Managing information effectively: a necessity for discrete manufacturers Business white paper This HP white paper is designed to share insight and stimulate dialog about the management of information flow and security within the discrete manufacturing sector It is based on the findings of research that HP conducted in cooperation with the Economist Intelligence Unit in June 2010, which included a survey of 332 executives in discrete manufacturing (27 percent of respondents), retail banking (24 percent), healthcare (23 percent), and government/public sector (26 percent) The respondents are heads of their departments or more senior; 29 percent are C-suite or board-level executives Geographically, 34 percent hail from North America, 31 percent from Western Europe, and 28 percent from Asia Pacific All respondents from the retail banking sector work at firms with a minimum of $25 billion USD in assets; all other respondents work for organizations with annual revenues or budgets of $500 million USD or more HP foreword Managing information effectively: a cross-industry perspective Managing information effectively: the discrete manufacturers’ perspective HP conclusion In cooperation with the Economist Intelligence Unit HP foreword It’s not news that manufacturing is among the most challenging types of business to operate profitably The relentless increases in core energy and raw materials costs, the demands of moving manufacturing hubs to locations that cost the least to serve, the imperative to keep intellectual property secure, and the need to avoid the latest geopolitical crisis are just a few of the many real-life problems facing today’s manufacturers Given the complexity of this environment, we set out with the Economist Intelligence Unit to understand the impact of information flow and security on business drivers and priorities within discrete manufacturing, as compared with other industry sectors The research spotlights the following business drivers for discrete manufacturers: • Improve efficiency • Comply with regulations and improve security • Drive growth through innovation and collaboration Over the next three years, there will certainly be changes in the business drivers affecting manufacturers Still, controlling costs, making business processes more efficient, and keeping employees productive are expected to remain important In this research, the Economist Intelligence Unit examines the effective management of information flow and security from a cross-industry perspective, as well as from the unique perspective of the discrete manufacturing industry The findings show that discrete manufacturers acknowledge the need to adapt their strategies to an evolving environment—a necessary first step in addressing the challenges they face Marie-Amélie Masnou Market Development Consultant HP Enterprise Discrete Manufacturing, Imaging and Printing Group Managing information effectively: a cross-industry perspective Information, an essential asset for organizations, is always difficult to manage effectively—and it is even more so in periods of economic turmoil and transition, when complexity increases and the stakes are higher For the past decade or more, organizations have been striving to build more open and collaborative relationships with their customers, partners, suppliers, and other stakeholders When the recession took hold, many such initiatives took a back seat as cost-cutting became first priority Now, with the effects of the recession waning, many organizations in developed markets are moving from a focus on costs towards new growth strategies, while some firms in emerging markets are experiencing rapid expansion, at home and abroad Companies in heavily regulated industries such as financial services and healthcare are adapting to constantly changing regulations that affect how their businesses operate In contrast, the public sector is still feeling the impact of the recession, with governments facing shrunken receipts and greater demands for social services And nearly every organization, regardless of sector or geography, is adapting to new technologies—such as advanced collaboration tools, mobile communications, and social media—that are changing how people interact and how business is done Whether they are renewing growth plans or still dealing with the aftermath of the crisis, organizations can benefit from more efficient and secure use of information, which can help them identify and deal with both opportunities and risks Our survey results show that executives in retail banking, healthcare, discrete manufacturing, and the public sector are addressing a host of challenges—from organizational to technological, and from regulatory to budgetary—as they assess the long-term impact of the recession on their markets and businesses At the same time, they are striving to bridge an apparent gap between the goals of their information strategies and their ability to act on those goals The survey also shows that while most decision-makers are uncertain about the effectiveness of their information strategies today, they expect to improve how they manage and secure information in the next three years This report presents the overall key findings, followed by the results of the discrete manufacturing sector Complex information flows require review Survey results show that the flow of information across global organizations with geographically dispersed business units, departments, and functions is growing increasingly complex, incorporating both formal and informal channels Often, even when senior management mandates formal strategies and policies and effective processes and technologies support formal flows, it is the personal relationships between employees or the preferences and styles of individual managers and supervisors that still determine what is shared with whom Information flows within organizations are complex (% of respondents who agree with the following statements about the flow of information across their organization) Information flow is electronic and supported by effective processes and technology 57% 51% Senior management has mandated a