ability to adapt is what they are providing to the customer, for instance by enabling uptime and availability of machinery for customers. It also allows customers to decide on specific output volumes (e.g. in "X-as-a-Service" business models).