Digital transformation implementation: Where does your facility stand?

Aug. 18, 2022
In this episode of The Tool Belt podcast, L2L's Eric Whitley presents the results of a recent survey on digital transformation in the industry.

Eric Whitley is director of smart manufacturing for L2L, with a background in lean manufacturing and total productive maintenance. In January, L2L surveyed 125 manufacturing leaders with mid to C-level titles across production, operations, engineering, IT, and management to uncover the state of digital transformation in manufacturing. Highlights from the survey are available at Plant Services Editor in Chief Thomas Wilk spoke with Whitley recently about the secret to successful digital transformation.

PS: For those who haven't had a chance to meet you, at this point yet, can you tell us a little bit about yourself and the kind of projects that you're working on?

EW: My name's Eric Whitley, I'm currently the Director of Smart Manufacturing at L2L, and basically, what that means is that I'm overseeing the development and communication of our processes, the way that we actually help companies transition in the digital transformation process. And so, I'm helping to put together that plan and that roadmap, and then communicate that out to the general public. My background is in lean manufacturing, and total productive maintenance. I've done that pretty much all my career, ever since the early '90s, I've been teaching that. Other than that, if I'm not working, I'm usually fishing.

PS: That's great, I am sure a lot of our listeners are going to hear that in themselves too. We got fishers, we got mechanics. Well, this research project, it's great to talk with you on this because a lot of times when Plant Services talks about research, often it's our own. And when you sent over this study that you recently did, and this study was conducted earlier in 2022, so it's fresh data. It was exciting to see the data coming through because it was a chance to get a sense from someone else on what's going on in the industry, the pulse they're taking. And this project was about digital transformation, right?

EW: Yeah, what we did is we kind of went out and took some data from those who are looking to implement digital transformation from the middle management up through the C-level in the organization and took data from those folks and just got some information on where they are, what they're doing with it, what they're trying to do with it. We really found some surprising data in that, which is not earth-shattering, but it tells us some really deep insights as to exactly what industry is doing, or what they haven't done, I guess is more important here, in their digital transformation process.

PS: It's really good, I think, for companies to see themselves in these kinds of data so they can benchmark what they're doing against, like you said, what everyone else is doing. Before jumping to data points themselves, I want to talk about that term first, “digital transformation,” because it can mean a lot of things to a lot of people, especially depending on who you're talking to. You mentioned that for this survey, you targeted mid-level managers, and also C-level managers. That's the people in charge of the budget, the decision-makers.

EW: Yeah, right.

PS: You also emphasized that digital transformation, the way that L2L is looking at it, is a business initiative and not a technology initiative, and I think that's an important distinction. Could you talk about the difference it makes to see digital transformation through that lens, specifically a business change?

EW: One of the things that we have noticed or we have seen from a success story is that the clients that we have that are using digital transformation as a tool to improve the business – and not necessarily a tool to drive technology with inside of the business – are getting a much higher return on their investment. Because they understand that the process of transforming technologically is about solving the problems out on the shop floor, not necessarily just putting devices or chasing after one of the high-end terms, either AI or augmented reality. If they use those things and try to chase after those, they lose sight of the business improvement side of it. What we've seen in this process is that those people who understand that “this is a tool that we're going to use to get better as a business” are the most successful ones when it comes to the return on their investment in this process.

The ones that really have a difficult time are the ones that approach it from a technology standpoint, because of a couple of things. They're spending a lot of money up-front to catch up technologically, right? They're spending a lot of money on devices, on infrastructure, on resources, all of that. And because they're not focused on the business, they're not seeing a quick or a sustainable ROI. And so, people lose interest in it, because they think, "well, this is not really working." Those companies that are concentrating on it from an improvement initiative are the ones that are going to be successful.

PS: You know, it's funny how often you talk to people for whom there's nothing more exciting for them on the job than bringing in a new tool. But there's also nothing more frustrating than watching a little layer of dust pile up on that tool, when technology for technology's sake often doesn't work out, like you're saying. So it was also good to see the results of the survey come in and see the perception of folks, who are getting this focused financial expected return and what they're doing with digital. Let's go to the survey itself. Huge open question: what were some of the data points that jumped out to you and the L2L team is as being important and meaningful?

EW: There are a few things in here that, to me, tell the story in the process. The first one is that only really about 24% of manufacturing actually have a digital transformation strategy. There's some supporting data within that, that makes sense if you understand that. One of them is, who do you look to when it comes to helping you? Well, if there are no strategies out there, then people are turning to consultants, right? I draw the parallel a little bit here, Tom, I go way back with lean. You know, in the beginning of manufacturing, when nobody knew about lean, lean consulting was a big deal. Now it's a little more difficult to be a lean consultant because everybody knows about it. So I think we're in that stage with digital transformation, is that people and organizations don't have a strategy, so they're reaching out and grasping for, "How do we do this? I know we need to do something but we, you know, how do we actually go do that?"

