Understanding Digitization: The first step in Digital Transformation for Industry

Introduction

This is the first part in my series on Ditigal Transformation in Industry. Digitization in the context of industry refers to the conversion of analog information into digital formats that can be processed, stored, and utilized by computer systems. This is the foundational step in the broader journey of digital transformation.

Industrial digitization began to gain momentum in the late 1980s when computers became widespread in commercial settings. Today, it is rare to find any organization that hasn't started its digitalization journey. However, many still find themselves stuck at this initial maturity level, struggling to fully leverage the potential of digital workflows. What makes this stage so challenging? What hurdles keep organizations from advancing? And most importantly, what can be done to overcome the obstacles?

These are complex questions with no one-size-fits-all answers, as challenges vary significantly across industries and organizations. However, there are some fundamental barriers and common situations that, once identified, can easily be efficiently addressed. In this article, I aim to shed light on these issues and offert strategies to move forward. But first, let's explore the origins of industrial digitization and how it has shaped the landscape we see today!

The Office Application Suite: A Digital Reflection of Physical Processes

Office applications, such as word processors and spreadsheets, were among the first tools to bridge the gap between physical and digital workflows. By closely mirroring traditional office practices, these tools facilitated a smoother transition for organizations adopting digital methods. However, this familiarity often created a digital comfort zone that many organizations have yet to move beyond, hindering further innovation.

For example, word processing applications provide an almost identical visual representation of paper documents. Despite the digital nature of the information, word processors adhere to a paper-based format, with a significant portion of the writing process geared towards printing documents for reading, distribution, and archiving. This reliance on traditional formats, such as footers for storing metadata like as author information and document numbers, reflects pre-digital company processes and underscores the initial step of digitization.

Is it truly easier to read from paper than from a screen? Some studies suggest this, but, as with many things, the answer isn't black-and-white and often comes down to personal preference. How much of our reading habits can be attributed to the simple fact that paper came first, and we adapted screens to mimic paper? Should text on screens adopt a different format altogether, independent of its physical predecessor?

Another notable example of successful digitization is how General Motors adopted Computer-Aided Design (CAD) systems in the 1980s. This shift enabled more efficient an precise vehicle design, moving away from traditional blueprints. The development of CAD and related software has been a major driver for digitization, particularly in industrial settings, due to the early adoption and significant improvements in precision and efficiency.

Document Management Systems: Beyond Physical Limitations

Document Management Systems (DMS) represent an evolution from simple digitization by utilizing metadata to improve how documents are stored, shared, and managed. These systems offers numerous advantages over physical archive cabinets, such as easier retrieval and better organization. However, despite these benefits, finding specific information within these systems can still be challenging. While lack of training is often cited as the root cause, the deeper issue may lie in the design of DMS, which remains deeply rooted in pre-digital paradigms, constrained by the structures and limitations of physical document handling.

In contrast, the internet showcases a different approach to information management. Online, information is typically not stored in paper-like documents organized in folders. Instead, search engines like Bing and Google use sophisticated algorithms to efficiently locate relevant information, regardless of its format or location. This contrast highlights the potential for more intuitive and flexible information management systems that could break away from traditional documnet-centric models, allowing for more dynamic and accessible ways of handling information.

Spreadsheets: Revolutionizing Data Handling

Spreadsheet applications like VisiCalc, Lotus 1-2-3, and Excel have profoundly transformed business practices, revolutionizing areas such as data analytics, budgeting, financial forecasting, and engineering. By separating calculations from raw data, these tools enable reuse, facilitate complex calculations, support chart creation, and mange large datasets—capabilities that were unimaginable before their advent.

However, despite these advancements, many traditional processes, document layouts, and data organization have remained largely unchanged. Data is still often shared between departments in the form of static reports, and significant manual labor goes into copying and pasting data from one spreadsheet to another. It's still common to see data exchanged between departments using printed documents, a practice that harks back to the pre-digital era.

If you find yourself regularly sharing Excel documents with colleagues in other departments or compiling Excel reports, it is a strong indication that your organization is still operating at the initial level of its digital transformation journey. While spreadsheets have been invaluable, relying heavily on them for inter-departmental communication and data handling suggests that more integrated and advanced digital solutions have yet to be adopted.

