Digital transformation at Murano Glass: Challenges and new directions

Murano Glass Group background

In 1959, the company moved to its current location about 40 km northwest of Venice. They offered hundreds of jobs to the local community. The Murano Glass Group had grown rapidly through the acquisition of companies that specialised in the design and construction of high-speed machines and production of specific glass containers. For example, it had acquired Medical Glass from Bratislava (Slovak Republic) in 2005, signifying a shift from family-owned company to multinational company. In the years that followed, the Murano Glass Group pursued a strategy of geographical expansion, which added new plants around the globe and ensured that operations and supply were closer to customers within markets of highest demand, while satisfying regional regulatory requirements. They had plants in Monterrey (Mexico), Sete Lagoas (Brazil), Zhangjiagang in the Shanghai area (China), and Nagoya (Japan). It had developed as a multinational company that specialised in the creation of pharmaceutical glass containers (ampoules, viles, cartridges, prefillable syringes), and was widely recognised as the first world-wide producer of insulin cartridges for the treatment of diabetes.

The group operated 14 plants in 9 countries, had several partnerships and employed more than 3800 people. Sergio Murano had assumed the CEO position from his father, Giovanni. Sergio immediately set ambitious goals for the Group and initiated innovative projects. In 2017, the company generated roughly 500 million euros of turnover, and comprised two operational divisions: the Pharmaceutical System Division and the Engineering System Division. The former had numerous global-based plants (Italy, Slovakia, Germany, Mexico, USA, China and Brazil). The company continued to focus on the production of glass containers for commonly used pharmaceutical products (vials and ampoules, syringes and cartridges for pen and self-injection systems) as well as high-quality precision plastic solutions, developed and manufactured according to specific customer needs. The Engineering Division dealt with glass processing, inspection systems, assembly and packaging solutions.

Murano Glass Group celebrated its 70th anniversary in 2019. The company was considered a market leader in integrated solutions in pharmaceutical and healthcare sectors, with a well-established international network of partners. However, rapid economic growth and international development had led to difficulties in team coordination and internal communication.

Giuseppe, CIO, had led successful IT projects such as Enterprise Resource Planning implementation and production automation, and he believed that leveraging IT was the only way to efficiently support the Group’s expansion.

It was a sweltering day in July 2019, Giuseppe stood next to the air-conditioning system, just 20 m from the overheated production line. It magnified the intensity of output as he explained the innovative ideas he had for the company: ‘Digital technologies are changing our society and working life and we need to use them to change the way Murano Glass operates and competes’. He described the implementation of an application that enabled remote assistance with augmented reality and a peer-assistance platform to connect employees all over the world. It would unite a geographically dispersed team and streamline connectivity. Despite his enthusiasm for the initiative, however, the budget for digital projects had shrunk and management support was lacking. His ideas for digital transformation were not progressing as he had hoped. Giuseppe wondered what was going wrong in Murano Glass’s digital transformation journey.

Pharmaceutical glass market

The pharmaceutical glass packaging market was growing at a significant rate due to the increasing demand for pharmaceutical products and technological advancements in the field. Indeed, its market size was estimated at USD 14.27 billion in 2018 and, according to a report by Grand View Research, Inc., was expected to reach USD 22.05 billion by 2025, expanding at a CAGR of 6.4% over the forecasted period. Glass packaging offered various advantages over alternatives, as chemical resistances to most medical products were isolated within the containers and glass guaranteed protection from potential drug degradation.

The pharmaceutical glass packaging market was segmented into four major groups of products: vials, cartridges and syringes, ampoules and bottles. Over the forecasted period, ampoules were anticipated to experience the fastest growth and bottles to hold the largest market share, while vials accounted for a volume share of 32.6% in 2018 and were estimated to become the second fastest selling product due to their suitability and analytical performance. The increasing relevance of biotech drugs and improved cost sensitivity in the healthcare sector were key drivers in the process of establishing stringent regulations related to drug delivery products. For this reason, most glass pharmaceutical packaging manufacturers were investing in products aimed at increasing shelf life of drugs.

The pharmaceutical glass packaging market was highly fragmented due to a large number of regional as well as global players driven and influenced by different factors, specific to their geographical positioning. From a general point of view, the market in emerging economies was driven by the prevalence of chronic diseases, rising income levels, healthcare awareness and government policies directed at achieving universal healthcare as well as the need for innovative products. Indeed, governments’ efforts to reduce healthcare cost and promotion of low-cost generic drugs were expected to fuel the uptake in utilisation of glass packaging in years to come.