And then a couple of other data points that that support this is that about 75% of the folks that we surveyed believe that their competition is ahead of them when it comes to digital transformation. So they know they need to go do something, they just don't know what to do. That's really been big for us from L2L standpoint, to be able to say, "Okay, what we've got to do is we've got to be able to communicate with our clients, our potential clients, that there is a strategy, there is a way to actually go do this." It really is backing up what we already kind of know.

PS: That struck me as a really important point too, Eric, especially given the people that you surveyed. And again, this is the mid- to C-level titles across production, operations, engineering, IT management. It really shows that companies do have a good sense of where they are. No one's kidding themselves about where we are in digital. A lot of the frontline-type employees I speak with also know that other companies are out in front of them. Sometimes they're not sure that the executive suite has the same perception they do that they need to catch up. But there's a real sense of self-honesty here that people do know where they are and they have an idea of what they need to do to catch up.

EW: I think the other thing too that we see here, and the reason why people are getting this great sense that they need to catch up, is because of those big terms that we hear – AI, and digital twin technology, and all of that – they're thinking, "I don't know how to get there." But I think what we need to do is realize that this is all high-end maturity stuff. And if you don't have a strategy, if you don't understand where you are, and where you need to go, then you're going to have fear of missing out (FOMO), right? You're going to think "I'm missing out here."

The key here that we see is that you've got to have a nice, good pragmatic approach to implementing this stuff. Don't panic, don't go spend millions of dollars, don't go off hiring a fleet of engineers to go install IoT devices, because that's not going to get you where you want to go. You want a very methodical, pragmatic approach to implementing this technology, and then you're going to get to that point. Don't try to jump there, you know what I mean? So that's been something that we've found as well.

Listen to the entire interview

PS: There's another data point there that reinforces what you're seeing, too, from the survey, that 34% of manufacturers believe they will need more than two years to achieve some level of success. There's that recognition that this process is probably going to take some time, and the data point was also, in contrast, 10% of the people that responded believed that it can be done within six months. So, you've got a healthy majority here saying, "Yeah, we know it'll take time."

EW: I think there's a little misnomer in that thought process that it will take time, because what we advocate for is taking some basic data, using that basic data – and, you know, with L2L you can get that data within a month or two months of installing L2L – and then go identify (and this goes back to our discussion about improving the business), go identify what is your biggest problem. Use technology to solve that problem. Does that problem have an opportunity to install some type of smart factory solution, in order to go solve that problem?

Once you solve that problem, now you've done two things: you've improved the business, you've also then paid for the smart factory solution that you've put in place. So you've got quick ROI, you've got quick improvement to the business, and now you move on to the next biggest problem. Instead of blanketing the entire organization with this smart factory solution – and this goes to people who are having a hard time getting a budget or having a hard time getting people to buy in – take what little window of opportunity you have, solve the problem, prove the process that smart factory solutions can actually solve a business problem, get your ROI off that, and use that to go implement the next thing.

This very methodical pragmatic approach is how we've seen our best companies who are doing this and winning awards doing this are using this methodology. Here we are a year-and-a-half, two years later down the road, and they are fully implemented doing some fantastic things from a smart factory approach. It's really kind of the only way that we've actually seen that works.

PS: If I can shift and focus to a different data point here, and that's the data points that relate to what's happening to industry as we move out of the COVID crisis and into more pandemic management. I remember the days when I heard technicians tell me that people who were familiar with infrared cameras back in 2020 were being put toward the front gate to scan people's foreheads on the way in. Your data was fascinating because it found that COVID-19 forced 18% of manufacturers to speed up their digital transformation process, whereas 35% had to slow down the implementation.

I wanted to say that very clearly for our listeners too because I think there may be some misperceptions out there – I certainly had one – that the pandemic drove a lot of people, in fact, a majority people from what I had in my head, to speed up digital transformation. So it was refreshing to see this data point again, 18% of the respondents said yes, they did speed up their process for digital transformation. 35% had to slow down! They had other priorities: corporate survival, rearranged the production line to accommodate 6-foot distance. I was curious about your thoughts on that aspect of the dataset.

EW: You're talking exactly what we're thinking with this, is that there were organizations who had these thought processes, and it's funny because this data correlates with those, you know, those numbers of people who have a strategy, right? Twenty-four percent say they have a strategy, 18% said they had to speed up. Those people who had a strategy could continue to keep going, they were following their strategy.

The other side of this is that, like you said, people just had to go into survival mode: "Listen, I don't have the resources to run my lines. I don't have the resources to implement my maintenance strategy, or do the PMs that I need to do. I don't have the engineers on-site to be able to do all of this stuff." They struggled with that, and they had a put a pause on the strategy.

But I think what this also tells us is that there are organizations who are still thinking that this digital strategy is – and again, I'm going to go back to the technology-led approach – “I have to go out and implement sensors and IoT devices, and I've got to do all this infrastructure.” Well, during the pandemic, you didn't have people to do that, so you had to just kind of stop instead of just doing these one, two, three things at a time. There was a lot of pullback on that, because we thought this was this massive project, that we needed a bunch of people for, we needed a bunch of money for, we needed a bunch of resources to go do this, when in reality those that understood it were still moving forward with a very pragmatic approach to the strategy. It actually flushed out what we thought, and kind of proves our point of you've got to focus on it from a business standpoint, and not a technology standpoint.