strategy and policies for the flow of information that are practiced widely throughout the organization 62% 65% 43% 71% 45% 48% Information flows based on the preferences and styles of individual managers and supervisors 53% 41% 47% Information flows informally based on personal relationships between employees 41% 48% 48% Discrete manufacturing Government 56% Retail banking 55% Healthcare Source: Economist Intelligence Unit, June 2010 This finding is not in itself surprising However, it raises questions about the effectiveness of existing formal strategies and policies, and suggests that organizations should continuously review how they manage information to extract maximum benefit The growing flood of unstructured information, which is by its nature more difficult to manage formally, also makes periodic reviews and strategic adjustments essential (In this analysis, unstructured information is defined as information that does not exist inside a data model that can be read and understood by a computer, and that therefore requires human intervention Examples include email, instant messages, audio files, and paper documents and forms.) Lack of an information strategy increases risk A large majority—80 percent—of respondents say their organization has a strategy for improving the flow of information Although most are satisfied with their strategies, about 25 percent of organizations that have strategies are changing how they deal with information These organizations seem especially aware of the need to adapt in response to the improving economic climate and emerging trends in their sectors A small but significant minority (13 percent) of respondents have no strategy for improving information flows There are several possible explanations These organizations may still be in the grip of the recession, worried more about survival than growth They may be slow to respond to the opportunities that an improving economy creates Or they may be latecomers to the now widely accepted notion that more open dissemination and use of information throughout an organization leads to better business outcomes Regardless of why they lack such a strategy, however, these organizations are at an extreme disadvantage in today’s dynamic environment compared with their more information-savvy competitors Information strategies shift focus from efficiency to effectiveness Organizations that have strategies for improving the flow of information throughout the enterprise today are pursuing greater operational efficiencies, seeking to increase the speed and lower the cost of critical business processes, and improve employee productivity and effectiveness They can so through better collaboration and/or the ability to provide employees with the right information at the right time to their jobs These organizations are also responding to the need to comply with legal, regulatory, or internal governance standards In three years, however, collaboration is expected to be the most important driver of information strategies, suggesting a stronger focus on employee effectiveness DRIVERS OF INFORMATION FLOW STRATEGIES CHANGE IN THREE YEARS RANK (Based on % of respondents who chose up to among 12 drivers) Today In years Need to facilitate collaboration across departments, functions, and geographies Employees need the right information at the right time to their jobs Need to increase efficiency and speed of business processes 3 Compliance with legal, regulatory, or internal information governance standards Source: Economist Intelligence Unit, June 2010 Collaboration becomes even more important as organizations grow and become more geographically dispersed The adoption of flexible work arrangements—such as telecommuting—creates other challenges, making it more difficult for people to connect informally in the workplace Yet sharing information across business units, departments, functional areas, and geographies is never straightforward Survey respondents cite organizational silos as one of the three main barriers to effective information strategies—the others being the perennial challenges of cost and aligning technology systems (each chosen by 37 percent of respondents) Organizations have more confidence in information security Respondents generally have more confidence in their information security strategies than in their strategies for improving information flows Just 13 percent of organizations are changing how they deal with security; 27 percent report that they have no need to so The 11 percent that have no information security strategy are exposed to greater risk Organizations confident in their information security strategies (% of respondents) No strategy 11% Implementing now 37% No need to change 27% Currently changing 13% Source: Economist Intelligence Unit, June 2010 Planning to implement 8% Don’t know 4% While most respondents report having formal strategies, just half say their organization has a single person or department with primary responsibility for information security This suggests that in most organizations, keeping information secure is the job of individual business units or departments—not a top-down mandate A fragmented approach to information security is to be expected in organizations that are subject to regulatory requirements from several different authorities In other organizations, though, this approach likely inhibits efforts to protect information from security breaches An analysis of survey results by sector provides a more detailed view of how organizations manage information flow and security The discrete manufacturing sector stands out as an early adopter of strategies for managing information flow Globalization, the burgeoning economic force of the Asia Pacific region, and increasingly complex business networks have made these strategies even more important for the sector today Managing information effectively: the discrete manufacturers’ perspective Effective information management is an essential element in the strategies of discrete manufacturers, which in this report include aerospace, automotive, consumer packaged goods, and high-tech manufacturing companies