As manufacturers move through proof-of-concept and into the second or third phase to deploy their digital strategies, it is clear that digital transformation is a complex process with several factors influencing success. Early stages of media hype, inflated optimism and overly-simplistic advice are now giving way to a more realistic view of the technology and its deployment. Surveys of early adopters point to one overarching conclusion: transformation is not for the ill-prepared. Professional Services Providers can play an important role when it comes to rolling out a successful digital strategy.
Moving Beyond The Projections
Digitalization in manufacturing is past the honeymoon stage. There was an early glow of rekindled hope across the industry after the Great Recession when production and employment numbers went up. But now that the rebound is stabilizing, it is no longer enough to talk about vague sweeping evolutions and visions of a reimagined processes. Jaw-dropping projections, like IDC’s forecast that worldwide spending on digital transformation — including hardware, software, and services — will pass $2 trillion by 2021, are certainly inspiring. But now, manufacturers need more than projections.
Most manufacturers have bought into the vision and are taking action. One survey on digitalization and the workforce shows that 62 percent of manufacturers have either completed or are in the process of deploying a digital plan. That said, deployment roadmaps have not always been straight forward, nor easy to follow. Complications can arise, from data storage to network security. A shortage of digital experts for internal IT teams has also been a challenge for manufacturers. The result is a widening chasm between digital masters and beginners.
Success Comes In Shades
Analysts observing and reporting on the digital trend have been able to draw some early conclusions about the ways companies are deploying tactics. Although exact terminology may differ, there seems to be complete consensus among industry pundits that digital transformation is a journey, one that often involves several solutions, that has various routes, with unexpected detour or speed bumps. Four classifications can be used to characterize where a company is in the journey and their type of approach:
Beginners. These companies have a “wait-and-see” attitude and are reluctant to launch programs without first conducting proof-of-concept projects to test functionality. They tend to have a limited IT resources and lack confidence. Their slow-moving progress often makes them fall behind their competition.
Conservatives. These companies are extremely risk-adverse and place emphasis on regulations and compliance. Security is a high priority. If the company takes steps to overcome these concerns, conservative companies can keep pace with the competition and thrive. If not, they can become lost in details.
Fashionistas. These technology-enthusiasts like to tinker with new toys. They also tend to create silos and lack integration between departments as individuals drive isolated projects. Without a strong leader, this type of organization tends to squander its budget on short-term solutions.
Masters. This type of company has a vision that is shared by the organization — and a plan for executing it. They have established a digital product and service offering, multichannel interaction in their customer solutions ecosystem, plus have integrated operational processes and the workforce with technology and data management. Some experts suggest that digital masters are up to 26 percent more profitable than their industry peers and enjoy 9 percent higher revenue from their physical assets. But, only about 10 percent of global companies fall into this category.
With few adopters having “mastered” the technology, it is easy to see why best practices have yet to be established. Case studies are limited, as few end-to-end transformations have been in place long enough to form the basis for business models which can replicated and scaled. Plus, technology is changing at such a fast rate that settling on one performance standard or one definitive software solution cannot be chiseled in stone. Change is the one constant in this kaleidoscope of innovation.
This can lead to doubt. Recent research shows many companies are less confident about their digital abilities than they were six years ago. Capgemini surveyed companies in 2012 and found 45 percent thought they had the leadership skills needed to launch a digital plan. In 2018 only 35 percent felt the same way. Companies are also losing confidence that they have the IT business relationships necessary for transformation.
Manufacturers, solutions providers and services experts are all learning from each other and forging partnerships which can lead to better problem-solving and faster resolution of the various obstacles that can arise during deployment. Alliance partnership are critical, as they mend different views to provide a balanced view that puts the needs of the manufacturer in sharp focus.
The Capgemini research suggests that the early enthusiasm for digital transformation in 2012 has been dampened by difficulties encountered in implementation. Organizations have made progress in customer experience but the lack of key competencies and increased complexity of the technology appear to be slowing down progress in operations. On the leadership front, organizations remain challenged to drive substantial progress.
Optimism is still building and bringing more competition into the arena. Reports of the early wins are compelling the companies on the sidelines to jump in but practical realism is also causing organizations to consider their deployment and implementations plans — as well as their software solutions. Strong leadership, change management, and training to help the workforce embrace new business models must also be part of the holistic approach.
Since the dawn of digitization, manufacturers have been attempting to define realistic expectations and steps to achieve modernization. It has been a journey as deployment has often become more complex than anticipated. Through the early stages, some clear principles are emerging: going at it alone will be difficult. Turning to solutions providers — and professional service companies — will give manufacturers a well-balanced, clear view of the big picture. Each partner in the relationship plays a key role: one focusing on product features, one focusing on implementation. By working together, they can help manufacturers define best practices and reach their goals.
Nick Castellina is Director of Industry and Solution Strategy at Infor.