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A Strategic View of Digital Transformation
We work with a number of stakeholders responsible for digital transformation at their organizations. While the level of digital maturity at a given company varies greatly depending on industry and location in the value chain, there is a universal need for a simple guide on how to go about bringing digital transformation to complex organizations. Based on our experience, the key steps are:
1. Build a cross-cutting function that has influence to drive change, with buy-in from the very top. This one is simple. Change is impossible without top-level commitment, and that means from the CEO on down. Most organizations will run into conservative functions that have a short-term view on results – this must be softened by a strategic commitment to change, where the long-term benefits outstrip short-term pain. Digital transformation is cultural transformation.
2. Assess what products and processes are candidates for digital transformation. Build separate lists of products and processes that may be ripe for change, then prioritize them. The ones on top are what you attack first, then move down the list. This will require a taxonomy with different levels. It is fine to put "manufacturing" as a candidate for transformation, but to be actionable, there must be further refinement down to a process like "wire harness assembly." Early on, prioritize quick wins – as with any new initiative, getting some early wins under your belt will help you build credibility for bigger projects down the line.
3. Identify what data you already have that has untapped value. As you dig into candidate products and processes, find the proprietary data you have access to that can drive transformation. Lab notebooks, product specs, data historians, machine data, customer usage, and more all may hold the key to new products, business models, and processes.
4. Build project teams that include stakeholders from the digital transformation function, as well as the process or product to be transformed. Impacted parties must have a say – after all, a transformation could impact their KPIs and the nature of their jobs. Building the right team increases the chance of getting buy-in and ensures better alignment with the business.
5. Identify the points of friction and seek out the digital tool that alleviates this friction. This is universal to both product and internal operations; however, the pathways differ. For products, the friction occurs somewhere along the path of the consumer transaction, and we have developed a framework for identifying those friction points and how to find the right digital tools to unlock new business models (see "From B2C to B2B: Identifying Digital Business Models for Physical Industries"). For internal operations, we must isolate the process to be transformed, examine inputs and outputs, and determine the right tools to ease mixing of these inputs to result in a more efficient or effective output. In our most recent report on digital transformation, we provide a guide on how to isolate and analyze these processes and arrive at the right digital tool, bolstered by real case studies of successful digital transformation (see "A Digital Transformation Framework: Applying Digital Tools to Improve Business Operations"). Underpinning this effort is a digital transformation team that is tasked with staying up-to-date and dangerous on the latest and greatest digital tools.
6. Once you've found the right tool, determine whether to buy or build. Except for the most digital-savvy companies, in most cases, it makes sense to partner/buy the solution you need. Whether it be hardware or software, it can be much faster to buy the capability you need. Choosing the right partner or target is always the challenge (and where we spend a lot of our time helping clients), but it is bolstered by your existing innovation and venture teams (who are good candidates for your digital transformation team), which excel at identifying leading developers.
7. Pilot and iterate until the benefits are clear. Make sure to measure and articulate the benefits. This should be messaged to all stakeholders, and especially upper management.
8. Evangelize and spread. If it's a process, scale it to more sites. If it's a product, identify related products that may be ripe for similar transformation and begin the process (these should be next on your list anyway).
9. Embrace failure. Not every project will succeed. Incremental changes will be easier to proliferate, while more ambitious initiatives may see false starts, cultural resistance, or other obstacles. Learn from these failures and above all else remember that with the right approach, the ROI on your wins will outstrip the losses from your failures.
While concise, these steps are not easy to execute. They require a combination of strategic vision and operational excellence. But the results are real, and digital transformation is more than buzzword – it is a necessary step to maintaining competitiveness in whatever industry you operate in. These points are our guiding light as we explore how to help corporations navigate digital transformation – look for more studies that examine this process as we move forward.
- A Digital Transformation Framework: Applying Digital Tools to Improve Business Operations (for Lux members only)
- From B2C to B2B: Identifying Digital Business Models for Physical Industries (for Lux members only)
- Boeing Uses Google Glass to Assist in Wire Harness Assembly Guidance (for Lux members only)