LCFC, Lenovo’s Hefei factory, was designated as a member of the Global Lighthouse Network in 2023. By accelerating the adoption of Industry 4.0 technologies and committing to R&D and innovation, LCFC has crafted a “peak manufacturing” paradigm, achieving a leap in manufacturing capabilities. In a talk with McKinsey’s Forest Hou, LCFC CEO Xiaohui Ding shares insights into the factory’s digital transformation journey. Highlighting the challenges of managing a highly personalized order process, a vast supplier network, and significant workforce turnover, he emphasizes the importance of foresight, value capture, the right talent, and firm resolve.

This interview has been edited for length and clarity.

Forest Hou, McKinsey: More than 80 percent of your orders are personalized and customized. As the “chain master,” LCFC needs to manage hundreds of suppliers and deal with significant seasonal order fluctuations and a high workforce churn rate. Undertaking digital transformation, therefore, was no small feat. How did you overcome these challenges?

Xiaohui Ding, LCFC: From my perspective, there were two primary concerns during our journey toward becoming a Lighthouse factory. One was resource allocation. We wanted a smooth business operation, but how do we secure the resources necessary to maintain operations while driving our smart manufacturing transformation?

I was also worried my team would overlook long-term value in exchange for short-term gains. We adhered to three core principles. First, we linked the enhancement programs and initiatives within our Lighthouse sprint to our tangible business objectives. This means that every effort and improvement should yield visible progress and change. Second, we were absolutely process-oriented. We insisted on a methodical approach to process changes, beginning with a thorough examination of the existing process, before introducing digital solutions. Third was being value-driven. Every initiative must deliver measurable value. If there was no value, we’d rather forgo it. If there was value, it needed to be quantified.

Forest Hou: Your words resonate. Digitalization is not merely the process of moving existing business operations online. Rather, it aims to boost business value through end-to-end process transformation. Is there any “secret weapon” in your digital transformation journey that you’d like to share with us?

Xiaohui Ding: Digital transformation is not rocket science. It can be distilled down to foresight, value capture, the right talent, and firm resolve. Foresight means changes must be aligned with your long-term objectives. Your mission, vision, initiatives, and strategies should be in harmony, providing a clear view of the future of your business and the value you aim to deliver to your customers. And this requires foresight. Value capture means every initiative, every investment, and every digital use case should be calculated for its potential return, revenue, and income. This includes tangible cost savings, quality improvements, customer satisfaction, and societal contributions. Understanding the benefits is crucial for making informed decisions on investment levels and estimating the time required to realize returns. The right talent is crucial for bringing changes. Designing, implementing, and deploying require professional and capable people. Choosing the right talent means choosing skilled people. Firm resolve is also a necessity. Digital transformation is a complex and time-consuming process; it cannot be achieved overnight.

Forest Hou: Becoming a Lighthouse is just a milestone in your digital transformation journey. Looking ahead, how do you plan to sustain the momentum of your digital transformation?

Xiaohui Ding: The success of the Lighthouse sprint for LCFC marks a pivotal milestone in our journey toward smart manufacturing. It is not the culmination of our project; rather, it signifies a fresh starting point for future transformations. First, we will explore broader application scenarios. We have over 40 digital use cases across the company, but it’s far from being enough. We aspire to expand this number to 400, encompassing every business activity and scenario and enabling every facet of LCFC to be fully digitalized and intelligent.

Second, we need to digitize our workforce. Our workforce comprises 4,428 dedicated employees and engineers. We are looking forward to a future where this group, along with the 18,000 production workers, will all be proficient in digital skills. This is what we term the “digitization of talent.” We want to ensure that everyone is equipped with digital skills. Third, our successful experience from our smart manufacturing and Lighthouse sprint needs to be broken down into manageable, modular components. By doing so, we aim to engage our partners within the ecosystem and empower them to embark on their own digital transformation journeys. Their enhanced quality development would elevate the overall standards within our industry ecosystem.

We’ve been doing smart manufacturing transformation for nearly five years. Our experience has taught us that digital transformation is not a project. It is, in essence, a self-revolution that must begin at the highest levels of management. Additionally, it necessitates a shift in cultural awareness. It’s a process of long-term iteration, requiring commitment and perseverance.

The Global Lighthouse Network is a World Economic Forum initiative. The initiative was cofounded with McKinsey & Company and is counseled by an advisory board of industry leaders who are working together to shape the future of global manufacturing. The advisory board includes Foxconn Industrial Internet, Johnson & Johnson, Koç Holding, McKinsey & Company, Schneider Electric, and Siemens. Sites and value chains that join the network are designated by an independent panel of experts.