Today, digital transformation is imperative for all businesses, be it small or large. As the world becomes increasingly digital, businesses need to learn how to remain competitive and relevant in this new ecosystem. Digital transformation has become one of the most used buzzwords these days and everyone has heard about it. However, many business leaders still struggle with questions like what digital transformation really means? How do we achieve it? What are the steps to transform? Is it really worth the efforts?
This whitepaper aims to answer some of the common questions around digital transformation specifically for the business leaders in the manufacturing industry. Because of the role that technology plays today in transforming a business, CXOs must lead their organizations through this era of digital transformation. Keeping this in mind, this whitepaper is divided into the below sections aiming at bringing clarity to the business leaders contemplating digital transformation:
Section 1: Busting the Myths of Digital Transformation
Section 2: The Three Areas of Digital Transformation in Manufacturing
Section 3: Top Technologies and Use Cases
Section 4: Critical Success Factors
The astonishing pace of change in the tech world is making it difficult to clearly understand digitalization and fully grasp its implications in business. It has also led to several myths which are not only misleading but damaging to the overall vision of an organization. Before we delve into the topic and learn what is digital transformation, let us first debunk few myths. Below are some of the most misleading ones, which have to be invalidated before an effective strategy for digitizing any enterprise can be developed.
Reality: For established businesses, who have been industry leaders before the tech evolution and are still in a leading position, the cautionary tale of Kodak’s bankruptcy, is frequently cited. Kodak failed to react to the disruptive impact of digital photography. During 2015, around 70 startups achieved unicorn status, attaining valuations of $1 billion or more. Hundreds of startups are now attacking traditional markets. This is a signal to the established businesses to act. They have significant resources such as hard assets, brands, global distribution, customer relationships, data and decades of institutional know-how in the industry. Given they harness these assets for their digital transformation, on time, the story is far from over.
Reality: Many businesses are moving beyond looking at technology as merely a supporting function and instead leveraging it as an enabler of revenue generation. Companies which have implemented digital technologies across their business have been successful in not only improving efficiencies, but also enhancing revenue sources, competing against digital natives and outperforming peers.
Reality: It is a myth that digital transformation is not for small and medium sized businesses. The reality is that all businesses fall into the radar of obsolescence without digital technologies. Of course the scale of applicability and adoption will vary with the size but overlooking digital technologies is a sure shot way to become extinct in the near future. Companies irrespective of size should start analyzing how best they can plan for accommodating digital technologies instead of just keeping a watch on what is happening in the market.
Reality: Typically, investments are compared and analyzed using a combination of payback period, internal rate of return (IRR) or break-even analysis. However, the ROI calculation of digital transformation cannot be justified by just using traditional methods. Digital transformation might appear to be a bad investment if we only look at short term gains. The reality is that the investment in digital transformation will bring in new revenue streams, save your money directly on existing processes, restructure your costs, transform the way IT services are consumed, increase your asset cycles and bring a lot of indirect/intangible efficiencies. Once an organization’s processes have been digitized, the transformation and cost savings continue to increase perpetually removing inefficiencies and automating steps in the process, throughout the transformation journey.
Reality: Nothing can be far from reality as thinking about digital as a standalone IT agenda without active business involvement or business stakeholder participation. The intersection of business and technology is the key to digital transformation. Only when business executives understand and work with technology executives, digital can truly add value to an organization. There is no one approach for digital which can work de facto for all organizations which can be plugged and played by the IT team alone. Digital transformation requires careful planning and cross functional involvement for successful execution.
Now that we have debunked the myths, let’s dive deeper into the subject of digital transformation. Digital transformation is the integration of technology into all verticals of a business, fundamentally changing how it operates and delivers value to customers. It’s also a cultural change that requires organizations to continually challenge the status quo and be open to innovation.
Any transformation is successful only after a considerable thought has gone into identifying appropriate transformation areas and embracing a strategy where technology enhances business, increases revenue and optimizes costs. The entire journey can be divided into three wide areas as below:
Legacy systems are another aspect of what is holding back many organizations today. Legacy systems are a single point of failure. They are not only non-scalable, limited business functionality systems, they are also highly cost-intensive in terms of operations and have long development cycles. Organizations need to take a hard look at their IT systems and conduct a thorough cost-benefit analysis to understand which technologies are efficient and which are holding them back. They can choose to tolerate, eliminate or modernize them based on their modernization drivers. For example, their drivers can be either cutting costs, improving efficiency or complying with regulations. Once the cost-benefit analysis is completed, these drivers would influence their priorities in the phase-wise modernization journey, so that the benefit is maximized, and the risk is minimized.
Many organizations today face the roadblock of data silos when it comes to digital transformation. Imagine an organization that collects data from several sources, and then stores that data separately depending on function and relevancy. This is no secret; many organizations have been doing it for a long time and that made no impact until now when everyone is leveraging analytics. It is impossible to draw meaningful insights and see the bigger picture unless all data is linked and unified. Data unification is the first stepping stone towards moving from a very reactive and intuition-based decision-making system to a more proactive, even predictive data-based decisionmaking system powered by AI.
