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The multiple dimensions of digital transformation: Part 2

April 23, 2018
Adding new technologies is just once piece of the puzzle.

Over the past several years, industrial and other leaders have become increasingly interested in digital transformation.

This is not surprising, given that many potentially disruptive digital technologies have emerged in recent years, carrying with them the implied promise of significant change. Vendors have started to incorporate these technologies into their products and solutions, and use cases, best practices, and solutions are becoming more widely known and available. This adds pressure for organizations to “do something” about digitization. Unfortunately, it also tends to add to the confusion.

Clearly, this widespread digital transformation will continue to accelerate and evolve.  It’s equally clear that every organization will need to innovate, change, and adapt.  The question is, how can organizations take best advantage of this disruptive transformation?

Let’s consider the four dimensions that any industrial organization must consider when developing a digital transformation strategy: targets and outcomes, technologies, change and impacts, and management issues. 

A holistic plan will work on all four dimensions, and changes in each dimension will affect the others.

Cybersecurity

Implementing and maintaining a thorough approach to cybersecurity is a requirement for digital transformation. The Industrial Internet Security Framework, created by the Industrial Internet Consortium, is an example of a comprehensive approach to cybersecurity that can support the needed vigilance. This framework identifies at least 15 threats and vulnerabilities to IIoT endpoints.

Change/impact

Transformative initiatives change the organization. Some changes are necessary to drive the transformation; others may result from it. The main levers of change include people and culture; business processes; and production, IT, software, and information systems. These levers should be considered in terms of the functional areas they are intended to affect, such as production operations, as well as other affected areas, such as the broader ecosystem. 

Business process automation

The shift from manual and/or paper-based business processes to fully or partially automated digitized processes can happen within the organization, across disciplines, across departments and/or across enterprise borders within the value chain network.

One example is automating production analysis. While engineers occasionally perform these analyses, they can never do so with the frequency and consistency that an automated application can. Automated production analysis results in operational analytics dashboards that provide operators with actionable intelligence about desirable process outcomes and the appropriate actions needed to achieve these.

Relationships and ecosystems

Introducing new, more complex and intense relationships and processes often requires new skills. For example, it may be necessary to align goals, roles, and responsibilities and to strengthen leadership skills and communication and negotiation abilities. Digital transformation ecosystems tend to be complex. They often need attention, methodologies, and management to work well. As a result, digital transformation triggers renewed interest in communication, interpersonal skills, change management (in the sense of supporting people and organizations throughout change), and leadership. 

Norms and culture

In addition to the new skills required, digital transformation also typically requires individuals, teams, and even entire companies to identify new values that may change or replace the vast number of habits, norms, and culture deeply embedded in many established companies. This requires change leaders to know how to surface these rules and habits, create trust and cooperation, encourage mutual awareness of each other’s goals, and make the teams and organizations agree on and commit to a new, commonly defined set of rules.

It can be helpful to use a maturity model (like the one shown for plant performance in Table 2) to help plan the transformation from a current state to a desired future state. 

Strategy and management

Perhaps the biggest challenge relative to digital transformation is the management challenge. Digital transformation is part of strategy execution. In addition to finding new solutions to known problems, transformation may involve finding new problems to solve and then solving them in a strategic way. The organization’s strategy must also change. Until recently, basic economic calculations often dominated the approach to strategy, with a focus on commodity, performance, or client intimacy. Now, we find that the potential scope for optimization has increased because systems can be larger and span more entities inside and outside the organization. 

Innovation and speed of implementation

It can be difficult to find the right balance between creativity and innovation on the one hand and control and predictability on the other. But if the world is changing around us, we must push beyond our comfort zones. We can anticipate the need for new ecosystems, relationships, and ways to collaborate. A premium will be placed on innovation, particularly as it relates to services, business processes, and strategies. 

Innovations will need to be implemented rapidly, and the innovation process itself will need to be ongoing and iterative. This has implications for technology implementations, which will need to be fast, agile, and iterative. 

Innovation must not be limited to products, production, technology, and business processes, either. It should also contribute to creating human-centered work designs in which humans and machines work interactively and share tasks through appropriate and adjustable levels of physical and cognitive automation.

Organization

Enhanced collaboration across disciplines may also require new organizational forms. Departments may have to be merged and/or collaborative “labs” created. Often, in situations where innovation or intense collaboration is required, it can be helpful to detach people or change from a hierarchical, technical, or support organization to small units within development or operations, supported by a centralized pool of experts. More important than formal organizational structure is that people understand their roles and that business processes perform well.

About the Authors: Greg Gorbach and Valentijn de Leeuw

Greg Gorbach, VP of digitization and IoT at ARC Advisory Group, heads the analyst team responsible for research and consulting in transformative technologies. He also moderates the Digital Transformation Council, a collaborative user organization.

Valentijn de Leeuw, VP at ARC Advisory Group, focuses on organizational change and effectiveness, business process improvement, and value-based performance management. He has extensive experience in best management practices in process industries and serves as the focal point for ARC’s Benchmarking Consortium in Europe. He also acts as independent expert evaluator of research projects for the European Commission in the Information and Communication domains.

Skills

Worker skill profiles will likely need to be redefined to include improving interpersonal skills, developing more IT and IoT skills for all trades, and developing more OT skills for IT and vice versa. This could help facilitate a fast-track approach to application and service development, with successive adaptation cycles following the changes in economics, raw material prices, and consumer trends. Not everyone can diversify his or her skills, so there is room for different, more- or less-focused skills profiles. Lifelong learning and development will be not only desirable, but necessary.

Conclusion

Digital transformation will bring increased data, powerful AI to process and interpret that data, and new business networks. This will almost certainly disrupt organizations and possibly entire value chains. 

For organizations to leverage this disruption in a positive manner, digital transformation requires:

  • Support from the CEO and top management
  • Programs to identify potential new business opportunities and specific goals for digitization
  • Innovation expertise
  • An expectation that digital transformation will involve substantial changes that will affect people, sacrosanct metrics, organizational structures, and relationships with customers and partners.

Readers from industrial (and other) end-user organizations may wish to join the Digital Transformation Council.  This is a member-driven community for professionals who are interested in keeping abreast of the many emerging technologies and business trends, learning from others on similar journeys, and leveraging trends and technologies to achieve transformational growth. There is no fee to participate. Join at https://digitaltransformationcouncil.com.

Click here to read "The multiple dimensions of digital transformation: Part 1"

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