North America sat atop the leaderboard and controlled the global market through its technological advancements and high demand for pharmaceutical products, while the Asian market was expected to witness higher growth rates in the future. It was predicted that China and India would become the fastest growing global markets due to their respective populations and increasing prevalence of chronic diseases. The European market was increasing due to general developments and progress in the medical field, stimulated by R&D and the introduction of new medicines.

Global manufacturers and suppliers were focused on shifting their base to China, India, and Brazil as a result of increasing market opportunities that were created by the pharmaceutical industries in these countries, especially the production of generic medicines.

The competition in the glass packaging niche market was fierce. ² Manufacturers were constantly trying to offer a wide range of technologies that covered as much of the value chain as possible. For instance, in November 2017, Şişecam Group installed Xpar Vision Hot End technology at its plants in Yenisehir, Eskisehir, and Mersin, Turkey. The system provided highly accurate, automated, closed-loop control of the bottle weights while providing ease of operation. Furthermore, companies such as Schott AG, Nipro Corporation, and Şişecam Group had increased their production capabilities to respond to the rise of product demand from drug manufacturers. In September 2017, Gerresheimer AG increased its investment in the manufacturing capability of its delamination controlled (DC) range of pharmaceutical vials to meet the rising demand for biotech drug formulations.

The road to digital transformation

In 2014, Murano Glass appointed an innovation manager who brought extensive experience in driving innovation in the pharma and medical industry to the group. He had developed high-technology medical devices and led successful startups; his skills and experience were directly relevant for Murano Glass at that juncture of the firm’s development. As Murano Glass aimed to retain its leadership position in the market, innovation had been considered as key to its future success. In addition, Murano Glass’s CEO believed that innovations that allowed the firm to stay close to the end user were going to be needed in maintaining the firm’s market leadership. In this regard, digital technologies would help refocus the corporate strategy and create new services for end customers.

Within months, the innovation manager had started a new digital initiative, focused on the business. An innovation programme was developed over four months and included four critical steps: (1) ecosystem exploration, (2) idea generation, (3) strategic profiles and (4) validation. The successful outcome of this project was the development of new products. Different teams analysed medical technology, customer behaviour trends and worked on the creation of a new ecosystem of services and products. There was a sense of rejuvenating the product line and various parts of the business were actively involved. The IT department was also involved by bringing in their technical expertise. Giuseppe at that time was curious about the innovation programme and provided advice about how technology could be better utilised in Murano Glass. However, decision making rested with the innovation manager. An event was held where employees presented their projects (glass products for administrating diabetes medication) and other products for improving the monitoring of patient and drug use. Mobile apps, devices for the Internet of Things, social communities and web-based services were presented. Cartridges featured prominently – as a core product of the company. Enthusiasm at the time was high and the innovation manager was recognised for his contribution and there was growing trust between him and top management.

However, implementation proved to be challenging. Indeed, numerous practical problems arose and solutions were not easily found. It was practically impossible to change existing operations, in the short and medium term, particularly those associated with the core glass cartridge production processes. It was extremely challenging to modify features of the glass product as well as amend production processes at the same time. Despite the rapidly emerging market of diabetics and the quest for new services, the board decided to postpone any changes relating to the glass cartridge product for three main reasons. First, it required drastic changes on all production machines that would take approximately two to three years to implement. Second, changes on products would require strict controls and authorisations from regulation bodies, such as FDA, which were likely to be time consuming and costly (taking months or even years to be approved). Third, unforeseen problems could arise that would affect the business, its reputation and traditions. These were considerations management were not prepared to risk.

As a result, the innovation manager had to review the digital innovation programme implementation. It was perceived to be too disruptive to core business processes and practices; challenges that could not be easily overcome. As a result, Murano Glass pursued an alternative path to digital opportunities – via a startup company – while maintaining the existing production and product lines. After only two years with Murano Glass, the innovation manager decided to leave the company.

Giuseppe knew the potential of digital transformation, and despite the many challenges, he remained committed to the pursuit of a digital path. He focused on improving the efficiency of plants, people performance and processes using digital technologies, as Murano Glass was still struggling to operate efficiently as a global operation. Giuseppe decided to target the improvement of processes using digital solutions in the following areas.

Remote assistance with augmented reality

Murano Glass were experiencing difficulties transferring expertise and experience from the Italian headquarters to plants. Giuseppe searched for a solution that would facilitate remote knowledge transfer that avoided Italian employees having to travel. It would reduce the cost of travel and facilitate solutions to remote plants quicker and more cost effectively. Giuseppe believed digital technology would be the best solution. The IT department interviewed employees from different plants to get their opinion about the challenge and potential solutions.