Distributed Control Systems: The Foundation of Modern Production

Industrial production has its roots in the Industrial Revolution of the 18th century, powered by James Watt's steam engine. These early industries relied on manual control by operators stationed at the machines. By the early 20th century, electrification enabled the creation of centralized control rooms, allowing larger sections of plants to be managed from a single location, thereby increasing efficiency and capacity.

In the 1970s, the first computers began appearing in control rooms. At this time, computer networks were not yet in existence, so a single computer was directly interfaced with sensors, relays and other actuators. This computer-based control system mirrored the earlier electrical control rooms, with wires running from the control room to each individual sensor and actuator. While this topology worked well for small operations, it could not scale effectively to systems with thousands of devices.

It wasn't until the 1990s, with the advent of computer networks in control systems, that distributed control became possible. Distributed Control Systems (DCS), and their counterparts in manufacturing, SCADA systems, allowed IO-modules to be distributed across the network. The central controller could then communicate with all these distributed IO-modules over the network, enabling the management of significantly more complex production systems involving millions of sensors and actuators. Today, DCS systems are rightly regarded as the most critical business system in modern process industries.

Digitization has enabled production to scale up dramatically, improving quality, efficiency, and environmental impact. Moden society as we know it would likely be impossible without these advancements. However, despite their success, DCS systems still operate under pre-digital paradigms that could benefit from more decentralized and intelligent processes. For example:

• Communication Protocols: The communication protocols used in DCS are often designed to replicate the centralized control structures of the past, inherently limiting the potential of modern networks, where all nodes can communicate directly.
• Data Handling: Process sensor data is frequently treated as analog signals, sampled at a fixed intervals, even for sensors that are inherently event based, such as open/closed state sensors. An event-based design would not only improve precision but also drastically increase data efficiency.

These limitations suggest that while DCS has been a cornerstone of industrial digitization, there is significant potential for further innovation. Embracing more decentralized and intelligent control processes could unlock new levels of efficiency and effectiveness in industrial production.

Rise of the IT department

As organizations embark on their digitization journey, the formation of an IT department becomes a natural progression. This department is responsible for managing both the IT infrastructure - such as networks and servers - and the IT systems, including applications and databases. As more IT systems are introduced, the demand for IT services, infrastructure, and maintenance grows correspondingly. By the time an organization is fully digitized, the IT department typically matures into an established support function, with a clear mission, defined targets, and a dedicated budget.

Traditionally, the IT department is organized and operated as a support organization. Its primary mission is to enable and support business operations, rather than to lead them. However, as business processes become increasingly digitized and automated, the demands on IT resources grow significantly, while operational demands may decrease. Over time, this shift can result in a situation where the IT department, originally intended as a support function holds more resources and influence than the core business operations.

This imbalance can become a source of internal conflict, as the growing prominence of the IT department may lead to tensions within the organization. The realization that a support function has more resources and control than than the core business can create friction and may become a significant obstacle to further digitization efforts. Addressing this potential conflict is crucial for organizations aiming to advance their digital transformation without internal disruption.

Conclusion: Call to Action

Organizations at this stage of digital maturity must to focus on the future -- and the time to act is now. Companies that successfully navigate their digital transformation will position themselves for extraordinary success, while those that hesitate risk falling behind, or worse, going under.

Digital transformation at this level is not uncharted territory. While you posses unparalleled knowledge of your business, the critical expertise in digital tools and practices may not always be available in-house. By partnering with the right experts, companies can leverage best practices, advanced technologies, and professional change management to set a clear vision, craft effective strategies, and avoid common pitfalls.

Remember, digital transformation is about more than just adopting new technologies; it's about re-imagining your business to thrive in a digital world. Embrace the digital shift with confidence, and seek out a partner who can help guide you through the complexities of this journey. With the right support, you can not only adapt to the digital era but also lead the way in your industry.

Next level: Digitalization

In the next post in this series, we'll explore the concept of digitalization, where digital tools begin to fundamentally transform not just how we work, but how we think and operate as organizations. Stay tuned as we dive into how embracing digitalization can unlock new levels of innovation, efficiency, and strategic growth.