A recent study shows that increasing the amount of digitalization in industries like manufacturing, healthcare, and finance, significantly decreases operating costs and leads to growth and revenue. For example, in the manufacturing industry alone, the implementation of digital technologies can lead to cost reductions of up to 25%.
Despite the fact that digital transformations have become an increasingly frequent topic of discussion within the industrial community, many organizations are still missing out on key opportunities as they fail to fully grasp what a digitally transformed future means or how they can benefit from it. Fortunately, it’s never too late to start planning your organization’s digital transformation!
Digitalization – An Industry Overview
Digitalization is often referred to as ‘digital transformation’ or ‘the digital enterprise’. Some may even go so far as to call it an information revolution. But whatever we choose to call it, there are four key aspects of digitization that every industry needs to understand if they want their business models and processes to be able to compete in today’s economy: Data Security, Real-Time Information, Predictive Maintenance, and IoT Devices & Sensors.
Technology has always been key to industrial efficiency and production, but with its ability to provide actionable insights on real-time data streams turning into a strategic asset rather than a mere operational benefit, companies are beginning to better comprehend its true value—especially when it comes to efficiency and accuracy.
The implementation of advanced analytics helps shorten time-to-value by ‘conveying precise recommendations as opposed to broad observations’ (IDC). It also enables organizations to see patterns or interdependencies that otherwise would not be apparent based on past experience or simple reporting algorithms.
Digital Tools To Solve Digital Transformation Challenges
One of the most important things you can do is identify your company’s digital transformation challenges with a digital audit. Armed with a strong understanding of what needs fixing and how you can begin using digital tools and strategies to solve these problems. Gartner research analyst Laura McLellan recently outlined three different types of tools that can help overcome specific types of industrial challenges. These are artificial intelligence (AI) solutions, software-defined infrastructure (SDI) capabilities, and robotics automation capabilities.
The overall vision of transforming manufacturing is achievable if you start with small steps. While it may seem obvious, taking small steps can prevent you from being overwhelmed. After you identify your organization’s digital transformation challenges you can identify digital tools and strategies to help solve them. You also want to ensure you align everyone in your company on a shared goal for digital success. If you follow these three steps carefully, your company will be well-positioned for long-term transformation success.
Most small companies and startups will benefit greatly from using agile software development methods. Whether you are using Scrum, Kanban, or another method of your choice, developing software quickly is a must for any organization that hopes to stay relevant in today’s fast-paced world. Software is what allows you to reach new customers and adapt as your business model changes. This is especially true for an industrial company like yours since it could have dozens if not hundreds of different product variations or customizations.
Digital and Physical Must Work Together
The digital transformation of industrial products, processes, and services is gaining traction across many sectors. But what is it that makes digital transformation such a potential game-changer? According to McKinsey & Company, in almost every industry we studied—from construction and energy to transportation and healthcare—digital innovation has begun reshaping competition. It’s been shown that digitally-enabled companies are 50% more likely than their peers to report higher operating margins.
Other reports from McKinsey & Company have shown that companies that implement effective digital strategies outperform their peers by 55% over a five-year period. When looking specifically at digitally mature companies, those with fully developed and integrated digital capabilities, we found that digitally-enabled firms were seven times more likely than their non-digital counterparts to earn a return on invested capital (ROIC) above their cost of capital. This means they’re earning more money than they could with investments in other opportunities. While none of these statistics are surprising, it does confirm what many business leaders already know: businesses are beginning to realize just how much value is available through digital transformation. But how exactly can you achieve digital transformation? The most logical place to start is by understanding why you need it in the first place.
Digital transformation isn’t about replacing physical products and services with digital ones. It’s about finding ways to combine physical goods and services with digital tools, data, and other advancements in a way that creates entirely new experiences for your customers. For example, if you sell cars in a traditional retail setting, you don’t necessarily need to begin selling cars through an app on mobile devices; instead, think of how those elements can be used to augment your existing business. Perhaps offering test drives through mobile devices is more valuable than selling cars online? How would adding apps allow you to better serve your target audience?
3 Tips For Successful Digital Transformation
The digital world has transformed every aspect of our lives over the past decade, and it’s now upending industries as old as manufacturing. It seems like everyone is talking about how disruptive tech can be to businesses, but what’s often left out of these conversations is how successful digital transformation efforts are achieved. While some companies implement new tools and processes immediately, others spend years trying (and failing) before realizing their current approach isn’t working. What separates one group from another? Here are a few tips for success:
Be open to change
Some industries have particularly challenging problems, making even small improvements difficult to achieve; that doesn’t mean you shouldn’t try, however. Many companies find increased productivity with minimal digital changes, which helps them more easily accept additional changes later on in their transition process.
Don’t rush the process
When companies are rushed by either internal or external factors, they often don’t take sufficient time to plan, leading to incomplete or faulty execution. If your goals include industry disruption—which they should if you want your company to remain competitive—you need a solid foundation of preparation before taking action.
Focus on people
A common pitfall when creating a digital strategy is concentrating too much on the technology itself rather than its purpose within the larger business model. Put simply, you won’t see results if everyone in your organization doesn’t understand why they are using certain tools or systems. You also need buy-in across all levels of leadership, so give each staff member an opportunity to provide input into product selection and strategizing. Once implemented, it will be important to continue educating employees on ways they can use their new tools and data to improve daily workflow.
What makes a good Digital Transformation Strategy?
Every year thousands of companies make significant investments in technologies like cloud computing, artificial intelligence, and Big Data analytics without gaining any return on those investments because they lack clear guidance on maximizing ROI. While many companies are now focused on innovation with new technology stacks, they can all benefit from an end-to-end approach to digital transformation that aligns their business with digital customer needs.
There is no one size fits all model when it comes to digital transformation strategies; what works for one company may not work for another. A strong strategy will be tailored to match your company’s current customer experience standards, strengths, and weaknesses.
Final Thoughts
Digital transformation is undoubtedly a term that’s been thrown around a lot recently. Companies want to jump on board and be at the forefront of change because digitalization has made communication so much easier, which has, in turn, caused productivity to skyrocket.
Completing a digital transformation may be the best modern solution for industrial problems so you don’t want to hesitate. Be sure you do enough research to figure out how digital transformation can be applied to your business as well. In any event, it always helps to remember: change equals progress, and every company needs to stay focused on growth. Don’t forget about technological advancements—digital transformation could certainly be an opportunity worth exploring!
