Digitalization in Manufacturing Does Not Fail Because of Technology. It Fails Because of Leadership.

Insights from the Scaling Business Summit 2026, Ho Chi Minh City.

Nguyen Trong Luat left Vietnam at 13, grew up in Germany, and spent 19 years there building a career in manufacturing. When he returned to lead Cicor Vietnam, four factories, 12,000 square meters, more than 300 employees, he expected a transformation challenge. What he found was something harder: a deeply entrenched culture where data was hidden, dashboards were manipulated, and the entire management structure was organized around protecting the status quo.

In three years, without purchasing a single external MES system, he and his team built their own manufacturing execution software from scratch, cut daily production meetings from two hours to fifteen minutes, and transformed what he called a "stupid factory" into one tracking toward smart factory status by 2027.

His keynote was not about technology. It was about what actually makes digitalization fail, and the specific cultural and leadership conditions that make it succeed.

1. Eighty Percent of Digitalization Projects Fail and Leadership Is the Reason

The statistic Luat opened with is consistent with what practitioners across industries report: the majority of manufacturing digitalization initiatives do not deliver on their objectives. His diagnosis is pointed.

"Eighty percent of companies, not only in Vietnam but in Germany too, fail on digitalization because they are missing commitment from leadership."

The CEO must have full commitment, and IT must not be left alone. The go-live day is not the success day. One hundred days after implementation is when you see whether the system is working or not.

The investment required is real, a full MES system for factory-wide digitalization can reach one to two million USD. Many CEOs are unwilling to authorize that without a guaranteed return. Luat's response to that constraint was pragmatic: he could not get the budget, so he built the system himself, using internal engineers and the motivation of ownership. The total savings versus buying an external solution exceeded 1.5 million USD.

But the financial case was secondary. The primary condition was commitment. Without visible, sustained leadership engagement, middle managers will not change their behavior. They will manage the data instead of managing the process.

Lesson 1: Digitalization is a leadership decision, not an IT project. The go-live is the beginning. The hundred-day mark is the test. The CEO's visible commitment is the variable that determines whether either matters.

2. The Power Shift: From Seniority to Data and Why Middle Management Resists It

The most honest moment of the keynote was Luat's description of what digitalization does to organizational power. Before digital systems, authority in a factory was based on tenure. Managers who had been with Cicor Vietnam for decades held influence because they were the repositories of institutional knowledge. They were difficult to challenge and difficult to replace.

After digitalization, the data holds the knowledge. And the data is transparent.

"Before digitalization, the most powerful managers were the ones who had stayed longest. They had experience, they had respect. After digitalization, the data matters more than how long someone has been with the company."

This is not abstract. Luat described a specific case: the head of production was maintaining OEE dashboards that showed excellent performance metrics. The physical reality on the factory floor was different, high scrap rates, quality issues, longer cycle times than reported. She was not incompetent. She was afraid. If the real data appeared on the dashboard, management would see her problems, her bonus would suffer, and her position would be at risk.

The resolution was not disciplinary. Luat stepped back from being her boss and became her coach. He sat with her and worked through the software together, gave her more resources, and explained the purpose of the system without threatening her with the output. The key insight: "Step back from being the boss. Become the trainer. Sit with them, help them enter the data, give them more resources. One to one and a half months later, they come back and appreciate it."

Lesson 2: Resistance to digitalization is almost always about fear, not capability. The manager hiding data is protecting herself from a system she does not yet trust. Change the relationship before changing the system.

3. The Four-Step Framework: Standardize Before You Automate

One of Luat's clearest contributions to the room was a sequence. Not a strategy document, not a maturity model, a practical ordering of four steps that he executed at Cicor Vietnam over three years.

• Step one: standardize. Standardize the work, the process, and the method. This is the foundation. Without it, digitalization records chaos rather than eliminating it. As Luat put it: "If you don't standardize the process first, you just digitalize the chaos."
• Step two: digitalize. Once the process is stable and documented, make everything paperless, visible, and real-time trackable. This is where the data layer gets built, not by purchasing software, but by building exactly what the factory needs, in exactly the format the team will use.
• Step three: optimize. With reliable data flowing, the team can now identify waste, reduce cycle times, improve OEE, and compress changeover. The data reveals what gut feeling concealed.
• Step four: automate. Only at this stage does automation make sense. Automation of a non-standardized process locks in the chaos. Automation of an optimized, data-rich process multiplies the gain.

