Scaling up digital projects is challenging for many European manufacturers. They are trying to keep pace with digital advancements, moving between smart products and manufacturing platforms, but find it hard to take the next step and move from the pilot stage to the business environment that will deliver the promised value.
A first and key step is to decide the right digital path for your company. What is the thing you want to invest your resources in? Dan Hushon, chief technology officer for DXC Technology, advises organisations to go after digital moonshots: focus on executing one single digital strategy. Let’s examine some of the key things manufacturers can do to successfully scale digital projects.
Put the digital goggles on
One obstacle on the digital transformation path for European manufacturers is their past. Many manufacturers have been around for decades, started as engineering or production companies, and hence love doing things themselves. Suddenly, they need to change their operating model. In the past, it was all about protecting their knowledge, intellectual property and products. But being a digital player means collaborating with partners to get access to missing skills in order to accelerate the go-to-market approach. Realise that you don’t have to do everything alone. Open up, talk to your peers and even competitors, and build partner ecosystems.
Don’t underestimate the effort
Becoming a digital company and scaling digital projects requires having the right capabilities and mind-set; a well-defined, integrated strategy; the right culture; a revised set of metrics; and leaders who go beyond mandates by working with teams on the front line. Sometimes, because of all the tech hype and available technology, the digital teams start digital initiatives as little islands, not thinking about the customer’s real business challenges, or how to create incremental value, or who could help scale up that initiative and embed it into the go-to-market approach.
Avoid the bottom-up approach. Assess things from the business point of view. Start from the customer journey, see what your customer’s challenges are, and develop a value proposition with digital technology to deal with those challenges. But don’t forget to also look after other areas in your company, such as back-office functions.
Break the silos
Innovation is still happening in silos in many companies. It is not aligned with the business strategy, there is no holistic view, and the people in charge of it have no execution power. This has to change.
Digital transformation activities must include representatives from all functions (production, sales, marketing, IT, etc.), and they must be aligned on all levels.
Also, the issues and solutions must be understandable by everyone. Avoid the tech jargon. Go deep into the issue — don’t just tell people they need a technology platform. Help them envision how the new solutions could help improve not only products and customer communication, but also the quality of their own jobs.
New business models
Transitioning to a new business model is not easy for manufacturers, and neither is finding the right model. How do you shift from shipping boxes with products to a pure consumption model?
For example, how do you sell predictive maintenance for forklifts? You produce forklifts and want to sell predictive maintenance as a service to customers. The service will save you time and money because you will know in advance when you need to service a machine and won’t need to send in service teams every 6 months just to check. However, even though the production costs of the smart product are higher for you, the customer doesn’t want to pay extra for this service.
What can you do? You can offer a new business model where you don’t have to sell the forklift, but provide it as a service with maintenance costs included.
It’s a new mind-set and culture. For digital natives, things are easier, because they haven’t always relied on traditional business models. For manufacturers that are still successful with traditional approaches, especially in countries with strong economies such as Germany and Austria, it’s hard for them to understand why they need to change. But, all of us must think ahead. We can’t wait for a crisis before we start to look for a new business model.
Integrate mainstream IT with digital IT
Do your homework first and plan how you will integrate your digital projects with your existing IT systems. If you start with a small proof-of-concept project, you can build it using independent technology, without utilising your existing IT environment. However, while it might work independently in this phase, you might discover integration challenges once you scale it up, which could require additional budget allocations to fix the problem. The IT environment — the enterprise architecture and data management systems — needs to be ready to make new projects work when you scale them up.
Get the “old dogs” and “new kids” together
Missing the right skills and capabilities is a persistent problem. You have to get people who can help with the digital technology, run the platforms and create innovation. These “digital kids”, however, need to collaborate with the traditional IT teams. You can scale up your project successfully only if those two worlds are integrated and work seamlessly together.
An international, Austrian-based steel company, for example, combined the new digital-savvy employees in teams with experienced employees who knew how to modernise the existing application landscapes and change the legacy IT infrastructure. Although the new “digital kids” didn’t know how to do that, they had other great skills. Combined in cross-functional teams, they did a powerful job with the company’s digital projects.
Being a digital organisation and scaling up digital projects is serious business. Forward-looking leaders must be willing to make bold moon-shot decisions, go into the unknown and lose some of the business stability that comes with the traditional model, knowing it’s all for the greater good of staying successful in the long run.