Unboxing Digital Factory

Digital Factory is an organisational construct. It enables digital transformation and builds one or more digital products and services. The key differentiator where the digital factory has the advantage over other sourcing models is the outcome-based sourcing of teams with an approach to mobilise, early value realisation, build at speed, scale, and incubate cultural change. It also complements the existing sourcing models such as bridge, borrow and outsource currently in use by the public/private sector organisations. The digital factory is positioned in a way that it is integrated within the business to drive cultural change by doing and delivering the projects and yet free from the BAU culture.

In simple terms the factory is a pool of teams with the team(s) construct designed and structured to have the right balance of skill and experience to deliver the targeted outputs and outcomes. Each member of the team has a clear role, and responsibilities and are provided with the right tools and technologies. The factory has a clear mission to meet the organisation's objectives by establishing ways of working that works with the internal and external stakeholders of the organisation. The team is also referred to as the squad responsible for steering the change whilst delivering the most important value-driven work first. The factory focuses on 5 key areas:

• Customer centricity aiming to build customer-oriented products and services,
• Digital platform providing infrastructure, tools, technologies, and platform to build & scale
• Digital operations providing processes and tools to support the BAU and new and continuous delivery of services and improvements
• Sustainable by design enables sustainability and an eco-friendly approach at the core of everything the factory builds or uses
• Security by design ensure users' data, product and services are secure and easy to use

This quasi-organisational setup provides acceleration to drive the transformation agenda and models a new way of developing products and services. The whole process of introducing new products and services using new ways of working and getting a feel of how it could be achieved whilst steering the day-to-day business provides the organisation a conscious viewpoint to assess what change to make and how. However, building new products and services and driving change requires predictability, transparency, the ability to measure change, room to learn and tune, and flexibility to adapt to the continuously changing ecosystem.

Like a real factory, the digital factory has its own bricks and mortars in the form of capabilities such as people, processes, skills, tools & technologies, innovation, data& insight, and operating models. The factory operates using an operating model that uses industry-standard best practices and guidelines, methodologies and tools, and technologies. Also, for the digital factory to work successfully, it does require active support from the central team or leadership or a command centre in the organisation so that squads in the factory remained focused on delivering value. So having leadership and empowered management layer over squads is pretty important.

How does digital factory results in success?

• Start-up mindset – Digital factory is designed to operate in a methodical approach using a start-up mindset that enables innovation and building products and services at speed to deliver into the hands of the customer early with MVP features. The approach is to start small, build, measure, learn, and refine in shorter iterations.
• Increased collaboration – The purpose-led collaborative operating model is a powerful engine that brings together a joint partnership between business, IT, legal, HR, finance, and policy. CIO and business unit leaders drive the mission together with mutual accountability.
• Decreases time to market –With a start-up mindset, a minimum viable product (MVP) is agreed upon and identified with operable quick wins reducing the lead time between idea and product or service launch.
• Better user experience – Customer centric approach means organisations can build products or services based on customer feedback. Rather than building a product with a lot of features up front businesses can build the product and services on MVP and be able to target customers of the varying group.
• Decreases operational costs – Digital factory reduces operational overhead for the organisation by efficiently managing the staffing and resourcing and efficiently running the delivery of the product and services. It relies heavily on feedback from people, projects, and delivery units to monitor the KPIs. Staffing estimates are done at both organisational and project levels. An MVP view and innovation accounting practices enable the factory to prioritise the allocation of investment efficiently across multiple projects. The digital factory also provides opportunities for organisations in considering green sourcing.
• Increase organisational effectiveness – Digital factory is a powerhouse for improving organisational effectiveness by streamlining value streams and connecting back to customers. With customer centric approach and start-up, mindset digital factory drives the business towards the lean and efficient organisation of business processes. It uses data-driven solutions relying on defining, capturing, and reporting the data from the processes against the OKRs and KPIs to measure the progress and improvements.
• Real-time intelligence – Digital factory ecosystem brings data-driven tools and technologies enabling the ability to gather real-time intelligence of the customer feedback and the performance KPIs about the product and services. It influences the investment portfolio, spending profile, and cost-saving initiatives.
• Incorporating sustainable IT initiatives – Digital factory enables organisations to meet their sustainability agenda and could help to improve ESG ratings. It offers capabilities to develop eco-design applications by systematically integrating environmental aspects right from the design phase (UX design) of a product and throughout its life cycle. It also includes tools and platforms to enable accurate assessment of organisation's application portfolio which supports IT departments in understanding and managing IT assets by integrating energy consumption indicators and optimal deployment of digital works force strategies such as computers, smartphones, and other phones, displays devices, printers, and connected objects.

Key characteristics that digital factories need to embed

A start-up mindset

The start-up mindset of kicking off with a set of ideas, starting small & incrementally scale, testing the understanding of the customer and the market, creating an MVP, learning & adjusting based on the feedback, and seeking investment incrementally requires good decision-making based on clear mission objectives and criteria. Digital factory demands a similar mindset to operate. Understanding the risks by trying and testing the ideas at speed with minimum investment to start with and without having to go through endless rounds of analysis makes the factory a real enabler to deliver value. But to take the idea into production the project team or squads needs to show progress at agreed milestones and so forth for the approval of funding. The mindset and the entire process are incrementally backed by measurable KPIs and OKRs.