Historically, these organizations have gained competitive advantage through careful control of their supply chains, from raw materials to finished goods As a result, they have been early and major adopters of strategies, processes, and technologies to maintain the efficient flow of information within their organizations and with their suppliers and customers The modern supply chain is becoming increasingly global and complex Manufacturing now routinely takes place in multiple dispersed locations, including in developing countries This creates both new opportunities and greater risk As their economies grow, developing countries become attractive markets Risk arises from the possibility of supply-chain disruptions and from instability due to supply-chain complexity, as well as from the varied regulatory environments, geopolitical uncertainty, and weak disaster-response systems in some of the countries where companies operate The survey shows that the sector is trying to keep pace with the challenges that accompany globalization and increased complexity It also shows the growing economic power and influence of the Asia Pacific region in this sector Support structures handle formal and informal information flows Respondents in the discrete manufacturing sector recognize that information flows both formally and informally But they are more confident than their peers in other sectors that their organizations support formal information flows Discrete manufacturers are the most likely of the sectors surveyed to say that information flows electronically and is supported by effective business processes and technologies (65 percent) This sector is also the least likely to have manual and paper-based information flows (6 percent) Discrete manufacturers lead the way in automation (% of respondents who agree with the following statements about the flow of information across their organization) 6% 14% 14% 14% Information flow is manual and paper-based 65% 62% Information flow is electronic and supported by effective processes and technology 57% 51% Discrete manufacturing Government Retail banking Healthcare Source: Economist Intelligence Unit, June 2010 Respondents from Asia Pacific are more confident than those from other regions that they have procedures and technologies in place to support formal information flows Of respondents in Asia Pacific, 68 percent say that information flows electronically (compared with 62 percent in other regions), and 85 percent say that information flows are not manual and paper-based (compared with 69 percent in other regions) Drivers of information flow strategies are evolving Discrete manufacturing information flow strategies currently target operational efficiency and collaboration within the organization, and will continue to so in three years This confirms the central role of information in supply-chain management What is most interesting, however, is the growing importance of two drivers: the need for mobile access to information anytime and anywhere, and the role of information in business continuity and disaster recovery The discrete manufacturing sector stands out from the others in acknowledging that information will be increasingly relevant for business continuity DRIVERS OF INFORMATION FLOWS IN THE DISCRETE MANUFACTURING SECTOR RANK (Based on % of respondents who chose up to among 12 drivers) Today In years Need to facilitate collaboration across departments, functions, and geographies Need to increase efficiency and speed of business processes Employees require access to information anytime and anywhere Information is a key component of business continuity and disaster recovery Employees need the right information at the right time to their jobs Compliance with legal, regulatory, or internal information governance standards Need to improve records management policies and processes 10 Need to more effectively manage unstructured information (e.g., email, instant messages, audio files, and paper documents and forms Source: Economist Intelligence Unit, June 2010 The especially steep rise in the rank of business continuity as a driver of information flow strategies—from ninth position to fourth in three years—reflects regional differences Overall, 26 percent of respondents cite it as a prime driver But in Asia Pacific, 33 percent rate it as one of three top drivers compared with just 17 percent in other regions Respondents recognize the greater risk of manufacturing in developing countries Sector is an outlier in barriers and benefits Discrete manufacturers also differ from respondents in other sectors in ranking change management (38 percent) and accountability (33 percent) as barriers to information flow strategies Cost, on the other hand, ranked quite low in this sector (29 percent) compared with the others This is surprising in an industry where managing costs is so important CHANGE MANAGEMENT AND ACCOUNTABILITY CHALLENGE—DISCRETE MANUFACTURING SECTOR (% respondents) Manufacturing Public sector Retail banks Healthcare Business organization: departments, functions, and geographies work in silos 40% 37% 25% 46% Change management: employees resist changing how they work to use information more effectively 38% 31% 20% 25% Technology: information systems not connect well 34% 37% 40% 37% Accountability: lack of ownership of the responsibility for developing, funding, and executing information 33% 23% 18% 23% Cost: implementing an effective information strategy is costly and complex 29% 39% 40% 44% Source: Economist Intelligence Unit, June 2010 There are regional differences as well Respondents in Asia Pacific cite cost—one of the region’s key competitive advantages—much more often than respondents in the rest of the world Effective information strategies help discrete manufacturers remain competitive by improving their ability to respond in a timely way to changes in the market This is especially important in Asia Pacific As the region’s manufacturers climb the value chain, moving from commodity goods to higher-value products, they must constantly take the pulse of the market Sector lags in information security More than 50 percent