Survive and Conquer Digital Transformation

We are moving into a period of unprecedented change with the advent of 4th Industrial Revolution characterized by the need of integrating physical, digital, and biological realms. In the 18th and 19th centuries, it was coal and steam power which swept aside certainties and ways of life that had endured for millennia. Followed by electricity and mass production transformed our transport systems, our homes and our jobs in the early 20th century,. More recently, the advent of mass computing and the internet has ushered in a digital world of instantaneous global communication and almost frictionless access to information.

At each of these stages, there were choices to be made. Those who embraced the new paradigm were propelled forward, gaining huge advantages over their competitors and earning the opportunity to shape the coming world. Those who chose to cling to the past were left by the wayside and consigned to history.

We now face similar choices once again. AI, automation, big data, and ML in association with Social tools have all moved beyond their infancy, forcing leaders across all industries to grapple with the changes they will bring. Big data analytics will open up new products and processes and will challenge businesses to find new efficiencies. Machines and algorithms are expected to displace 75 million jobs by 2022, while 133 million additional positions will be created by the new technologies. The tasks carried out by humans will change radically and quickly, requiring reskilling on an unprecedented level.

The scale of these challenges, and the speed at which they are approaching, can seem overwhelming. However, if we take a deep breath and change the way we think about this future, the picture begins to look rather different. The 4th Industrial Revolution offers unparalleled opportunities for improving the way customer is viewed. It is not a future to be reluctantly survived, but one to be embraced with enthusiasm. For those who accept the challenge, the question becomes not ‘How can we get through this?’

Keeping abreast with the change and not risking to be obsolete just about every organization looking to remain viable in the growing digital marketplace has some sort of digital transformation in progress or one in the planning stages.These projects range from implementing basic applications to better interact with online consumers, to converging OT and IT networks, or even pushing their entire infrastructure to the cloud.

Surviving the digital revolution and thriving in this digital age is not for the faint of heart. Surviving the digital revolution and transformation is not just about shiny new technologies, which of course are important and a means to an end, but it is about strategic intent, operational execution, culture and mindset, and rethinking the product development and service delivery model. Most of these boil down to a organizational change management technique well known as SERE.

S : Survival

Digital transformation is now a CEO priority, because it is a matter of surviving in an increasingly competitive environment. We live in a world where if companies don’t digitally transform, their bottom lines will not survive. In the future, even today, every single company will differentiate itself over its competition through digital assets. It’s software, it’s 0s and 1s. This is what it comes down to. Car manufacturers, for example, will not differentiate themselves by the driving experience, but by how these cars are digitally connected to each other, traffic controls and services, and so on.

Companies must digitally transform if they want to survive long-term, because otherwise they will be disrupted by competitors in their existing industry or brand new players coming in from an industry they don’t even know about yet.

This means that digital transformation is an absolute must for survival. And that obviously puts a big focus on how you digitally transform – what is the best way of doing that?

The first thing would be for a company to build a platform, or an architecture for its digital transformation. Whatever a company’s digital future is, it needs a solid platform that helps to develop new apps in a much more productive way, and, at the same time, provide much-needed flexibility to run these apps in a modern infrastructure.

When we talk about modern and flexible infrastructure, we talk about an open hybrid cloud, meaning that they can either run on their own premises or they can run on something like Microsoft Azure. So, the first advice is that businesses should decide what platform they want to put their applications on for the future.

This platform can also become the host of the existing applications, which they start to modernize and want to take on their journey. Most companies cannot ignore all the history, because they have to take some of the legacy with them. It’s not just about the brand new things.

Using BMW as an example, it uses a platform called ConnectedDrive where all the digital services – which are offered to the car – are served. It’s not the IT within the car, it’s services they deliver to the car. They use Red Hat’s container platform, which is scalable and is also able to run on different clouds – on-premise and public.

The clear trend of all the modern cloud-based applications in the development world is that they are being developed in a micro-services architecture, and being delivered in containers. That’s where the world is going.

By Embracing Digital Transformation Companies have a higher chance of survival. It’s all about competitiveness, so if they don’t digitally transform then they will suffer. This is a fact of life – they will simply run out of business. It’s a question of survival.

E: Evasion

The truth is that digital transformation is a journey that, by its nature, take a while. Any meaningful change in competitive position is difficult and doesn’t happen overnight. Changing the company’s operating model to take full advantage of the digital platform and execute business in a different and more profound way. The operating model affects your company’s processes, policies, procedures and talent model. Adding to the difficulties, your company must iterate the building or composing of the platform and changing the operating model at the same time. Digital transformation collapses business processes into data and the resulting decisions of a data-driven world necessitate careful change management to avoid serious business issues throughout the digital journey.

Although your company can accelerate implementing technology, it’s very difficult to change your operating model quickly. That’s because people need time to go through the learning curve. They need time to understand the technology. They need time to understand the implications of how they will do their work. As their work changes, they also need time to understand the upstream and downstream implications. And there will be necessary iterations as the understandings become clearer. Finally, all these changes will change your company’s understanding of the technology needed and force you to recompose part of the digital platform.

All this learning, understanding, communicating and iterating takes time. This is the reason why transformation often creates problems and delays. Those delays extend the time of your company’s journey before you get useful impact from the transformation.

R: Resistance

Resisting digital transformation is riskier than embracing it. The first risk stems from maintaining legacy systems, which requires special skills and funding and creates barriers to integration with new technologies. Cyber security due to the inability to secure legacy systems and a lack of updates to the systems is the second risk. The third risk is driving away talent and reinforcing a stagnant work culture. The fourth risk is the increasing risk of service failure as the gap between service delivery and customer expectations widen. Failure to embrace expectations could lead to irrelevance, customer frustration, and eventual disengagement.

