Driving Digital Transformation through a Holistic Strategy
Published on : Thursday 16-07-2020
Sharad Nigam, Madhu Juvvanapudi, Akhila Kakeri and Niket Malpani delve upon the one key ingredient that sets the successfully transformed ones apart from the laggards.
Digital Transformation as a buzzword has been taking the manufacturing industry by storm these past few years, but the fact remains that technology has always been at the fore-front of advancements in the factory setting and has led to the transformation of shop floors into a giant digital machineries by themselves. This is clearly visible and validated from the adoption trend of various technologies during these years. As manufacturers learn to tackle with the newly evolving pandemic situation along with the ever-increasing pressure to reduce costs and enhance quality, digitalisation offers real opportunities for faster recovery, robust growth, and greater productivity. Different companies within manufacturing fall under different levels of digital maturity, given their level of adoption.
The variations in digital adoption highlight that there is significant room for beginners and learners to spearhead towards the next level of maturity on the digital spectrum – which calls for a focused thinking on the depth and breadth of digital solutions. As the manufacturing industries (highlighted in the image above), stride towards truly digital and fully optimised shop floors from yester-year’s manual labour dominant factories, in this article we delve upon the one key ingredient that sets the successfully transformed ones apart from the laggards, i.e., a well-articulated and holistic ‘Digital Strategy’.
Why do organisations need a digital strategy?
Even within the continuum of digital maturity, the understanding around digital transformation is evident and clear in some companies while not so much, in others. This might be because most manufacturers understand digital transformation as an application of one or more technologies such as IoT, AI, ML, Digital Twin, etc., in silos. While the presence of some or all of these in a factory setting might indicate a level of digital adoption, manufacturers that want to transform into a full-fledged digital organization need more than just a set of technologies.
Studies indicate that a staggering 70% of digital transformations fail, as there is a huge difference between planning and putting the plan into action. Of the $1.3 trillion that was spent on digital transformation last year, it was estimated that $900 billion went to waste (Source: McKinsey and HBR study). Organisations trying to embark on a digital transformation journey have a gap between their digital ambition and execution, thus needing a roadmap to guide digitization efforts and processes.
The key steps leading to a successful journey of digital transformation entail, envisioning a digital future, defining objectives and putting a strategy in place, evaluation of implementation options, building a proof of value, and partnering along the journey. In other words, Strategise, Execute and Sustain. The most important lever among these, which also acts as the first and foremost step according to many experts, is defining a digital strategy. Digital strategy is the outcome of an organisation’s planning exercise that defines new business strategies supported by digital capabilities and a specific action plan to implement them. Apart from bridging all the important gaps, a digital strategy ensures the organisation is taking the rights steps, looking at the right data, implementing effective technologies, and guiding the application to business decisions.
What are the typical challenges in building a digital strategy?
Whilst being the most important aspect of the digital journey, defining a digital strategy is perceived to be a challenging task. Studies have highlighted that only 23 percent of manufacturers (source: Jabil Survey) admit having a well-defined corporate-wide strategy for their digital transformation. This a startling insight into the quantum of organisations that do not have a digital strategy in place. On the other hand, Hitachi has also seen organisations that begin a digital journey but cannot take it to fruition. In our perspective, the following can be cited as the top 5 challenges that become a bottleneck.
1. Lack of vision/ goal post for the leadership to pursue
2. Non- alignment amongst stakeholders on objectives and return on investment (RoI)
3. Siloed thinking on digital use cases (divide between geographies and organization layers)
4. Lack of clarity on business issues, current maturity level of the organization and the potential impact, and
5. Lack of insight at the level of frontline workers.
At the outset, all these five challenge areas are controllable and when solved for in a systematic way, cease to be the bottlenecks. We invite you to explore Hitachi’s perspective on the right way of defining a digital strategy.
What is the right approach to define a holistic Digital Strategy?
Having a digital vision in place is foundational as manufacturers begin to think about putting together a digital strategy. A digital vision brings clarity as to where the organisation wants to go and what they want to become. Once there is a clear vision, then laying down a strategy to get there would be possible. Reflecting upon the definition of a digital strategy – it is evident that a set of focused as well as structured activities lead to making one.
At Hitachi, we follow a three-step process to define a holistic digital strategy.
Step 1: Determining key competitive levers for the business
The first step is strategically aligned to the organisation’s vision and key objectives. Manufacturers should identify the levers of improvement that aid in achieving their mission and anchor the digital strategy to the same. For example, if the vision and mission of an organisation is to provide sustainable and affordable products, then sustainability and product levers become foundational to the journey ahead. Most organisations that do not align on this step end up having a digital strategy that is not aligned to the business objectives. The impact of which is adequately seen in the envisaged outcomes.
Step 2: Perform selective assessments
Once the key business levers are identified, they should conduct selective assessments within their business units to understand their current digital maturity when compared to best in class. An outside in study of competitive digital maturity, challenges across the value chain, expectations of the customer base, regulatory compliances and level of disruption impacting the industry would undoubtedly highlight what they should factor in from a transformation perspective. An inside out assessment across process, systems and organisation would unearth the gaps across key business processes, interdependencies, asset intelligence, and flexibility to adopt a new technology as well as the current organisation level capabilities. The gaps identified through these assessments should then be put through a series of use case identification and solutioning workshops to arrive at digital initiatives that bring value and relevance. At this stage, the manufacturer gets clarity on scope for transformation and builds a high-level perspective on the nature of interventions required.