The study revealed that the biggest issue was assistance for machinery malfunctioning as it proved difficult to give instructions over the phone. Remote communication was often unclear and an inefficient way to solve simple issues. Consequently, technicians travelled to site to provide assistance. In 2015, Giuseppe contacted a company from Rome that was developing an app for remote assistance called ‘Remote R’. Unfortunately, the collaboration failed, the contract was terminated and the project was put on hold. Despite this initial setback, Giuseppe still believed in the value of the solution and he pursued a Canadian-based company that produced a similar application. This partnership flourished and in 2017, the IT team implemented the solution. They were able to connect the Italian Operations & Service Department with Brazil and Mexico, supporting each other with production line solutions.

Training for employees was embedded in the app, so learning to operate the tool was relatively quick and easy through an intuitive interface. The app allowed real-time interaction, so staff could provide technical assistance through a Live Call, taking advantage of real-time, visual-communication-led directions. The operator and the support expert had sight of the context and the problem, for example, a faulty machine could be addressed simultaneously by both parties. Conversations were augmented with graphics and annotations, which included arrows and circles to pinpoint issues and explain possible solutions. Therefore, it was the first solution to overcome the geographical and temporal barriers.

Two years later, Murano Glass was still using the app at its lowest potential, essentially to provide support for the first assistance issues in Brazil and Mexico. The remote assistance app was then put to use in marketing and events. The Italian headquarters, for example, used it to manage and organise the opening of the Brazilian plant, and in support of product export (the app was used to verify the remote arrangement of product platforms for expeditions), and in after-sale service, for example, as part of their machinery distribution business that provided post-sale and maintenance support (despite discussions at board level for this third application, it was never fully implemented).

By this time, the app was applied in all plants but it was not used as frequently as expected by the IT department. Indeed, its introduction required changes in the assistance model, as engagement and utilisation needed to be standardised. At the same time, several operations managers perceived it as a mechanism to strictly control their work and they struggled to accept it. This resulted in an extremely low rate of utilisation.

Digital dashboard for peer-assistance

The geographical expansion experienced by Murano Glass benefitted the company’s market growth and revenues but it led to a series of managerial difficulties, among which the most relevant were as follows: (1) difficult internal communications, particularly between plants; and (2) lack of awareness about building layout and assets availability within factories located all over the world. To overcome these difficulties, Murano Glass decided to support a startup, to develop a software that featured the ability to synchronise plant layouts over Google maps, which specified all the assets and machinery located in each plant, and allowed smoother, real-time communication between regionally based peers. The tool they developed was made up of two components: SYN and HERE.

SYN referred to the platform that displayed the blueprints of Murano Glass’s plants: it was a digital representation of the globe, equipped with little flags that reported the exact locations of the company’s factories. By zooming over these areas, it was possible to see the buildings and all the available assets. HERE was the app used to rove inside a factory. It used a net of beacons and augmented reality that allowed the user to track activities and notify employees. This particular feature was supposed to be synchronised with the Remote AR tool: whenever an employee detected a malfunction or experienced a problem with a machine, they could create a ‘ticket’ through the HERE app, which sent a message, describing the circumstances and their exact location inside the plant. This ticket was forwarded to the technical team for a timely resolution.

By the end of 2017, the innovation team decided that the tool was ready to be distributed among employees. However, the initiative was stopped again by the company’s board. The innovation team worked with great enthusiasm on this project, but they had not involved the board during the ideation or the development phase. When they presented the final product to the company, they found a reluctant and resistant audience.

After several years, in 2019, there was a glimmer of hope as the board was encouraged by the operational department to test the distribution of digital dashboard. A move that would solve operational and maintenance issues was addressed by SYN and HERE, but full company adoption was still some time away. Further to these initiatives in digital technology, some additional projects had been developed in collaboration with management students from a local university. These included the following:

Giuseppe was keen to promote these digital transformation projects, but he had learned how challenging innovation and digital implementation could be and his reflections might lead to a different approach.

Epilogue

Giuseppe had actively promoted digital innovations at Murano Glass for years, however, by 2019, it was evident that the results they anticipated from these initiatives had not materialised. The innovation process seemed to be informed by knowledge held within the IT team and augmented by occasional consultation with end-users, academics and external practitioners. Digital solutions seemed to be benefitted from positive operator and user feedback, but the adoption of these digital tools was minimal. Giuseppe felt that the intended benefits from some of the solutions had not led to greater savings or improved problem solving. Giuseppe felt these initiatives could have been better governed. While corporations from around the world ramped up investment in digital innovations, Murano Glass had decided to put similar initiatives on hold. He was puzzled: why had digital innovation at Murano Glass failed to take off? Why had implementation proved so difficult? Why was the board so complacent and seemingly disinterested in digital transformation and its benefits?