LNS Research Principal Analyst Dan Miklovic continues his posts on the Digital Transformation with this follow up on Operational Excellence.
Companies in almost every industry are talking about Digital Transformation, but frequently they are taking a somewhat narrow view. In various industries, when you talk about Digital Transformation, the focus is on the idea of the digital thread. Possessing a detailed digital model of each and every product sold, as well as doing all of the design and prototyping carried out, is the main discussion in many of consumer goods oriented industries.
Many automotive companies talk about how smart connected cars will change the industry, including the concept of driverless cars and advanced telematics. Tesla Motors has already demonstrated that they can reduce the number of recalls required by downloading software updates automatically to their vehicles.
In many of these cases the goal is not just to speed time-to-market, but to create a revenue stream of after-the-sale services. Even resource industries are pursuing Digital Transformation from either the geo-technical aspects of resource exploration or the performance optimization of production assets, or both. Yet, in all of these cases the better description of what is happening is that the businesses are digitizing some aspect of their business, they are not truly pursuing a Digital Transformation.
Digital Transformation Goes Beyond Digitization
From Michael Porter at the Harvard Business School, to U Penn’s Wharton School of Business there is a growing consensus that Digital Transformation is not only real; it is imminent and inevitable. This consensus is built on the foundation of the convergence of numerous technological trends, such as
Each of these technologies, which have been on the forefront of business discussions over the last three to five years, offer the ability to digitize some process or activity in business if taken independently. If they are taken together you have the potential for Digital Transformation. As I noted in my previous post, you can’t build next generation products in last century’s factory. This holds true in other aspects of Digital Transformation as well. If you don’t invest in Big Data and analytics to gain knowledge from that data, you are falling short in your pursuit of operational excellence. Knowing what your customers want by using Big Data, predictive analytics, and the Cloud to gauge production performance means you are missing the maximum value of Digital Transformation.
All-In Does Not Mean Massive Investment or All-or-Nothing
I have made the assertion that the Digital Transformation is an all-in game. I am not implying that an enterprise must make huge investments in new technology and scrap everything to start over, or they are doomed. What I do mean is that for an enterprise to effectively pursue a Digital Transformation all the elements of the business must finally break down the walls between the siloes in their organization. For the last several years much of the discussion has been about information (IT) versus operational technology (OT). There has been the assertion that the CIO will be the new business leader because IT and OT are converging. There are others who say the new leaders will be the tech savvy business leaders since CIO’s don’t understand the business. I have been an analyst for over 20 years now, and the entire time I have heard that one of the top issues CIO’s face is trying to show business relevance or to create alignment with the business.
When I say Digital Transformation is an “all-in game” I mean it is time for IT and Operations people to stop operating in silos and competing. With a background in maintenance, I see the parallels with the old ways of maintenance and construction and today’s new digital environment. Decades ago it was not uncommon to have to have an electrician lock out the motor of a pump, the millwright disconnect the pump from the motor, a rigger transport the pump to the shop, and a machinist to fix the pump. Only then would the whole series repeat in reverse to get the repaired pump back in service. Then came the concept of multi-skilled crafts where a mechanic could do everything required to return the pump to service. The mechanic had to learn enough about electricity, alignment, and machining to do the entire job.
The Digital Transformation requires that same evolution in our approach to business processes. Less time has to be spent arguing about who will do what and whose turf it is, and spend more time on what the potential is by carry out a Digital Transformation. Everyone has to be all-in and committed to the vision of what Digital Transformation means to the business. In the next series of posts I am going to explore the progression an enterprise needs to follow through with operational excellence, defining the architecture to support the processes, building business cases for change, and finally selecting the technology to make the Digital Transformation real.
NEW Research Spotlight on strategies and recommendations for minimizing risk through a migration away from monolithic, single-plant MOM architectures through exploration of Cloud and IIoT technologies that are advancing in manufacturing today.
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