Digital Transformation: A Revolution Just Beginning, Not a Trend Fading Away
The World is Racing Toward Artificial General Intelligence, So Why is Industrial Operations Lagging?
Artificial intelligence is evolving at an unprecedented pace. Large Language Models (LLMs) like OpenAI's ChatGPT are transforming industries by automating tasks, augmenting human decision-making and reshaping business operations. The rapid strides toward artificial general intelligence (AGI) highlight how quickly digital capabilities can scale.
Yet, in industrial operations, one of the most critical foundations of global supply chains and manufacturing, progress has been slower. While AI-driven transformation is accelerating in knowledge-based industries, industrial operations remain stuck in pilot purgatory, with fragmented digital initiatives struggling to scale and capture the full value of digital investments.
Why?
The issue isn’t that digital transformation has lost relevance — it’s that many organizations are still treating it as an Information Technology (IT) project rather than the fundamental business and operational shift it truly is. The reality is that digital transformation isn’t stale or past its prime, it’s barely getting started.
Historical Perspective: Why Digital Transformation Matters?
The essence of digital transformation has remained largely the same over the past 15-20 years. Initially, it evoked excitement around emerging technologies, but today, it’s about leveraging data and advanced strategies, including analytics, AI models, and robotics, to achieve tangible business results. Publications like Forbes and CIO have questioned whether digital transformation is still relevant. The issue isn’t the concept itself, it’s the way organizations are implementing it.
Historically, organizations implemented enterprise software platforms assuming new technology alone would improve productivity and efficiency. However, after many years and billions of dollars invested in these platforms, organizations have realized that while they offer some benefits, often within a single function, they do not facilitate cross-functional operations.
Some argue that these enterprise platforms have actually hindered organizations, creating functional silos and disparate data models. Enter digital transformation, positioned as the new hero with a “magic wand” to connect the enterprise and revolutionize businesses overnight. However, organizations have quickly recognized that even with rapid technological advancements, digital transformation is not as easy as many had made it out to be. It requires deep, complex work, and full value capture is only realized when approached holistically—integrating strategy, culture, data and technology.
Digital Transformation is in Its Infancy, Not Its Peak
Just as self-driving cars seemed like a fantasy a decade ago but are now hitting the roads with companies like Waymo and Tesla, industrial automation is at the early stages of a transformation that will redefine how products are made, moved and monetized. Yet, many businesses continue to view digital transformation as a technology investment rather than a strategic imperative. This mindset is impacting their competitive edge in their respective industries.
Companies aren’t struggling with digital transformation because it’s a flawed concept. They’re struggling because they’re applying outdated industrial-era mindsets to a digital-first world.
The notion that digital transformation fails to deliver ROI is not a reflection of the technology or strategy’s effectiveness. It’s a reflection of how companies are implementing (or failing to implement and embrace) it.
The Unique Complexity of Industrial Digital Transformation
Unlike traditional AI applications, which primarily deal with knowledge work, software, and digital data, industrial digital transformation is significantly more complex. It requires the convergence of multiple critical elements: people, products, industrial data management, AI, robotics, heavy machinery and equipment.
Manufacturing and industrial operations must integrate IT-driven AI models with operational technology (OT) systems, ensuring that real-world physical assets can seamlessly interact with digital intelligence. This transformation isn’t just about upgrading software. It’s about synchronizing industrial processes that involve:
OT Data and IT Systems
Integrating data from industrial control systems, sensors and factory equipment with enterprise-level software and AI models and establishing a data framework and vocabulary.
Worker Safety and Cybersecurity
Ensuring that automation and AI advancements do not compromise worker safety while protecting systems from cybersecurity threats.
Network Reliability
Industrial environments require real-time data exchange with ultra-high reliability, something far more demanding than standard AI applications.
This complexity is why digital transformation in industrial operations is so difficult yet critical. A truly effective digital transformation strategy must address all these aspects holistically, ensuring a secure, resilient, and highly functional digital ecosystem.
Addressing the ROI Challenge: It’s Not the Tech, It’s the Execution
The most common criticism of digital transformation today is that companies are investing but failing to see ROI. This isn’t because digital transformation is a buzzword or an empty promise—it’s because most companies are approaching it the wrong way. Here’s why:
1. Tech-First Instead of Business-First
Many organizations implement technology solutions without aligning to clear business outcomes. Digital transformation should not be about adopting AI models, IoT or automation for the sake of innovation; it should be about using these technologies to solve real business challenges, optimize operations and drive measurable financial impact. Organizations should clearly define the business outcome that the technology or data integration is intended to achieve and ensure that leadership is aligned with this outcome.
2. Ignoring the Human Factor
Technology alone doesn’t drive transformation—people do. Companies that fail to consider change management, workforce adoption, and digital upskilling will struggle to see returns on their digital investments. Successful organizations understand that an effective digital transformation strategy is as much about culture, leadership and workforce empowerment as it is about technology and automation.
The human side of transformation is often where issues arise. Organizations must consider the role technology plays in their operating model, how it fits into the future of their operations, and the need for a robust organizational change management (OCM) strategy. A strong OCM capability is crucial for success. CIO also highlights the importance of change management, noting that organizations should not expect that employees will keep up with AI.
3. Failing to Monetize Data
Many companies sit on vast amounts of operational data but don’t know how to extract value from it. Data is the fuel of digital transformation, but without the right strategies to collect, unify, and produce data, companies are leaving massive value on the table. The ability to turn data into actionable insights is what separates industry leaders from laggards.