The target at Cicor Vietnam is smart factory status by 2027. Three years in, they are tracking toward it, having built the entire system internally, without external MES vendors.

Lesson 3: The sequence matters more than the speed. Standardize, then digitalize, then optimize, then automate. Every shortcut in this order creates a larger problem downstream.

4. Vietnamese Speed Plus German Discipline: A Real Competitive Advantage

Luat is, by his own description, a cultural bridge raised Vietnamese, shaped by German manufacturing, now operating at the intersection of both. His operational framework for Cicor Vietnam is built on that duality.

German manufacturing culture brings discipline, structured processes, a culture of documented error resolution, and comfort with transparency. Vietnamese manufacturing culture brings speed, adaptability, and a capacity to improvise and execute quickly under pressure, the same qualities visible in the chaos of Ho Chi Minh City traffic, which he noted has its own internal logic behind the apparent disorder.

The gap that required management: in Germany, criticism is delivered directly and responded to with process improvement. In Vietnam, criticism in front of others causes loss of face, the employee becomes defensive, shuts down, or finds ways to work around the system rather than improving it. Luat's adaptation was to separate feedback from blame, to coach privately, and to frame improvement as a team achievement rather than an individual correction.

The result: "If you can combine Vietnamese speed with German discipline and excellence, you are able to upgrade your factory to world-class level, increase competitiveness, maintain fixed costs, optimize operations, and grow margin."

Lesson 4: Cultural difference in manufacturing is not a problem to manage. It is a capability to build. Vietnamese speed and German discipline are genuinely complementary but only if the management model bridges both deliberately.

5. What to Do and What Never to Do

Luat closed with two lists drawn from direct experience. He called them the things that will save you millions if you remember them.

What to do: start with process discipline, not software. Build a super-user network inside the factory, internal champions who own the system and bring their colleagues along. Set one clear KPI per function, reviewed daily. Celebrate adoption, not perfection. The team that enters imperfect data is more valuable than the team that refuses to engage with the system. Run daily production meetings at a fixed cadence, at Cicor Vietnam, fifteen to twenty minutes, because everything is visible in the dashboard before anyone sits down.

What never to do: "Don't digitalize a broken process. Don't overload the tools and the project. Don't punish mistakes during adoption. And never separate IT from operations."

The last point deserves emphasis. Luat watched other companies build walls between IT and production, different reporting lines, different physical locations, different objectives. When the system breaks or the data stops making sense, there is no one in the room who understands both sides well enough to fix it. At Cicor Vietnam, IT and operations built the system together. They own it together. They improve it together.

Lesson 5: The rules that govern digital transformation are not technical. They are behavioral. The failures are always cultural. The successes are always cultural too.

The CEO Execution Playbook: What to Do Tomorrow

1. 1. Audit your middle management's relationship to your current reporting systems. Ask: is the data in your dashboards used to make decisions, or managed to look correct? If your team is optimizing the report rather than the process, you have a transparency problem. Address the fear before addressing the system.
2. 2. Map your four-step position. For each major production or operational process, identify which of the four steps it is at: standardized, digitalized, optimized, or automated. Most companies have a mix. The question is whether there are gaps in the sequence, whether anything was automated before it was standardized.
3. 3. Calculate the cost of your current meeting structure. Count the total person-hours spent in production or operational meetings each week. That is a direct cost of information opacity. When data is visible in real time, meeting time compresses, Luat cut from two hours to fifteen minutes. Calculate your own number.
4. 4. Identify your internal super-users. In every team, there are one or two people who adopt new systems early, understand them deeply, and are trusted by their peers. These are your digitalization champions. Give them ownership, not just access.
5. 5. Define your adoption metric, not your implementation metric. The go-live date is not a success measure. Define what active daily use looks like, what percentage of operators log in, what percentage of data entries are completed on time, what percentage of KPIs are reviewed in each daily meeting. Measure adoption. Everything else follows.

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