What is Digital Transformation, Really?
By Charles A. Riggle, President, Carpéggeo
For the last half dozen years, I have struggled with how some people view the definition of IoT, Internet of Things. For me, it has always been more than just connectivity plumbing that connects things to the Internet. It has always been a technology means to capture new insights from things. That, by necessity, includes connectivity between sensors and machines and the cloud, through the internet. But it also includes the new and rich sources of data that comprise the building blocks of what feeds ML algorithms to produce insights about demand, performance, health, usage, and more about things, machines, and systems.
Today, the term Digital Transformation now occupies the same confusing business category definition that IoT once held. Too many people equate Digital Transformation with the use of connectivity, AI, and data to realize new capabilities for businesses. In reality, I assert, it is much more. So, what is Digital Transformation really, and how does it help companies?
The world and businesses are becoming more complex. It used to be that people spent their entire careers building up knowledge of how a steel mill, or a consumer goods manufacturing plant, or a component fabrication factory operated. Institutional knowledge was the way you kept the factory running. Certain highly skilled people could tell by the sound a machine made that it needed adjustment or maintenance. Today, people are not so interested in working for one company their entire career. Institutional knowledge, while valuable, is no longer good enough to keep companies competitive, and is often lost before it can be effectively transferred to new workers.
Manufacturing systems are also much more complex. CRM’s feed ERP’s. PLC’s and DCS’s fed MES’s. Supply chains are much longer. Product mixes are more diverse. No one person can know everything about the plant and its systems. Software is critical in keeping things running smoothly. Yet, despite numerous individual productivity tools, many of the feedback mechanisms and important operating decisions are still based on the accuracy of an expert’s individual knowledge and decision-making abilities. So, to ensure that what is promised is done, forecasts and production plans have slack to account for unknowns, bottlenecks, breakdowns, and mistakes. Digital Transformation attempts to orchestrate across complex systems, eliminate or minimize error and uncertainty, and allow companies to deliver new and better outcomes for their customers and stakeholders.
Yes, Digital Transformation includes the use of IoT, AI, and data to enable new insights, but if that’s all it is doing, then all that is being accomplished by digitizing existing processes is to optimize individual workflows that were already being done.
Digital Transformation should also work to capture institutional knowledge and codify new best practices for delivering outcomes knowing that today’s workers may not be as experienced as a decade ago but may be more computer savvy than their predecessors. The way in which products are made and work gets done will also need to change to reflect the number of workers employable in the factory of the future, as this total may be substantially less than in prior decades.
Digital Transformation should also define new workflows that constantly adapt to working conditions and include feedback from AI recommendations on optimizing end-to-end production. Employees should be trained and upskilled to leverage these decision tools and adaptable workflows to deliver against demand signals rather than just against a production target.
Digital Transformation should also include provisions for new growth objectives. Why would leaders consider major investments in Digital Transformation if not for a material return on investment? Such investments in digital technology, process, and people transformation should be aimed at delivering new value to customers using tools of innovation, ingenuity, efficiency, and resilience. Digital Transformation can make manufacturers more agile in their operations and able to meet new and greater demands from customers. The outcome of which is new profitable growth in a complex and competitive business environment.
Enterprise leaders must recognize that the realities of current and future business cycles mean that they must prepare their companies to thrive in a world full of disruption – supply chain disruption, natural disasters, inflation, wars, pandemics, geo-political pressures, and more. Being resilient means quickly adapting to such forces and still delivering results. Digital Transformation is the mechanism to prepare business operations to manage through and around these challenges.
Digital Transformation is the use of connectivity, AI, data, people, processes, and culture to create an organization with new capabilities and the capacity to thrive and win despite the unprecedented change. Companies that adopt this approach and transform their organization will greatly outpace those that maintain the status quo. Digital Transformation will define the leaders for what I like to call the Exponential Age.
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Chuck Riggle is President of Carpéggeo, LLC, a business strategy advisory firm specializing in helping enterprise leaders to articulate their ambitions, build organizational support, and develop executable growth strategies for a business environment marked by continuous change. We help companies prepare and position for leadership in the Exponential Age.