Fail fast and scale fast: How can companies accelerate digital transformation through a digital factory approach?

In my last article, I explored what is arguably the most fundamental challenge associated with digital transformation today. How can companies bridge the gap between experimentation and industrialization so that they are able to launch new innovations rapidly and at scale? In the article, I explained that companies need to instill a culture of innovation right across their business, but also have a venture capital mindset to scale successes.

So how can a company create a culture of innovation? First, it needs to create the kind of environment that nourishes a transformative skillset – an environment that is orchestrates engagement and inspires people to come up with great ideas and challenge long held beliefs. Culture typically trumps the innovation mechanism (such as hackathons, hack weeks, employee crowdsourcing, academic partnerships, and more). Secondly companies need to establish the right eco-system, carefully assembling the right, diverse set of players from start-ups, accelerators, freelancers, academic and research institutions etc. In this environment, innovation is not treated as the preserve of co-workers within individual internal teams – it comes about through much broader collaboration within an ecosystem of internal and external stakeholders.

Next, the company needs to adopt proven methods for developing and scaling innovation. One proven way is by establishing a digital factory approach. Digital factories are not replacements for the standalone innovation labs that have been established over the past five to seven years. Innovation labs are still very much needed pursue genuinely disruptive innovation, that might be cannibalizing to the company’s core business and initiatives that might otherwise be constrained from succeeding in the current business model.  

Digital factories complement and extend innovation labs by bringing the broader capabilities to the innovation process necessary to drive transformation and scale. Typically hosted in either one physical location or within a network of locations around the company, a digital factory usually has a permanent workforce that is supplemented by staff on secondment for period of months and temporary visitors who may only work on projects for a matter of days. Digital factories can either be static or mobile, but they usually consist of the following components:

·      A data and research lab that allows the company to keep a finger on the pulse of customers and employees by testing all new innovations against ‘voice of the customer’ research. Think of the lab as analytics mission control.

·      A design studio that applies the latest thinking, methods, processes and technologies to develop innovative products and solutions and ensures people are put right at the heart of the innovation process.

·      A showcase that effectively brings the future to life by enabling people to feel and touch new products and imagine how new solutions could be deployed in practice.

·      Centers of excellence, which are typically centralized pockets of key skills. For example, they might be populated by professionals with skills in blockchain or data science.

·      A near-shore or off-shore delivery centers, where the business undertakes further development work.

Benefits of digital factories

Digital factories have multiple benefits. Firstly, they encourage employees to break out of siloes and work in different ways, with different people, using different tools. Participating in cross-functional, immersive teams drives behavioral change, which is key to any successful digital transformation.

Secondly, digital factories have the effect of significantly accelerating digital transformation by reducing the time it takes to move from ‘no go’ to ‘go’ for each new initiative.

Thirdly, digital factories help to prevent what I describe as the ‘chaos of digital spend’. This is where companies pursue hundreds of disconnected (and often overlapping) digital initiatives with no co-ordination or orchestration in contrast, digital factories provide company-wide visibility on the portfolio of initiatives happening at any point in time, as well as what has worked and what hasn’t.

Secrets to success

Digital factories are key to industrializing digital transformation because they inject scalability into the innovation process. It takes time and effort to establish an effective digital factory, however. So here are some suggestions for getting the best out of your digital factory: 

1.    Make sure the digital factory has C-level sponsorship. Otherwise, it could end up being dismissed as a side project or experiment.

2.    Recognize that engagement is key and transformation should be used to unlock human potential as well as business value. Employees often feel apprehensive about digital transformation because it can threaten jobs, force them to work in new ways and result in uncomfortable levels of transparency. But if they can experience the showcase environment of a digital factory, and get to touch and feel some of the new things that are being built, they can get their own glimpse into the future, which helps them to feel part of the change journey.

3.    Get the right balance between separation and integration. A lot of the original innovation labs failed to succeed because they were too separate from the rest of the company. Equally, innovation can’t simply be managed on a part-time or ad hoc basis. So, it is key to find the right level of integration and connectivity between the factory and the rest of the business.

4.    Adopt design thinking, which is data-driven and centered in the wants and needs of customers. Use prototypes so that people can see solutions from an early stage and then improve them through continuous iteration.

5.    Don’t just focus on fail fast; focus on scale fast. It’s usually easy to build a proof of concept, but it tends to be far more difficult to scale it. So, the factory needs to have a deployment hub that is dedicated to building and funding the innovation, and assessing the impact of the innovation on customers, people, processes and technology.

6.    Use your organization’s sense of purpose to inspire new ways of working as well as thinking. Encourage everyone who comes to contact with the lab to consider how the organization can constantly reinvent itself.

We are at a pivotal moment in history, when the possibilities for the future are greater than they have ever been before. At the same time, the four walls of industry have been blown away. That’s why transformation is not merely an option for businesses operating today – it is an imperative.

So, if businesses are to navigate and survive the large-scale disruption that surrounds them, they need to comprehensively transform themselves by embracing digital, fostering innovation and instilling customer centricity into everything they do. Digital factories are a crucial component of this transformation strategy because they enable businesses to thrive amid the paradigm shift, accelerate ahead of the speed of change, and seize the upside of the Transformative Age.