Digital transformation is rocket fuel for manufacturing, promising instant access to data-driven insights, automation, and a stake in global digital value chains. But there’s no guarantee that your digitalization of manufacturing will succeed; over 70% fail.
This article breaks down the shared characteristics of successful digital transformations and identifies six red flags to watch out for. It’s written for companies setting out on their digital transformation journeys and others who can sense their projects veering off course.
Here’s what I explore in this article:
- It makes the right information available to the right people at the right time.
- It weaves a digital thread.
- It creates an interface between digital models and real-world physical products.
- It provides flexibility to the fast arrival of new technologies.
- It’s prepared for the next wave of digital transformation: Convergence.
- You’re suffering from Shiny New Toy Syndrome.
- You’re trying to go too big, too soon.
- Fear is making you overly cautious.
- Breaking down silos isn’t the top priority.
- There’s no guiding coalition (or there is, but it’s too weak).
- There’s no real vision.
What Is Digital Transformation? It Incorporates Technology and People.
Before diving into success and failure, let’s first define what digital transformation actually is. There’s a lot of confusion out there. From scrapping paper-based processes to building fully automated smart factories, digital transformation means different things to different people.
A common misconception is that digital transformation is purely about introducing new digital technologies. Yes, that’s part of the story, but digital transformation requires more than technology alone. It requires a foundational change in how manufacturers pursue revenue and deliver value to customers.
Manufacturers have to introduce new digital technologies and applications to succeed in digital transformation. But they also need to implement a cohesive digital strategy and a digital culture conducive to its execution.
Successful Digitalization of Manufacturing Industry Looks Like This
There’s no one-size-fits-all approach to digital transformation. For example, introducing industrial augmented reality (IAR) can 10x productivity for some manufacturers but negatively impact others, creating confusion and firing resentment from existing employees used to doing things their way.
Every manufacturer needs a bespoke strategy that gives technology and people equal billing. Still, there are some universal characteristics to successful digital transformation. These, I explore below.
Successful digital transformation makes the right information available to the right people at the right time.
It breaks down functional silos and democratizes data across your entire organization. This means:
- Employees gain instant access to clean, standardized data, enabling them to make faster, better decisions.
- Manual work and human error are reduced.
- Collaboration is promoted at all levels, at all times.
Successful digital transformation weaves a digital thread.
It creates a framework for communication that captures and connects every piece of data surrounding a product, from design to production. By leveraging the digital thread, manufacturers can:
- Provide an integrated, holistic view of a product throughout its lifecycle
- Create a secure transfer of information within organizations and between internal and external stakeholders
- Improve data management, making it easier to adapt to shifting business priorities, market conditions, and regulatory requirements
Successful digital transformation creates an interface between digital models and real-world physical products.
It focuses on creating digital twins–digital definitions of products that mimic the behavior of physical assets. Digital twins enable manufacturers to:
- Simulate and predict product behavior and optimize performance under past and future scenarios. Crucial to product development.
- Integrate data from multiple engineering domains, illustrating the interplay between them.
Successful digital transformation provides flexibility and agility in the face of rapid technological change.
It makes incorporating the latest developments into products and processes quick and easy. A flexible approach:
- Enables the trial and adoption of new SaaS and on-prem solutions without risking the disruption of other services.
- Provides instant scalability.
Successful digital transformation embraces the concept of Convergence.
It unites processes, technologies, data, and industries, creating new combinations of products, services, and experiences. Digitally mature manufacturers can:
- Let different functional teams (i.e., design and manufacturing) share processes and workflows, achieving lower costs and faster production times.
- Run digital technologies in tandem rather than in parallel (i.e., combining IIoT with AI), creating new solutions more potent than the sum of their parts.
- Make previously siloed data available organization-wide, increasing its accessibility and usefulness.
- Partner with new industries, becoming similar and connected, creating new value creation opportunities.
6 Reasons Why Digitalization of Manufacturing Fails
A 2020 study by Boston Consulting Group found that 70% of digital transformation projects fall short of their goals, often with disastrous financial consequences. Usually, there are warning signs of an impending failure. Below are six of the most common red flags to watch out for:
1. You’re suffering from Shiny New Toy Syndrome.
The biggest mistake manufacturers consistently make is optimizing for features rather than outcomes. They invest in the hottest new technologies without considering whether they will actually help achieve their business goals.
2. You’re trying to go too big, too soon.
Digital transformation is a vast, confusing subject. Too many manufacturers lack focus, trying to achieve too much when their efforts should closely align with overcoming current or anticipated challenges. As President & CEO for Ricoh North America, Carsten Bruhn, says: “Bigger is not always better; in fact, the more specific the approach, the better.”
3. Fear is making you overly cautious.
The manufacturing sector is up against growing complexity. Supply chains are facing unprecedented disruption, and labor shortages are getting worse. Factories are shrinking and being re-localized, and customers are demanding increasing levels of personalization.
Manufacturers can’t let excessive caution get in the way of taking decisive action. Failure to act on the digitalization of manufacturing now could spell the end for your business.
4. Breaking down silos isn’t the top priority.
Something is wrong if breaking down silos–centralizing data and driving cross-functional collaboration–doesn’t lie at the heart of your digital transformation strategy.
In a recent Accenture survey of 1,500 executives, 75% admitted that their different business functions are competing rather than collaborating on digitization. No wonder 64% are seeing no revenue growth whatsoever from their digital investments.
5. There’s no guiding coalition (or there is, but it’s too weak).
Successful digital transformation requires a guiding coalition that includes members from different departments, backgrounds, and organizational levels. Most importantly, however, it should consist of your CEO and other senior executives–the coalition must be powerful enough to enact change.
6. There’s no real vision.
According to John Kotter at the Harvard Business School, every successful transformation needs a vision that “goes beyond the numbers” and paints a digital future that appeals to customers, stockholders, and employees alike.
Can you (and everybody else in your organization) easily communicate your digital transformation vision? If not, your guiding coalition is failing in its job of spreading the vision far and wide.
Faced with supply chain turmoil, siloed data, and a complete lack of transparency, 85% of companies have been forced to accelerate their digital transformation programs since the COVID-19 pandemic began. How many will achieve their digital objectives? We don’t yet know.
Understanding the digitalization of manufacturing success factors and risks in this article (and the links embedded within) will help you to flip the odds in your favor, putting your company among the 30% of businesses that manage to achieve their digital transformation objectives.