Thedevelopment of novel digital technologies connected to the Internet of Things, alongwith advancements in artificial intelligence and automation, is enabling a newwave of manufacturing innovation. “Smart factories” will leverage industrialequipment that communicates with users and with other machines, automatedprocesses, and mechanisms to facilitate real-time communication between thefactory and the market to support dynamic adaptation and maximize efficiency. Smartfactories can yield a range of benefits, such as increased process efficiency,product quality, sustainability, and safety and decreased costs. However, companiesface immense challenges implementing smart factories, given the large-scalesystemic transformation the move requires. We use data gathered from in-depth studiesof five factories in two leading automotive manufacturers to analyze these challengesand identify the key steps needed to implement the smart factory concept. Basedon our analysis, we offer a preliminary maturity model for smart factory implementationbuilt around three overarching principles: cultivating digital people, introducingagile processes, and configuring modular technologies.