of respondents in the discrete manufacturing sector say that their organization has implemented, or is planning to implement, an information security strategy—yet the sector is less likely than the others to have formal procedures to so This is not surprising: although discrete manufacturers understand the importance of protecting intellectual property, they are regulated lightly and not have to adhere to the privacy rules imposed on retail banks, healthcare providers, and many government agencies While overall the sector seems to regard information security as an option, not a necessity, regional perspectives differ Asia Pacific respondents are least likely to say that their organization has strong information security procedures in place As the region’s manufacturers increase their share of intellectual property, such procedures may be more highly valued Summary Discrete manufacturers recognize that effective information management is central to their operational efficiency, and they have been leaders in adopting information flow strategies and technologies To remain competitive, however, they must continue to adapt to an evolving and increasingly complex global market that requires information to flow smoothly—not only within the organization, but between the organization and its partners and customers, as well Information management strategies should help them take the pulse of the market, identify risks that threaten business continuity, and get the right information to the right people HP conclusion Efficient information flow has long been strategic to supporting discrete manufacturing’s supply chain imperatives But if new technologies have improved information flow over the past decades, they have also surely added complexity Manufacturers have been forced to recognize that the only way to increase both operational efficiency and employee productivity is to implement new technologies and reengineer business processes In response, HP has developed solutions specifically to help manufacturing companies improve efficiency and streamline business processes and IT operations in order to better manage costs For example, the HP Automated Document Management Solution helps manufacturing companies increase the speed of core processes, improve compliance with myriad local and national laws, and eliminate a great many of the costs associated with managing document workflow Compliance with security and regulatory mandates is a second key driver for manufacturers But as the Economist Intelligence Unit discovered, manufacturers often lag behind in safeguarding information As manufacturers go down the path of globalization, however, the increasing complexity of the supply chain presents serious threats to information security Manufacturers must comply, as well, with regulations such as the Sarbanes-Oxley Act, the automotive industry’s TREAD Act, and environmental regulations; maintain required audit logs and production batch records; and adhere to many other such mandates To address these requirements, manufacturing companies have to put solutions in place that will sustain both information flow and data security With technologies such as HP Access Control software and card readers, HP is a leader in delivering security solutions that protect data in motion, data at rest, and data in use While security is key, HP solutions also help companies a better job of responding to environmental imperatives and contributing proactively to corporate social responsibility An area of recent innovation and improvement for manufacturers of finished goods lies in the transformation of marketing publishing The creation, editing, and publishing (especially printing and storage) of vast quantities of customer-facing documents is a huge expense The process of creating these documents is generally very inefficient Printing and storing millions of marketing documents is very costly—and that expense is magnified by the fact that a large number of these documents become obsolete while sitting on a shelf The Dynamic Publishing approach from HP helps customers streamline the document creation process, and it provides print-on-demand services that help save on printing, shipping, and storage costs As manufacturers work with shrinking budgets, they are discovering that collaboration among suppliers, manufacturers, retailers, and end customers can help them gain a competitive advantage, create and capture demand with more innovative products, and support market evolution faster than their competitors can Creating a manufacturing ecosystem that delivers improved operations, lower costs, and drives growth and innovation can only be delivered through collaboration From the cloud network infrastructure that links business applications together to a demand-driven mobile computing environment with innovations such as HP ePrint enterprise printing solutions, HP offers a complete, end-to-end solution portfolio for the discrete manufacturing industry To learn more, contact Marie-Amélie Masnou at marie-amelie.masnou@hp.com To learn more, visit www.hp.com © Copyright 2010 Hewlett-Packard Development Company, L.P The information contained herein is subject to change without notice The only warranties for HP products and services are set forth in the express warranty statements accompanying such products and services Nothing herein should be construed as constituting an additional warranty HP shall not be liable for technical or editorial errors or omissions contained herein 4AA3-1713ENW, Created October 2010 ... provides a more detailed view of how organizations manage information flow and security The discrete manufacturing sector stands out as an early adopter of strategies for managing information flow... Manufacturing, Imaging and Printing Group Managing information effectively: a cross-industry perspective Information, an essential asset for organizations, is always difficult to manage effectively and it... formally, also makes periodic reviews and strategic adjustments essential (In this analysis, unstructured information is defined as information that does not exist inside a data model that can