The most frequent answer to this is that it is generational. I call this the ‘blame baby boomers’ argument in that the decision makers in companies are a generation that are fundamentally resistant to change. Personally, I think this has merit when broken down. I like Eddie Obeng’s thinking that someone or something has changed the rules of how the world works and it happened at midnight! Essentially we are responding rationally to a world we know and understand but that no longer exists. The argument then is that as a millennial, I relish the concept of rules going out the window but apparently this terrifies everyone else?

Large companies that have created enormous wealth and generated incredible market positions on a global basis — who’s going to argue that what they’re doing today is wrong? I think they lose the creativity and become complacent and assume that somehow, whatever’s going on today is a blip or an aberration, and we’ll get back to where we were and things will be back to normal.’ The irony that digital is creating new pressures on business that only digital (technology and thinking) can help with. ‘In a world of mounting pressure, there’s a natural human instinct to stick to what you know. And so there’s a tendency to just hold on and just squeeze harder on what you’re currently doing. Nobody’s creative in a time of mounting pressure. You fall back.’ When in actual fact, creativity becomes even more critical when your back is against the wall.

The fight to remain relevant and digitally savvy has plenty of obstacles. Security concerns, legislation, and lack of standard processes were named top barriers to digital transformation in a recent IFS survey. Aversion to change also made the cut. "It's not unusual for employees to resist change, even if they can see how the technology will improve the business in the long-run and it is addressing one of the complaints they made formerly about a system. While it's easy to assume technology changes would cause the most issues in the transformation process, tech isn't actually the root of the problem ."Rather, it's usually organizing the people and processes around the new tech that's difficult," It's hard to change the way people work, and realign them to new roles and responsibilities. In short, digital transformation is not only a transformation of tech, but it also must be a transformation in a team's (or entire company's) culture and priorities." Inertia and ignorance are two key parts of employee resistance to transformation. "Inertia results in the 'but we've always done it this way' response to any proposed change in operations, process, or technology, while ignorance limits the ability of constituents to see the necessity and benefits of digital transformation.

E: Escape

In recent years, the American manufacturing industry especially metals like steel has experienced a boom in business that has led to a wave of investment in the modernization of steel mills and new technologies. As this year's AIST Digital Transformation Forum for Steel Industry has shown, American steel producers are now striving to keep pace with other industries, such as the automotive industry, which has been promoting the use of Artificial Intelligence (AI) more and more. Without a doubt, an industry as complex as the metals industry can be digitally transformed with Industry 4.0 technologies such as AI, Cloud Computing, Big Data, Augmented Reality & Virtual Reality, Smart Sensor applications. But which of these technologies is the real game changer and which is just a hype in the pool of inflated buzzwords? A clear answer to this complex question is not possible. Industry 4.0 will not fall from the sky or soon be on the shelf - waiting for instructions and roadmaps is not the solution. What you can do is review the technological opportunities and put together your individual business strategy based on your existing conditions and your needs.

The fear factor also plays an extraordinary role, with the question presenting itself: why would anyone change a winning horse that is already profitable? This lack of knowledge about the business implications of change is compounded by uncertainty or insufficient information about the economic benefits of industry 4.0. Another challenge is the ability to choose the "right" strategy for digital change, to define a clear "roadmap" and to develop an ecosystem that supports both.

Despite carefully planned digital transformation initiatives, ROI assessments, and technology selection, manufacturers are beginning to grapple with the unfortunate reality — too many projects begin with so much promise yet end up in a suspended state due to challenges such as failed ROI, mismanaged expectations, or scalability concerns. It was McKinsey and Company who coined the term pilot purgatory in a recent report and highlighted that two of every three companies piloting new technologies fall into this static state.

Sometimes the simplest ideas are the ones most easily overlooked.Bringing in new technology comes with its own set of risks, and pilot programs are a good way to de-risk these efforts. Manufacturers de-risk by limiting scope — such as running a pilot in one facility or one production line — by limiting investments, or by limiting exposure or time. Often this opens up bandwidth to de-risk decisions by piloting multiple technologies or even vendors at the same time.

But make no mistake — though you might de-risk the license fees, technology pilots can be expensive. They require a large investment in time and resources, require careful planning, diligent execution, and firm decision making.

That last point is key — firm decision making really matters. Pilot programs often drag on into pilot purgatory as organizations keep expecting to ‘100% de-risk’. What organizations may not realize is that by not taking decisive action, they are still taking on risk, albeit a different type. They continue to bleed without realizing, as pilots drag on and on and on, all because they’re always ‘so close’ to addressing all open risk items.

We need to begin to see technology pilots not just as ROI proving grounds and de-risking initiatives, but as the first step in a broader, longer-term digital transformation. As you would with any such project, remember what’s important. Involve the right cross-functional leadership team, build critical mass, create safe spaces for failure, manage change at all levels of the organization, and enable the teams to make bold decisions.

A staggering 70% of digital transformations fail. Although most companies and executives know how crucial it is to evolve with technology and create digital processes and solutions, putting it into action is a different story. Many companies have endeavored on digital transformations, only to hit roadblocks. Understanding what went wrong with the following three companies can provide guidelines of things to avoid and point future digital transformations in the right direction.

It’s important to note that although these companies failed on their initial digital transformation efforts, they were able to make adjustments to succeed in the future. A failed digital transformation doesn’t spell the ultimate end of a company, but it can be incredibly costly in lost money, resources, time and credibility.