Industrial digital transformation is the journey that organizations undertake where they integrate business model change, process improvement, and cultural shift, often leveraging a number of digital and emerging technologies. We will refer to industrial digital transformation often in the context of companies from the commercial or public sector that deal with physical assets, factories, and field operations, generally dealing with business-to-business scenarios, and the transformation involves improvements in these products, equipment, and operations. On the other hand, when the transformation involves software or business enhancements for asset-light or pure tertiary services companies, including business-to-consumer scenarios, then we will refer to it as digital transformation. To include both, we will refer to it simply as transformation. Likewise, our use of the term industrial includes both the commercial and public sectors, in the...
Exploring industrial digital transformation
Industrial digital transformation may often bring a radical rethinking to the use of technology, culture, people, and processes in an enterprise. This can lead to a fundamental change in business performance and outcomes, as well as how the customers perceive the company. Figure 1.1 provides an easy way to look at the transformation. It shows that culture and technology changes go hand in hand with the business process and business model changes. Several books have been written on the broad topic of digital transformation, and some of these will be referenced here. George Westerman and Didier Bonnet wrote a book en titled Leading Digital: Turning Technology into Business Transformation, George Westerman, Didier Bonnet, Andrew McAfee, Harvard Business Review Press, published in 2014:
The technologies used to help drive an industrial digital transformation may include one or...
Identifying the business drivers for industrial digital transformation
The power of transformation applies to some or every aspect of an organization. It can generate business value, agility, and resilience. The importance of resilience is shown at the time of local or global crises. This book will focus on driving transformation in industries – in both commercial and public sectors – to accelerate business outcomes, by deploying the digital technologies in combination with transformative planning and shifts in the culture.
The different forces that help to shape the industrial digital transformation in an organization are shown in Figure 1.2. The industrial digital transformation often entails a series of big bets or bold steps, to achieve large-scale benefits or competitive advantage. This differentiates transformation from regular generational changes, which are often linear or a series of small and gradual steps. Humans climbed mountains through the historic ages...
The evolution of industrial transformation
Changes in the global landscape seen during the healthcare and economic crisis in the first half of 2020 due to COVID-19 (https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/Immunization/ncov2019.aspx) have highlighted the need to develop a deeper understanding and preparedness for transformation, not only for the government at different levels (federal, state, and local), but the commercial sector as well, across the board, be it a family-run business or a global enterprise. This book will cover some of the major crises the world has experienced in the last several decades and the lessons learned from each of them. This would allow us to see concrete examples where the industry has successfully identified an opportunity for transformation.
Let's look at some examples of past crises and the lessons learned in the following table:
The impact of industrial digital transformation on business
The internet, web applications, and the easy availability and low cost of massive amounts of computing power and storage have revolutionized the way that businesses operate and, in the process, have reset the competitive landscape. In some cases, industrial digital transformation is a competitive advantage, but in other cases, it is simply the minimum effort required to stay in business. For many organizations, digital transformation is a do-or-die proposition.
Industrial digital transformation can serve one or more of three purposes for business:
- Improve internal processes, thereby reducing costs and increasing competitiveness.
- Streamline the delivery of existing solutions within an existing business model to reduce costs or improve customer service.
- Transform a business completely, resulting in new products and business models.
A true digital transformation is a disruptive innovation that fundamentally...
Quantifying business outcomes and shareholder value
The decision process in large public or private organizations is often driven by strategic goals or value of investments to its stakeholders while making the organization stronger and sustainable. As a result, any new initiatives beyond the incremental efforts to preserve the business goes through a business case of Return on Investment (ROI) analysis. As a result, it is important to understand the key benefits of the industrial digital transformation to the business. The desired outcomes of digital transformations are often as follows:
- New digital revenues
- Productivity gains
- Corporate social responsibility
In Chapter 10, Measuring the Value of Transformation, we will look in-depth into how to quantify these outcomes. Let's understand these outcomes qualitatively here.
New digital revenues
The phases of the digital transformation journey
Let's look at an example of a phased approach to digital transformation using the example of the automotive industry. In recent decades, we have experienced phases such as going from gas to electric cars to the use of driver-assisted technologies on its way to the different levels of autonomous driving. This journey continues and next, we may witness unmanned taxis and possibly flying taxis in the future.
In this example of autonomous cars, it is important to think through the breadth of the impact. As autonomous cars become mainstream, it has an impact on how roads, traffic signs, and even cities and airports are designed. Likewise, it may have a profound economic impact not only on the automotive industry, but also on the utility providers, due to electric vehicles, and finally, on employment via the automobile and the trucking industry.
Finally, auto insurance and the department of motor vehicles would have to adapt to...
In this chapter, we learned about the importance of the cultural, technological, and business drivers for industrial digital transformation. We learned about the history of such large-scale industrial transformations to understand how to identify and select transformation initiatives going forward. Part one of this book will go further into the details of these topics and part two will show detailed examples of industrial digital transformations at work.
In the next chapter, we will explore the capabilities necessary to enable successful digital transformations. A digital transformation simply cannot be accomplished with existing staff with existing skills in the existing culture. We will discuss how to create the right culture for transformation as well as the skills required. We will discuss the rise of the chief digital officer and their role in implementing a digital transformation.
Here are some questions to test your understanding of the chapter:
- What are the main drivers of industrial digital transformation?
- Are there major differences in the commercial sector compared to the public sector for transformation objectives?
- What is the role of digital technology in driving transformation?
- What are the benefits of industrial digital transformation to an organization?
- Why is it important to understand the history of the industrial revolutions in order to understand industrial digital transformation?