While vacationing in Maine, I learned a saying of theirs: “You can’t get there from here.” This is their way of relaying the impossibility of traveling from point A to point B in a direct path due to various ponds (you might call them lakes), mountains, bays, coves, and other obstacles. This reminded me of digital transformation efforts trying to get to point B, where few are succeeding. According to a McKinsey survey of 1,733 executives, only 14 percent say their efforts have made and sustained performance improvements, and only 3 percent report complete success at sustaining their change.
What makes it even more daunting is the amount of complexity being added to products. As they become integrated systems made up of transdisciplinary systems, this increases the need for “systems thinking” as articulated in Verl McQueen’s blog Thinking of Thinking.
The number of compliance and defect-associated recalls issued by the National Highway Traffic Safety Administration (NHTSA) are clear proof that organizations are not stepping up quickly enough. The U.S. agency’s published numbers indicate a 33% increase in recalls between 2008 and 2018. And it’s not just automotive—it’s all industries. Expectations of customers are outpacing many organizations’ abilities to rethink how they adapt and use technology to own their operational ecosystems and sustainably digitally transform their product, services, and delivery models.
The need to transform in an increasingly digital economy with continually accelerating disruptive technologies, and a changing hypercompetitive business environment, is constant. Change and digital disruption is coming at all of us faster and will only continue to accelerate.
This is both good and bad. Good in the sense that the digital economy is causing more and more opportunities. But bad in that the disruption caused by the collision of physical and digital economies is tearing through the Fortune 500 unabated. Estimates as high as 75% of today’s S&P 500 will be replaced by 2027. (HBR, 2017)
Established market leading companies are being outflanked by more nimble competitors. Hence the huge emphasis on digital transformation. In the latest update to its Worldwide Digital Transformation Spending Guide, International Data Corporation (IDC) forecasts global DX spending to reach $1.18 trillion in 2019, an increase of 17.9% over 2018. According to IDC, spending on digital transformation is the largest priority by 11 percent. And companies IDC groups as “Digitally Determined” spend 23% less across functional budgets while investing 18% more on IT annually as compared against their “Digitally Distraught” counterparts, according to Shawn Fitzgerald, practice leader, IDC Insights' Worldwide Digital Transformation Strategies.
Here are some takeaways I hope you’ll find useful:
Know Why You’re Transforming
The first problem with getting to point B is that it’s “over yonder” (which is where everything in Maine is), except its also always moving and accelerating, so a moving B is more challenging.
There are many “whats” involved, such as improving customer experience, enabling worker productivity, improving data visibility, using data and analysis to better understand and meet customers’ needs, and I could go on.
If we focus specifically on technology, we have plethora of so-called “disruptive” technologies like 5G, AI, Machine Learning, AR, VR, IoT, Bots, Multi-Cloud, etc. to consider that can be applied to any of these efforts. Some of these might fall into the “how’s,” which go far beyond technology.
But the real trick to sustainably transform is understanding “why.” If you know why you want to continually transform, you have a vision—something you can communicate that everyone can get behind. I’d contend that to have a successful digital transformation, it has more to do with “why” than any other factor.
Navigation: Know Where You’re Going
It may seem obvious to know where you’re going, but based on the number of digital transformation failures, I have my doubts.
I did some sailing in Maine, so let’s say that point B is directly upwind. You can’t sail directly into the wind (“in irons”), therefore you must sail at a 45-degree angle (“close hauled”) to either side of the wind. So, let’s say you decide to go right (starboard). At some point before you run into an obstacle, such as land (rocks, in this case), you may need to switch direction (“tack”) and head 45 degrees to the left of the wind. This zig-zagging (“tacking”) is doing the best you can do given the headwinds you face. Similarly, in business, you must know where you’re trying to get to and what headwinds you might face along the way. You are then prepared to chart the right course to transform. And then you need to communicate it clearly so your crew are all working toward the same goal.
I’ve been sailing since I was a kid and have always found it interesting that sailors have their own confusing language. If we’re sailing and I yell, “ready about,” “prepare to tack,” “tack,” “stand by to go about” or “duck—I’m turning,” it doesn’t matter, as long as everyone understands that I am turning, and the very appropriately-named “boom” will sweep across and take your head off unless you duck.
Part of the problem with understanding where you’re going in a digital transformation is the terminology itself. So, let’s settle on a definition of a Digital Transformation, which is a business transformation that radically rethinks how technology, people, and processes are used to fundamentally change business performance. I’m borrowing this from George Westerman, MIT principal research scientist and author of “Leading Digital: Turning Technology Into Business Transformation.”
But there are many other definitions. For instance, few would disagree you could add “data” to that definition. Historically, those that controlled the data typically became the disruptor. Every organization’s needs are different, so they may include many things, like digitalization efforts in their digital transformation. I don’t think it matters what you call it, so long as everyone knows what it is you’re transforming and why you’re doing it. It’s your vision and where you’re headed that’s important.