Perhaps the most exciting and rewarding of all the transformation initiatives discussed so far is the connected manufacturing or connected factory. This is the stage where you enter a cyber-human space, where devices become your employees, they work for you to monitor status, analyze patterns and predict intelligent insights for the business in real-time. Digital technology solutions can help manufacturers become more responsive and predictive than reactive, by turning real-time data from sensors and devices into actionable intelligence. Such is the power for digital transformation.
Today, everyone is riding with the tide, no exceptions. Few are thinking about it, few are already at the top, but everyone is in the technology business.
Few years back, in many businesses, it was recognized that the data being generated by connected devices and consumer activity holds potential, however most conversations emphasized volume, variety and velocity. There was little to no discussion around value. Big Data with no context serves no purpose in the business world, and the recent developments in the field to “humanize” big data or adding context is changing the game and helping the business people derive relevant insights that affect business in the real world.
Internet of Things has become a reality for many industries already and it’s far from being just a buzzword. Specifically, in manufacturing industry, businesses are leveraging Internet of things for use cases like – asset monitoring, predictive maintenance, real-time field service management, asset tracking and many more. With an upsurge of tech friendly “things”, drop in costs of internet services and increase in data generation, IoT is a much more attainable transformation than it was few years ago with a plethora of benefits.
Manufacturing is a process-intensive industry and RPA can serve as a boon reducing costs, increasing accuracy, cutting process times and lowering operational risks. High volume, routine and repetitive tasks can be automated to improve efficiency. Also, processes which are speed-sensitive, cross-functional and have low fault tolerance can be automated to decrease process time and increase accuracy. The manufacturing industry is utilizing RPA to its fullest for creating error-free and streamlined processes. Repetitive processes are inherently erroneous and they dramatically increase the productivity risk. Smart leaders are embracing RPA to enhance their productivity and outcomes.
Possibly, the most amazing thing in the tech world right now is machine learning. Machine learning is an application of artificial intelligence (AI) that provides your system the ability to automatically learn and improve from experience without being explicitly programmed. It enables software applications to become increasingly accurate in predicting outcomes. Machine learning applications and platforms are helping manufacturers find new business models, fine-tune product quality, and optimize manufacturing operations to the shop floor level. It is enabling improvements like modest reductions in equipment failures, better on-time deliveries, improvements in equipment, and faster training times in the competitive world of industrial robotics.
The tsunami of digital technologies is disrupting many industries, particularly manufacturing. Business leaders are being forced to learn and lead their organizations through this wave of digital transformation and adopt technologies like cloud, mobile, IoT and analytics. Businesses need to embrace digital technologies to survive in the new ecosystem. Below are few critical success factors which would help them in this journey:
The first step to any success story is a well thought, prioritized and viable strategy. It is very important to understand your organization’s vision and priorities, so that you could align your transformation vectors according to these priorities. When you get into the phase of cost benefit analysis and take a hard look at all your business processes, it may occur to you that there is a lot to be done. It could become overwhelming and many people stop their effort at that point. The only way to come out of that overwhelming feeling and turning it into an efficient roadmap for your organization is to prioritize. This requires deep understanding of what your organization stands for and what are the top business issues your organization is dealing with today.
Digital transformation is not a one-time event with an end date. It is not an easy switch. Digital transformation is an ongoing process, which requires adjustments to maintain success. Hence, it is important to have a phase-wise approach towards digital transformation, to give your customers, stakeholders and employees to adapt. Small wins keep people excited about the changes and shows value earlier in the transformation cycle. It also helps in course correction. Deep change across process, people, and culture is necessary to get the most out of digital transformation and hence, it won’t happen overnight.
When launching a transformation project, there should be a core team representing each aspect of the areas of technology and business that will be affected by the transformation. This core team should be made up of both business and technology members. Digital transformation is a big opportunity and the very best and brightest in your company should be a part of the core team to exploit this opportunity. Once the core team is in place, they should be given some level of authority to make decisions. Here is where strong leadership and sponsorship needs to come from the CIO or the CDO of the organization.
Agile and Lean project management methodologies allow managers to break work into more manageable, more measurable pieces, making it possible to deliver faster with higher quality. As a result, more value can be added and waste can be eliminated at different steps of transformation. This is a powerful combination for handling something as big as digital transformation. Agile methodology can ensure company-wide process and methodological alignment. In terms of business benefits, both provide:
Digital Transformation is changing the way business is done in every sector of the economy. Businesses will need to transform themselves into digital enterprises to thrive, and this transformation will need to be far more profound than merely investing in the latest technology. Few companies need it for survival, and while others may not go bankrupt without these, they will have to settle for a low-margin model for their business. Business leaders must debunk the myths in the industry, learn about the technologies thereby, helping organizations to ride this tide and develop a successful transformation roadmap to develop a competitive edge. This may be a daunting task, but the time to start is right now.