LNS Research Principal Analyst, Tom Comstock, answers the 5 Most Asked Questions from his Digital Readiness for Industrial Transformation: Success...
What we see about Leaders within Industrial Transformation (IX)
LNS Research has been studying Industrial Transformation (IX) for all 10+ years of our existence. We know it has now gone mainstream, with more than 50% of companies reporting they are actively executing a transformation program. We also know that the way companies are executing transformation is changing. One clear example of that change can be seen in the changing profile of the program heads leading Industrial Transformation. More than half the companies executing IX are on at least their second program head. Let’s look at the data and drill into the changing characteristics of the newest set of leaders.1
Turnover is Common
Leadership is always a vital contributor to corporate success. It is particularly important in Industrial Transformation as the processes and technologies deployed are only now maturing, and its impact can ripple across the company. This importance can be seen in the fact that the “C” suite leads IX in over 90% of organizations. Often the CEO takes personal responsibility for leading the transformation initiative.
Many companies initiating a transformation program start by appointing a Chief Digital Officer (or some other exotic title) to champion and run the program. It can be common for industrials to appoint executives from technology companies to build digital skills within the executive suite. LNS Research sometimes uses the phrase “celebrity CDO” to capture this phenomenon. Initially, we used the “celebrity” phrase a tad pejoratively, but now we believe it can have its advantages in signaling the corporation on how important IX is to the Executive Team.
Whether starting with an outsider or an insider initially, we see that most companies have changed who leads their program at least once. Interestingly, we see more turnover amongst IX Leaders – the 20% of companies succeeding in transformation – compared to the 80% of Followers in various stages of struggling, stagnation, or start-up. Sixty-nine percent of IX Leaders are on at least their second program lead. In fact, they are 375% more likely to be on their fourth+.
From “Celebrity CDOs” to Deep Domain Experts
As we compare survey data across the years, we see other changes as well.
IX is still a “C” suite-led program 89% of the time, but which “C” level executive is changing? CEOs are less likely, and CIOs are more likely to be the ultimate program head.
More importantly, we see significant changes in the skill set of the IX Program head. To state the obvious, these jobs are demanding and require knowledge in all sorts of directions. IX Leaders have found that the program head must deeply understand business/operations and technology. IX Leaders are three times more likely than Laggards to have a program head with a deep understanding of:
Operational Technology (OT) generally
- Company’s strategy and business objectives
Clearly, the success profile is increasingly oriented towards domain expertise.
In fact, this is one of the key Pivots companies need to make as their IX programs mature. In the early stages of transformation, it really may be essential to communicate to the company that something is happening here. It may be valid to add digital depth to the executive team. However, over time, as the program goes from incubation to proving, then on to scaling and embedding, expertise about existing systems, the company’s strategy, goals, and operations become increasingly important. These requirements fit the changing profile of maturing IX Programs as they go from a largely exclusive focus on digital technologies to a more demanding focus on how those digital technologies extend and enhance existing OT and IT to enable process changes. Therefore, it should not be surprising to see that IX Leaders are ahead of Followers in ensuring that their program heads have the required deep domain expertise.
If You Lead an IX Program and Want to Keep Your Job
The lesson from the data is always to be learning and focus on learning the business. Build your expertise and that of the team. There are two team staffing tips we have seen in the real world.
First, build an inclusive team especially heavy with operations personnel. Leaders are significantly more inclusive in staffing: they want representation and participation from everywhere. The data is overwhelming on the value of inclusiveness of the IX Program.
Industrial Transformation (IX) Leaders are:
More inclusive, with 17 out of 19 different business functions
TWICE as likely as Laggards to be seen as reaching “across” and “deep” into the company for subject matter expertise (SME)
FIVE times more likely to include Operations (not just OT)
TWICE as likely to include EHS and/or Quality professionals
Significantly more likely to include customers and/or suppliers in their program
Obviously, be conscious of “building the gene pool” of the team - add skills that you don’t have.
The second is to be sure to build the voice of the customer and operations into your team structure. LNS Research specifically recommends that companies appoint a “lead” for manufacturing on the IX Team independent of the titular head of the program. Ideally, that person reports directly to the COO or the head of global manufacturing (who is and is seen as committed to IX). It is imperative that the “lead” represents the business and has detailed knowledge of manufacturing challenges and processes. Representing the business of manufacturing, it is their job to speak definitively on priorities, practices, and policies and to counterbalance technology-focused IT professionals. The “lead” should have a background in operations, not just OT. The “lead” should be “first among equals” in prioritizing which business problems to attack, use cases to implement, and types of technologies to deploy.
If you are a COO or Head of Worldwide Manufacturing
The research is compelling. Ultimately, the head of the IX Program should be a senior business leader with technology and change management expertise. That head should report to you or at least have dotted-line responsibility. Transformation should not be technology-driven but driven toward manufacturing and supply chain process improvements.
It is fundamentally on you to ensure your company’s IX program is focused on the right business problems and delivering meaningful and sustained business value. IX Leaders falter because they are too junior, lack credibility within the organization, or are focused on the wrong priorities. IX is not just about deploying new technology but developing new manufacturing strategies enabled by technology. Do not push this off to IT or your OT technical team to drive. Develop a trusted advisor relationship with the IX program head and champion the program across your extended team.
Change is not always easy but sometimes required. Change of the program head is only one of several discontinuous changes that IX Programs must execute throughout their IX Journey. In fact, these changes are so critical that LNS Research has identified the Pivot-to-Value as the most crucial factor in realizing meaningful and sustainable benefits from an IX initiative.
All entries in this Industrial Transformation blog represent the opinions of the authors based on their industry experience and their view of the information collected using the methods described in our Research Integrity. All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.