And Yet It Moves
This is a phrase attributed to Galileo, who was forced to recant his observation that the Earth moved around the Sun. He’d appreciate that point B is a moving target and so must your operational ecosystem and Go-To-Market strategy keep moving. Typically, these transformations are undertaken to pursue new business models, such as offering the end-result as-a-service. Do we really need to own a car if our only goal is to go from point A to point B? Do we really need a driver? Do we need to use tires and roads? Why doesn’t anyone pay attention to George Jetson? skai.co. I digress. The real point is there are no time-outs in business, so keep moving.
Stop Buying Instant Legacy
At the root of all Digital Transformation failures is a simple misuse of technology . . . over and over again. It’s the application based on a specific technology stack with the data stuck in a specific schema. The trapped product data needs to move to another application based on another specific technology stack with a specific schema, and so on. This myriad of legacy applications, integrations, manual hand-offs, Excel spreadsheets, duct tape and spit, is the standard enterprise architecture. So, when you need to pivot and give the order to “tack”, you won’t because you have too much baggage—too many points of failure—and your enterprise will keep plowing forward until it is too late.
In the case of PLM, most vendors sell out-of-the-box (OOTB) and the ability to “configure” with the pitch that you’re better off modifying your processes to fit these PLM systems because they use "best in class" practices. That’s a fantasy, which I outline in a former blog: Out-of-the-Box is a PLM Fantasy. Instead, you’ll be forced to customize and customize and support year after year because the cost of an upgrade and a migration can’t be justified. Once you’ve customized on the wrong architecture, you’ve created “instant legacy.” Eventually, you hit a rock, take on water, and get wet. At that point you start looking for the life preservers.
We need to reframe how we evaluate technology. Embrace “Resilient Thinking.” When you evaluate technology, you need to consider how the technology will grow with you. What’s critical is a resilient platform architecture that allows you stay current and take advantage of technology. Tomorrow’s requirements are not yet known. The focus needs to be on choosing enterprise architecture that will accommodate the unknown. Demand resiliency—the openness, the flexibility, and the industrial low-code capability to meet tomorrow’s yet known challenges.
Enterprises must stop acquiring siloed applications based on breadth and depth requirements for a static point in time. This is like dragging your anchor around and trying to compete in a race. The major requirement is to meet your future customer’s unmet needs. Is your PLM platform “instant legacy” or is it a platform that allows you to reduce the number of legacy systems? Is your PLM platform on a current version? Obviously, if it’s not, how are you simplifying your enterprise architecture to move data across your digital thread?
Configuration Management (CM) in an IoT World is Not Understood
Make no mistake: industrial IoT devices are coming by the thousands to companies in manufacturing, transportation, healthcare, and other major industries. Gartner predicts businesses will employ 7.5 billion connected things by 2020.
The challenge with this new data is the massive blind spots created throughout the organization. Putting IoT in place without understanding the “why” and having CM2 configuration management in place is largely a waste of money and can lead to massive failures of compliance, unplanned work stoppages, waste, and safety issues. The disconnect between CM and IOT is a risk that ties to the bottom-line and directly impacts your ability to do business.
Transform Your Culture
Joseph Anderson, president, Institute for Process Excellence (IpX), helps companies navigate these challenging waters. He believes CM2, which is configuration management at the enterprise level, makes a huge difference in reducing product failures. Rather than take an engineering-centric approach focused solely on the product, IpX and the CM2-empowered enterprise vantage point encompasses product, system, and services. In a recent article in Digital Engineering 247, Anderson reflected on the recent high-profile recall cases, “A common theme is, they stem from a lack of enterprise change management and configuration management processes. The majority of these companies still work in silos; they tend to view things from a silo and legacy vantage point.” In order to thrive in today’s fast-paced global environment, organizations need to continually maximize their agility and not only transform their digital capabilities, but their organizations and processes as well. IpX can bring invaluable insights and expertise to help companies achieve sustainable digital transformation.
As in sailboat racing, in the digital era, you can never copy others, or you’ll never outpace them and just end up in their wake. Historically, you could be a fast follower in business and use size and other factors to your advantage, but that’s no longer the case. According to McKinsey, three-year revenue growth for the fleetest was nearly twice that of companies that played it safe when it came to digital competition. And simply cutting costs to survive digital disruption is not a winning formula. The “me-too’s” become digital roadkill.
When I was a kid sailing in Barnet Bay off Long Beach Island, NJ, a Swiss boat maker introduced himself to me and let me race his Moth Class pre-hydrofoil dinghy. It gave me more speed, less drag (more efficiency), and the ability to change direction faster, which was an unfair advantage versus my competition. This is exactly what you want in business.
Own your lifecycle. Connect your digital thread across your product’s operational ecosystem and do it in a way that it can respond quickly to unforeseen existential threats. We’re in the midst of a platform revolution—using platforms that allow applications to use data across a digital thread. Aras Innovator is the only industrial low-code platform for PLM that is built for speed, efficiency, flexibility, and upgradability.
Digital Transformation is ongoing—plan for it.