Step 3: Define 4W1H of Digital Strategy
Digital Interventions that are identified during the assessment stage are to be further defined before making them part of the mainstream digital roadmap. The critical components that fully define a digital strategy are use case definition, technology stack, exhaustive business case, scope of implementation, execution methodology and milestones. For all use cases in scope, it is imperative to identify key digital technologies with business relevance. The selection of technology should be based on delivery of impact as well as potential for maximising return on investment. It is not necessary for a specific technology stack to address all identified requirements and hence the right technology mix that strikes a balance across current and future needs to be evaluated.
In order to peg the initiatives on a timeline and assist the decision making on investments, we recommend every use case to be looked through three perspectives – investments, impact and implementation feasibility – it is what we call as the 3i analysis to defining the digital imperative. Based on the 3i analysis, the manufacturer should pinpoint the initiatives that are must haves and ones that are good to have from a strategic perspective. While defining the execution methodology, a fair assessment of organisational capability should also be done to assess how strong the internal team is to execute the digital transformation agenda. Basis the capability assessment, a dedicated digital team or a capable vendor must be identified to execute the same. A thorough vendor evaluation and selection process basis the fitment to project requirement, delivery capability of the vendor and technical competence would help narrow down the right execution partner in the transformation journey. Hitachi’s extensive research and assessment of capabilities of vendors across various digital aspects can be leveraged to gain a well-rounded perspective of a vendor before it is selected as a digital partner.
The implementation roadmap should also factor in the risks envisaged, solution availability and envisaged uptime, data security, risk mitigation plans, milestones (short term, midterm, and long term) and a change management plan alongside the identified initiatives. Most often, we see that the desired outcome of digital transformation programs is compromised due to lack of a change management plan or an ineffective change management plan. While strategising for technology, process and systemic shifts, the people component should not be overlooked in the digital transformation journey. True success is when people use the envisioned digital environment for operational excellence.
While the governance and sponsorship for driving such initiatives might vary across organisations, it is imperative to have a dedicated cross functional team in place to drive the digital transformation agenda effectively. Their roles and performance metrics are to be defined and acknowledged as the transformation initiates. The cross-functional team should hold not just the reigns of program management but also be responsible for the defined KPIs that reflect the efficacy of delivery in the digital transformation.
Here are two examples of digital strategy work amongst the many that highlight the effectiveness and impact of the 3-step approach. A large global tractor manufacturer who embarked upon their digital transformation journey with aim to reduce their defective products, had very low insight into the right metrics defining their success. Their existing key performance indicators (KPIs) across departments were not linked to operational performance. The impact of which was visible in the way they worked, executed priorities, and collaborated amongst themselves. Hitachi worked with them in defining their digital strategy, carved out new KPIs that were reflective of the operational performance and built a premise for developing digital dashboards that give insight into quality and other operational metrics. The digital strategy gave progressive transformation steps towards the desired outcome and when implemented, the organisation transitioned from being an excuse-based management to action-based management, they imbibed a collaborative work culture and demonstrated enhanced ownership with respect to quality on the shop-floor.
A leading aluminium manufacturer with an aluminium rolling mill and large single-can sheet facility in North America, embarked on a digital transformation journey to maintain a competitive advantage in a rapidly evolving market. Whilst generating significant quantum of data within their plants, they were using less than 5% of their data for handling machine operations and customer queries. They also had limited insight on how to go about changing their business with digital solutions. The holistic digital strategy approach led by Hitachi Vantara helped them garner new possibilities for leveraging their operational data. The approach yielded solutions that led to optimised production, enhanced safety, and quality there by enhancing their competitive advantage.
A well-defined digital strategy avoids the pitfalls of siloed approaches, impact of delayed digital adoption and the ambiguity around RoI but does spearhead the business objectives through meaningful digital considerations. A holistic digital strategy that gives clarity, focus and direction towards achieving the organisation’s goals.
Hitachi has been a digital partner to various leading manufacturing companies bringing the best of its information technology (IT), operational technology (OT) and industry domain capabilities to the forefront along with strategic advisory to accelerate digital journeys.
For more information or to discuss how Hitachi can help in your digital transformation journey, you may visit https://www.hitachivantara.com/en-us/solutions/industry- solutions/manufacturing.html or reach out to India.email@example.com
Sharad Nigam, Vice President – Smart Operations, is responsible to harvest the best of Hitachi’s innovative cutting-edge solutions and services across OT, IT and products and execute strategic priorities for Hitachi and its customers. He has led several breakthrough initiatives at world’s leading organisations towards achieving higher growth and profitability through digital intervention and has published viewpoints across industries and functions.
Madhu Juvvanapudi, Manager – Manufacturing Consulting, is a lead at Hitachi Vantara with a focus on strategy, organisation effectiveness and change management. During her 15 years of experience, she has taken up different roles in consulting, research, new product development and project management.
Akhila Kakeri, Senior Consultant – Insights and Analytics, works as a research and management consultant for Hitachi Vantara, majorly supporting the strategy team of Hitachi Ltd, innovation excellence and go to market initiatives. Her 6 years’ experience spans programming, researching, IT blueprinting, operations and strategy consulting, and publishing.
Niket Malpani, Senior Consultant – Global Business Operations, works as a senior consultant in Hitachi Vantara, supporting and strategy and global operations team, management consulting and knowledge hub teams. During his 6 years of experience, he has taken different roles in analytics, research and consulting, and strategy and operations.