For any manufacturer, the disruptions to both work and the supply chain over the last 14 months have underscored the importance of digital transformation and accelerated digital transformations already underway. But for many companies, these efforts have stalled out or failed to scale as they struggle to achieve meaningful business results and the return on investment that shareholders and executives expect.
When digital truly transforms physical at scale, companies can accelerate business growth, maximize productivity and optimize operations in ways that make them more resilient, flexible and prepared for future disruptions. And the most successful digital transformations result in better products that can improve people’s lives and expand human possibility.
Whether you’ve embraced digital transformation or are still trying to figure how to translate proof experiments into real value, here are four core concepts that companies must understand about how to drive business value, build resiliency, and scale into the future.
The Digital Thread is Core to Transformation
The foundation of digital transformation is a connected enterprise which unites and integrates information technology (IT) and operational technology (OT). The result is a digital thread of information initiated at the front end of innovation with digital twins and model-based design and simulation efforts that that is then enhanced to span the entire value chain – a seamless, integrated flow of data across the lifecycle and systems that delivers top-line business growth, improves operational excellence and enables risk mitigation.
Key to the digital thread is the digital twin. The digital twin is a representation of a product, physical entity or system using comprehensive data, analytics, simulations and emulations. By virtually modeling and piloting the entire value chain and the products in it, companies can quickly and easily optimize products, systems and supply chains in a virtual environment rather than a physical one.
This optimization (and the collaboration enabled by a digital environment) drives significant benefits, including fewer prototypes, faster development times, and more agile factories. We’ve seen companies use digital twins during requirements collection and design, factory layout, capacity planning, scheduling, processing, manufacturing, and servicing in the field. Through these applications, they remove risk from the equation and speed cycle time in the process.
Start with Business Value for Scalable Digital Transformations
Digital transformation doesn’t start with technology – it starts with business value that fundamentally impacts the top and bottom line. An effective strategy formally defines how the transformation will contribute to business growth and provides a roadmap to keep the focus on executing successfully.
That said, companies shouldn’t worry about perfecting the digital transformation roadmap. As companies face investment choices across many opportunities and experiments to drive value, delivering meaningful return early is critical. Companies get better results from a simultaneous, dual-pathway approach.
The first path defines an overall transformation direction with a high-level view of processes, systems and connections required to get there. Consider separate roadmaps for aspects of digital transformation like data science, smart connected factories and smart connected products. Revisit and adjust every 6-12 months based on learnings or business changes.
The second path should be to tackle important, current business priorities leveraging new and emerging technology. This extremely agile path puts out current fires while not compromising longer-term planning. Learning from this path also feeds planning in the first path.
Avoid Proof of Concept Purgatory
Many companies focus only on technology (or proofs of concept designed to demonstrate technology). These companies are more likely to have digital transformation initiatives that stall out or fail to scale. Recent research shows that just 25% of Industry 4.0 use cases are fully rolled out or used extensively at manufacturers today.
To avoid this challenge focus instead on a proof of value-- creating digital proof points with measurable business value. Think about the application of the technology as well as the associated process and organization change required to achieve value of solving a particular business challenge, then drive the organization to realize the intended impact.
When it comes to a proof of value, take a minimum viable product (MVP) approach, which is based on the idea that depth of value beats breadth of application. Instead of focusing on building a broad base of foundational digital capabilities generalized across multiple use cases, the MVP approach builds a full stack of capabilities and value focused on a narrow, high-priority use case.
When value is realized for the high-priority use case (ideally linked to a significant business challenge), companies can then scale for additional use cases.
With an initial digital strategy and proof points established, next define the capabilities the organization needs to move through this journey. This is a combination of people, process and technology that will support a digital transformation that is sustainable and scalable, no matter what the future brings.
Take a Technology Platform and Organizational Plan Approach
To build the technology infrastructure to support a digital transformation, companies need a platform approach to support the ecosystem of technologies and solution providers, as well as an enterprise architecture that can make it all work together.
A scalable transformation will not happen by plugging in various point solutions like IoT, augmented reality, data science or digital product creation in an ad hoc fashion. A true digital strategy and plan require a comprehensive, integrated yet practical approach, combining new technology, skills and capabilities supported by effective organizational change management.
With an ecosystem approach, foundational product lifecycle management (PLM) technology platforms provide the critical infrastructure to support digital twins and the digital transformation of the end-to-end product development lifecycle. When linked with new technologies, PLM can become the foundation for the digital thread of your product value chain. The digital thread then brings together digital twins, model-based design and simulation data to provide intelligent insights that span the entire value chain with a seamless, integrated flow of data across the lifecycle and systems.
The Bottom Line
As a business term, ‘digital transformation’ is overused and often misunderstood. But like any true transformation, manufacturers that embrace it as a holistic effort that drives value for all areas of the business will scale more quickly, build resilience, grow rapidly and take market share.
Rod is a leader at Kalypso with over 25 years of enterprise transformation experience with digital product development and disruptive technology, bringing high performance teams to our clients as they strive to deliver on the promise of innovation.