The 4 biggest digital transformation hurdles in industry

In my previous article , I highlighted the 10 most important things which enable successful digital transformation. Let's take a look from a different perspective, and see what are common hurdles to experiment or scale-up digitalization initiatives in the industrial landscape. Every customer and project is different, so those four, named below, are not?the only way, but based on my experience and hundreds of discussions and digitalization projects, with full confidence, I can say these are the most common and the most frustrating ones.

1. Stuck in the?pilot transformation

Proof Of Concept (PoC),?Proof Of Value (PoV)?or?Pilot?are the new, ubiquitous products which are offered in the industry, no matter who, what and where they are offering. Now, almost every project starts with?PoC. Don't get me wrong - I do not think it is bad. Test, small-scaled projects are important to verify the capabilities and scope of work of our partner, as well as the readiness of our internal processes, people and technologies. Proof of Concepts are an extremely valuable tool for both:

• supply-side (to start cooperating and partnering with customers)
• demand-side (verify if a company is ready for a change)

The challenge I have with PoCs is?de facto?volume and the relative simplicity of initiating and delivering it.

Normally, we perceive those features as the biggest advantages, but only if they are manageable. Often, companies start the digital transformation with?hands-on?Proof of Concepts (like predictive maintenance, operation digitalization, decentralization, etc.) without any plan or strategy behind it. If there is no governance (and it would be peculiar to nominate a digital lead before even creating a digital strategy), companies end up with siloed results, scattered architectures, no change management and a lack of training plans. Not mentioning island experience and knowledge, limited to only engaged departments. Before you know, digital transformation starts to be project-driven, focused on delivering results for particular departments (i.e. maintenance) and not taking into consideration holistic value for the company. What is worse, if those projects start to scale up without any coordination, companies end up with a patchwork architecture that has nothing in common with the biggest DX incentive - integration and collaboration.

Once a company is in the middle of this closed circle, it is immensely arduous to break it as you may jeopardize people's excitement, dismiss valuable projects or lose creditability on the market and inside your company.

To solve this puzzle with the least possible damage, you need to take a step back, (re-)define a digital strategy, nominate a digital lead and then re-assess all Proof of Concepts once again.

2. Back to the future

Another common hurdle of digital transformation is technology fear. Digitalization is driven by new technologies which are becoming more and more complex (AI, machine learning, low code programming, etc.). Evaluation of the solutions requires specific expert knowledge and understanding of the bigger picture. At this moment, main decision-makers have built their expertise and experience on legacy OT systems which exalt availability and reliability over interconnectivity and interoperability. Those systems are locking you in technology by default, as their designed lifetime is at least 15 years lifetime. With the new digital paradigm, especially if we look at?IIoT, fear of lock-in in incompatible and legacy technologies is still valid but rather illusionary than real.

Industry leaders are starting to be aware of this. When we look at the open vacancies from the biggest industry players, we can find more DevOps, Programmers or Architects than Mechanical or Electrical Specialists. This is a result of market transition and increased awareness of required in-house capabilities to make sustainable, technological decisions. The struggle remains for small and medium enterprises which cannot afford the horde of specialists in new technologies which drive the digital strategy and mitigate the technology fear.

3. Double-edged sword

Every DX presentation, pitch or talk repeats constantly one thing:?digital transformation is a complete business transformation of your whole enterprise. I cannot agree more with this statement, but I also see the other side of the coin of this mantra: paralysing effect on pursuing digital transformation in the organization. Most companies in the industry are relatively siloed and cooperation between employees and departments is more project-based. Re-writing the whole business towards new narratives requires huge leadership, coordination and collaboration.

Coming back to previous points as an example. If a company wants to have a successful?PoC?and scale up the project, then it needs to think about the learning & development of the project team and future operations crew. Not only within the scope of the project but also incorporating any future requirements to ensure that once?PoC?is delivered it does not become obsolete. This means for:

• Human Resources?- a complete redesign of career paths, new job descriptions and training plan
• Finances?- adjusting rates to new job descriptions with certain flexibility (we live in a VUCA world!)
• Procurement?- new ways of cooperation and partnerships, new types of service agreements
• IT?- redesign of IT strategy (cloud/on-premise/hybrid) and security guidelines
• Safety?- assessment of new risks and mitigation procedures
• Maintenance?- learning new tools and techniques based on prediction, not only condition or time
• Production?- utilize new technologies to enhance and de-bottleneck process (i.e. data science)
• Operation?- more agile and non-routine operations
• Planning?- be flexible and adjust to constantly changing external and internal conditions
• Management?- switch from resource (or stakeholders) managers to change managers

Assessing, aligning and ensuring collaboration between different departments to maximize output is by far the biggest challenge that is hindering the acceleration of digital transformation within the company. Challenging old ways of working and confronting them with market and customer expectations is the baseline of any business transformation, also this digital. No shortcuts nor temporary solutions can be applied.

4. What-if business case

Digital transformation is like a crash test for investment departments which is used to the clear split of project execution into CAPEX investments and OPEX services. This schism is becoming obsolete as with more fit for purpose than off-the-shelves solution, more software than hardware deliveries and more partnership than supplier approach standard investment procedures start being additional risk than its mitigation. Getting approval for investment without clear ROI or with ROI heavily dependable on the performance of the own employees is another hurdle for digital-savvy enterprises. Those?what-if business cases?are extremely common in digitalization projects and are not in favour of decision-makers. I.e.:

• An increase in safety or security is risk mitigation so has value only when an incident happens (if it happens at all)
• Predictive maintenance may not be more beneficial than time-based maintenance (if performed well)
• Higher quality of information (i.e. about energy consumption) can mean a higher carbon footprint than expected (if values were artificially lowered)

One of the solutions to this uncertainty is new types of contracts that additionally prize certain flexibility and agility in processes, people and technology. One of the best examples is Demand Side Response, where based on proposed energy demand flexibility company is receiving a bonus from grid operators. This bonus then is a great basis for evaluating certain investments which can unlock further flexibility in energy demand.

Another use case is a profit-sharing contract wherein the exchange of potentially higher income suppliers are mitigating most of the customer's risks.

These are the most common examples of hurdles that can be minimized by a structured approach to the whole transformation process. As you can easily notice, by addressing properly and timely one challenge, we can easily solve the other. Creating a holistic digitalization strategy, followed up by a dedicated roadmap and set of priorities, is an option that drastically increases our chances of having an enjoyable and exciting journey. But more about it, in the coming article.

With The Future Digital Energy Systems articles series, I'd like to address the main drivers and enablers of our future energy landscape. Analysing available technology, required changes in organizations, legislation, and society, I want to disenchant and simplify all actions needed to fulfil net-zero commitments and limit global warming.

Thank you again for taking the time to read this article. If you enjoyed this post, please click?LIKE, to share it with your network, click?SHARE, and if you have any more thoughts drop them in?COMMENTS.

About the author:

Mateusz Kasprzak?is an enthusiast of sustainability with the aim of understanding and describing?how the industry is changing our planet and how our planet is changing the industry.

Professionally, for more than 10 years, he has been helping the industry to translate management goals into real actions and projects with respect to energy efficiency, digitalization, and operational efficiency. One of the first?Official SIRI (Smart Industry Readiness Index ) Assessor?in Poland.