Survey Snippets #3: The Evolution of Industrial Transformation (IX) Leaders

LNS Research first introduced the term Industrial Transformation (IX) in our research on Industrial Transformation Readiness in 2018. We chose the moniker to specifically distinguish from the existing Digital Transformation term as we see IX as an important but distinct subset of the broader Digital Transformation umbrella. Our definition of Industrial Transformation states that IX is a proactive and coordinated approach in leveraging digital technologies to create step-change improvement in industrial operations.

Defining IX Leaders: 

An important finding from our 2018 IX Readiness research was the discovery of IX Leaders. We asked our survey takers to self-evaluate the perception of their transformation program. Respondents who answered either of the two choices highlighted below were classified as IX Leaders. These IX Leaders made up 28% of the data set we surveyed in 2018.

The IX Readiness research showed that these IX Leaders were significantly ahead of the rest of the industry (whom we named as Followers) in terms of their transformation programs. Further analysis revealed how the IX Leaders did a better job than the followers in: 

• Defining and executing their IX programs 

• Implementing technology solutions 

• Setting goals for IX programs and investing in those goals 

• Involving plant management and front-line workers 

• Managing IT and OT data, leveraging analytics, and so on. 

We have since then applied the same methodology to identify IX Leaders in several other surveys and analyzed their performance to feed our thought leadership reports over the past three years.  

Fast forward to Q4 2020, our then-recent survey showed that the IX leaders made up 47% of the data set, increasing from 28% in 2018. At first glance, it might look like IX Leaders have substantially increased in a couple of years but a closer examination tells us that among the two types of companies we grouped under IX Leaders, only the first group has been increasing significantly every year, while the second group has not changed at all.

Examining the two types of IX Leaders: 

The first group of IX Leaders mostly represents the companies in the early stages of transformation programs who are just starting to gain initial benefits. LNS Research believes that the rapid increase in this group of companies could be largely attributed to two things: the proliferation of IX technology vendors in the space, and more recently, the COVID-19 pandemic.

Modern, easy-to-deploy applications and platforms that have eliminated the need for months of implementation and customization have enabled IT and OT personnel to collect data from multiple sources within a short time, aggregate them, and produce basic dashboards to quickly get some value to the plant. Additionally, the COVID-19 pandemic has influenced manufacturing leaders to accelerate their transformation programs to fill their shop floors with IX technologies to sustain future lockdown scenarios, like the one we saw last year.  

We have to note that, while these applications and cloud-based technologies have enabled manufacturers to “make progress and see value,” they are mostly results of siloed solutions to short-term problems. These technology solutions are also challenged with scaling across multiple plants as they might not be aligned with higher-level corporate objectives for the IX program.  

On the other hand, when we inspect the second type of IX Leaders (who are perceiving themselves as a real success in terms of business benefit and speed of impact), our analysis tells us these companies are realizing the true potential of IX with significant, meaningful, and scalable value to the entire organization and not just one or two plants. The above data shows that they make up less than 10% of the market, and that number hasn’t increased in the past three years. In fact, it even decreased by 1% from 2019 to 2020, validating our statement that IX is a journey, not a destination; companies have to continuously invest in people, process, and technology resources if they want to ensure a long-term successful Industrial Transformation (IX) program.

Redefining IX Leaders:  

In our latest research on IX Readiness 2021, LNS Research has updated our definition of the IX Leader. The graphic to the right displays the latest version of the question, in which we have increased the granularity of the choices to distinguish the companies who are only attaining  short-term, siloed benefits from the companies that are seeing meaningful value. As you can see below, the new IX Leaders make up 21% of the dataset, reducing from 47%. LNS Research believes this is a more accurate representation of the market as it only includes companies who are seeing long-term, significant, scalable, and meaningful value to their organization.

 

As we pursue our research in this space, LNS Research will monitor the industrial end-user community’s progress in IX and continue to raise the bar for IX Leaders.  

To be considered as an IX Leader under the new definition, LNS Research recommends companies to: 

• Consider your IX program as a business transformation that primarily tries to solve operational problems supported by technology, not as a technology-led project to gain quick value.

• Ensure your IX program benefits are aligned with your corporate strategic objectives.

• Look at IX as a continuous journey, not as a destination. Continue to invest in and update the program to ensure long-term success.