As part of the start-up mindset, adopting innovation accounting practices is important to be able to define, process, measure, and report the progress of new ideas and innovation. Unlike, traditional accounting practices innovative accounting practices rely on measures such as average user engagement, the completion rate of the transactions on the first attempt, customer conversation rate, increased user satisfaction, etc. Whilst these innovation practices don't appear immediately in the bottom-line sales figures but provide an immediate view on the sustainability of products and services to meet future demand and to increase further customer footprint in the market. To achieve this, it is important to have a clear view of KPIs for the products and services, accessible data, and reporting mechanism.

The very incremental & thought leadership of capitalising the market based on the potential that is testable and measurable and being able to turn that into a sustainable product or service makes a digital factory home for delivery and sets itself apart from other scaled delivery models.

All of the above requires a model of purpose-led collaboration and a shift in mindset. Just having cross-functional teams with an agile ethos like in traditional digital teams will not work on its own. A purpose-led collaboration requires an effective balance of autonomy and leadership starting from the top of the management to the team level with clear support from the central nervous system of the organisation. Then only it can connect the dots of underlying thought leadership from the CIOs with the mindset prevalent in the delivery team to meet the mission objectives and provides a measurable way to see the progress and report.

Build the talent pool that is right for the factory

Since COVID, the expectation of work-life balance, remote working, and pay checks has challenged many organisations in their traditional ways of working. More so ever-increasing price as a result of inflation means we will see the impact also on the cost of resources. However, the market for IT has boomed and the demand is much higher than the supply. All these factors have a major impact on attracting and retaining talent. Skills such as user research, interaction design, application development, DevOps, etc. are high in demand and expensive. Besides these technical skills, digital delivery requires individuals with empathy, good collaborators, team players, and driven and good communicators. Relying on the market alone to hire people with such talent is not feasible anymore. We have seen it again and again where organisations are struggling to source quality resources on time and as a result, hastily sourced people not fit for a fast-paced entrepreneurial environment.

To attract & retain such talent, the digital factory uses a value proposition based on a start-up mindset i.e. the investment towards a minimum viable talent pool and focuses on continuity. With the start-up mindset, it uses a talent attraction value proposition that not only focuses on new technologies and skills but also focuses on creativity, growth environment, entrepreneurial culture, and collaboration. The investment in the minimum viable talent pool helps to build the critical pool of talent which is a springboard to build and attract talent by hiring and internally training. This critical pool of talent is people who can talk the lingo of today and can see the future. One way to achieve this is by setting up a community of practices such as product management, business analysis, engagement management, agile delivery, etc. These communities are a great place for a body of knowledge, recruitment, keeping up with the market trend, training, etc. Of course, the problem of being short of talent externally and internally could hit organisations at any time and relying on one-off external hires and internal training alone won't solve the problem. Hence platform to continuously build a talent pool and supporting strategies need to be in place. This strategy could be enabling ways for employees to gain further exposure within the organisation by moving across projects & different sectors, helping them to gain wider experience focusing more on soft skills needed to operate in varying environments, building accelerators by appointing senior team members to coach and leadership training programmes, locating talents based on geography and supplementing with external talent and building partner ecosystem with other suppliers.

Build purpose-led squads and not just cross-functional teams

Squads are purpose-led multifunctional teams often of varying sizes between 8-10 resources. Where squads differentiate themselves are being agile with pragmatism over purism, focusing on value over activities, adopting a customer-centric approach, striving towards change over chasing timeline, looking at the problem as a whole, seeing value in both tactical versus strategic pathway, and very good communicators and team players. These teams often include user researchers, UX designers, product managers, solution architects, scrum masters, business analysts, developers, etc. In traditional digital projects, organisations will approach forming a scrum/ agile team sourced from either a single supplier or multiple suppliers. Digital factory approaches the demand on a project-to-project basis working with the business owners for the duration of the project. Depending on the problem "Squads" can bring in more specialist roles as well which might not be very cross-functional. Digital factory sources the resources with the overall mission & culture of the organisation in mind and not just a project objective. It brings cohesiveness in the values regardless of the project and sets clear communication, purpose, and roles. Purpose-led collaboration needs transparency of work for squads to operate. They work closely with various BAU and run teams and take part in the actual lift and shift activities instead of being observers or simply orchestrators.

Measure change

If an organization is to systematically change its way of working and keep track of what's happening, its management systems will need to evolve, starting with knowing what to change, knowing parameters that will enable them to keep track of the progress, and knowing the clear pathway to meet the business objectives. Non-traditional metrics such as tracking digital adoption through tracking new customer registrations on digital channels or digital-engagement levels for a particular product or service line—are often more useful than traditional metrics like return on investment in tracking the progress of a digital transformation. So, it is critical that in addition to traditional metrics non-traditional metrics are also understood and maintained.

Digital factory brings all those elements that a business need to stay ahead in the race of the ever changing technology landscape and to stay close to their customers. It is truly agile at heart and brings all the good things agile methodology and agile principles have to offer. But it is more than just supplying or deploying an agile team. It requires experience, pragmatism, knowledge of operations, a whole lot of start-up mindset, and innovative accounting to be successful.