Activating operational data and extracting value is difficult. It requires a clear data strategy that enables both humans and AI models to read, interpret, and understand data for meaningful decision-making. This includes not just data analysis but also advanced data science capabilities that drive predictive and prescriptive analytics, ultimately leading to autonomous control of operations. A well-defined data and architecture strategy across both IT and OT is essential.
Real-World Success: Scaling Digital Transformation in Industrial Operations
Overcoming typical digital transformation challenges is possible. It requires disciplined and strategic execution grounded in a business-first approach, aligning digital initiatives with core pain points or opportunity areas and objectives, and focusing on delivering tangible value quickly – then scaling it.
We’ve seen this transformation firsthand.
Consumer Packaged Goods Company
One of our clients, a leading protein consumer packaged (CPG) company, set out to achieve $1 billion in productivity gains over two years by modernizing its manufacturing capabilities through digital initiatives. The company faced several obstacles in its digital transformation journey including:
- Manufacturing inefficiencies: Identifying and addressing inefficiencies across multiple plants to enhance productivity.
- Scalability of digital initiatives: Ensuring that digital solutions could scale effectively across various facilities.
- Alignment with business objectives: Developing a cohesive digital transformation strategy that aligned digital initiatives with overarching business goals.
By shifting to a business-first approach—aligning digital initiatives with core strategic goals, investing in change management, and leveraging advanced analytics to monetize their data—they on the path to scale their digital capabilities across multiple plants, drive significant cost savings and operational improvements.
Medical Technology Company
In another case, a rapidly growing medical technology company, a division of one of the world’s largest life sciences corporations, recognized that its historical success was not enough to sustain its 25% CAGR. To continue this growth, they focused on digitalization as a key driver of transformation. By collaborating closely with their leadership team, we helped develop a value-driven digital transformation roadmap, aligning across research and development, manufacturing and quality on key outcomes such as quality, scalability, innovation velocity and productivity. By evaluating investments against these core value drivers, we ensured the prioritization of the most impactful initiatives.
Faced with the challenge of sustaining rapid growth, we identified key areas for digital transformation:
- Scaling operations: Establishing a robust digital foundation to support global expansion.
- Accelerating innovation: Advancing a fast-paced pipeline of new product launches while ensuring compliance with stringent regulations.
- Enhancing quality and compliance: Strengthening systems to minimize recall risks and optimize audit processes.
Our client is now positioned to scale efficiently, with a projected over $50M ROI from high-impact digital solutions and a foundation for AI-driven manufacturing, enabling sustained growth and innovation.
Manufacturer of Industrial Machinery
In yet another instance, a leading manufacturer of industrial machinery set out to build digitally enabled greenfield facility as part of a multi-million-dollar investment. Their goal was not only to ensure a smooth and efficient launch but also to establish this facility as a digital lighthouse of future sites.
To achieve this, in partnership with us, the client developed a digital transformation roadmap focus on integrating a digital thread from product design through production execution. Over an eight-week project, we conducted site visits, stakeholder interviews and data analysis to prioritize more than 50 digital use cases and 70 simulation objectives based on business impact, complexity and cost. This structured approach allowed the team to quickly mobilize three-high impact use cases including digital twin. Their goal was to ensure the new facility met throughput goals from day one by optimizing material flow to production lines and designing efficient warehouse operations.
Beyond delivering immediate value, the digital strategy aligned stakeholders across the organization, secured funding and created a scalable framework for digital transformation across the company’s entire manufacturing network.
The lesson? The goals companies aim to achieve with digital transformation may differ, but the challenges – alignment with business objectives, funding, scalability, adoption – are often the same. They key to success isn’t just adopting new technology; it’s taking a disciplined and strategic approach that ties digital initiatives directly to business value. Digital transformation isn’t failing, companies just need the right roadmap to make it work.
The Window for Hesitation is Closing—Act Now
Unlike previous industrial revolutions, which played out over decades, the current pace of innovation is unprecedented. We are living in an era where technology is advancing faster than our ability to adopt it. Companies that hesitate or take a "wait-and-see" approach to digital transformation risk being permanently left behind. The winners in this new era won’t be the companies that experiment endlessly with pilot projects; they will be the ones that move from experimentation to execution. This journey will come with trials and failures- embracing the reality of setbacks will strengthen and sharpen your operations approach. The key is to maintain a clear strategy and a focus on value creation.
Will You Lead or Will You Be Left Behind?
Despite some skepticism in the market, digital transformation is far from obsolete. In fact, it is a long-term business imperative. Market research shows that global spending on digital transformation is expected to reach $4 trillion by 2025, up from $2 trillion in 2021. Key areas of focus for organizations include AI, automation, data strategy and ecosystems and cloud adoption.
These statistics underscore the reality that digital transformation is a critical, ongoing journey that businesses can’t afford to ignore. Companies that approach it strategically—prioritizing long-term value rather than short-term trends—are seeing success. This requires more than technology investment – it demands alignment with business objectives, culture, workforce needs and data strategies.
The time to act is now. Businesses that embrace a disciplined, strategic approach will lead the next wave of innovation. The rest risk being left behind.
Don’t let your company become a case study in missed opportunities. The next industrial revolution isn’t coming—it’s already here.
The question is: will you lead it, or will you be left behind?
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