PS: This is great for me to see from the editor's perspective because we had heard stories on both sides, people having to slow down for whatever reason, people actually taking advantage of the moment to add new technologies. And my perception was different than what the data is bearing out. I think what's interesting too, again, for our listeners is that 42% of manufacturers who responded to your survey said they hadn't started the process yet. So this question about did they speed up or slow down was kind of a moot point. Two-fifths, close to half simply hadn't started the process yet for whatever reason, whether it wasn't a business imperative for them, or whether they simply needed to start and hadn't yet.

EW: I think we are in a time talking about digital transformation, if we recognize that we are in that bottom, sloping up of the north inside of the bell curve, and so, there's a bunch of people who are just now opening their eyes to this and going, "Okay, wait, what is this we're talking about here? And how do we get involved?” We know we have the early adopters, we know we have the people that are out on their front foot that know exactly or see the vision of what this can do for them from a business improvement standpoint. And then there are always going to be those folks that are behind going, "Ah, we don't need..." You know what I mean? The naysayers or the people that are just not getting on board. I think that goes back to a little bit of the competition data that we see in here. Now, people are going, "Oh, so my competition is doing this, and I'm losing, I gotta get caught up." They're just starting off on that path, and so, you see 48% of people going, "Ah, we're not even doing anything right now."

I go back to my thought process about lean. How many people do you now know, or how many organizations do you now know, going, "What's lean? And what are we doing here?" Nobody! Because it's permeated through academia, it’s permeated through trade schools and with inside organizations, so now it's a commonplace. The same thing is happening with digital transformation is that people are just now getting on board going, "Oh, I see what we've got to do here" and then starting that process.

PS: In that 25% - 75% split, you mentioned where 25% perceive they're ahead of the pack and 75% perceive they're behind, 25% is not huge but it's also not 10%.

EW: Right, it's a big deal when you think that 75% of the respondents think that they are behind. You get a sense that there's going to be an influx of people wanting to know about this thing and getting on board and moving forward with the process, and realizing they've got to do something.

PS: Well, let me ask you a kind of a wrap-up question, then, about looking forward. Of all the data that you've collected for this survey, which data points do you see as pointing the way towards what industries should be focusing on next? And we alluded to some things people can do, but are there any data we did or maybe didn't talk about which to you said, "Oh, that is the direction we're heading."

EW: Well, I think there's a couple of things that stand out for me on that. The one is the data that shows that people don't have a clear path. For me, what that says is that there is yet – and this is part of that, what you and I are doing right now – there is yet enough data for the “lay company” to be able to glean how to move forward by themselves. How do we move forward? We don't have enough information, there's not a clear path to do that? Part of what we're trying to do, part of what you're trying to do is to put the information out there to give people that clear path of what they need to do in order to move forward.

But then the other side of that, for me the supporting side is that the data still shows that people are still understanding that this is about return on investment and costs, and that they need to be able to focus on the fact that those that are doing it are saying, "Yeah, we're doing this, because we need a return on our dollar. We need to reduce costs within our factory, we need to be more efficient." When it all boils down to it, it still is about business improvement. And if we're not doing that, because of business improvement, we're still going to not see that ROI.

It's really important that the folks have a good clear path, and know what it looks like. I think that's the other thing that we're not seeing a lot of, and we're beginning to see some of it, we see it from our standpoint because we have customers that are very successful. There's not a lot of benchmark opportunity out there to go, "Can we come talk to you about what you did, and how you got to where you're going? We want to learn the process that you use." We have a lot of people that are doing a lot of stuff technologically, but they're not seeing that ROI and that ROI is not being published out there, and people are not able to kind of glean onto and copy, if you will, what they did in order to reproduce that success. We understand that people are still trying to focus in on getting the business better, and we need to have more companies out there that are the benchmark, if you will, of how to go do that.

PS: It's such an interesting point, and it maps onto what we've heard too about digital projects, which is that the advice that people who have success give, is start with the project, the problem that you need solve at your facility. And as you said, the challenge is the lack of easy benchmarking, because facilities can be so different even within the same industry. I suppose the more success stories people see and get them thinking is the path forward, but it's just tough because they can't count on easy comparisons between themselves and another facility.

EW: Yeah, and that's the problem is, that if you look at it from a technology play, then what you're going to do is you're going to jump out and think you need the latest technology in order to go solve your problems. That's actually the reverse of really what we've seen. Go solve your problem and identify the technology you need to solve that problem. Don't go get the technology and think it's going to solve problems. Identify the problem, and bring the right technology in to solve that problem. And then you're going to see that ROI.

PS: And that's a clear path you referred to.

EW: Yes, exactly, and then go do that over and over and over again, and be able to create that repetitive process of improvement. Use your problem-solving methodology – PDCA, AD, whatever it is you want. Identify the problem, identify the root cause, implement your smart factory solution, and just do that over and over and get better at that process. You will see a much quicker ROI than all of your competitors, because you're solving problems and improving the business and then implementing the technology as you do that, not the other way around.

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