What is a digital transformation?
Digital transformations are different for each organisation, so it’s hard to say what a generic transformation looks like. Such a beast does not exist. However, broadly, Digital Transformations focus on a few things:
- Embedding digital in your business by connecting people and devices.
- Fostering a business culture that encourages innovation
- Making data-driven decisions.
- Adding agility to your business.
What a digital transformation is NOT:
- Just another kind of IT
- A project that has a start date and an end date.
What is a digital transformation in heavy industry?
We’ve outlined above what a digital transformation is, but how does the above definition differ for Heavy Industries like Mining, Shipping, Construction, …etc?
Typically companies like Amtrack, Seaspan, and Teck Resources have huge expenditures in equipment, vehicles, or real estate. These costs don’t go away because you’re undertaking a digital transformation. Most of these assets must be running 24/7 and can’t stop while you dump a database or build a model.
Businesses involved in heavy industry must live in two worlds. They need to keep their eye on their traditional business and add digital capabilities without interfering with it. Unfortunately, these two worlds, often referred to as “waterfall” and “agile” do not often play well together (and getting them to do so will be the topic of a future article).
Why should your business undertake a digital transformation?
You may not be the decision maker in your organisation, but I imagine you’re a decision maker, so I’m going to help you to sell a digital transformation to the folks that it needs to be sold to. And who is that? Absolutely everyone.
Odds are, the executives in your organisation have heard of digital transformations and they know they need to do something, but they’re not quite sure where to start. They look at the spectacular collapses of companies like Sears and Blockbuster and wonder if their business will suffer the same fate. They are worried that a platform like Amazon will buy a competitor, as they did with Whole Foods, and move into their industry. They are aware of small-but-nimble startups who can peel off an especially profitable segment of their market. They also know that digital transformations carry with them a huge first-mover advantage. Even incumbents (i.e. dinosaurs) can grow their market share by up to 20% after undertaking one.
What they need, is to understand how to begin.
How do I start a digital transformation?
- Decide as a company what a digital transformation means to you. What are you trying to accomplish with this transformation? Is it defensive in nature? Are you prepared to adopt new business models if that’s what the data tells you? Or, are you prepared to move gradually and potentially give up that first mover advantage.
- Understand what resources you have available to you.
- Do you already have “citizen data scientists” on staff? Is there a hunger to adopt digital tools, or will you have to hire new talent to shepherd you through this? If so, how much as you prepared to spend up front to attract that talent?
- How much buy-in is there among the executive group and the staff at large?
- What does the data landscape at your company look like? How much data you have on hand already and is that data of good quality? In Mining, for instance, most trucks have been quietly accumulating data for twenty years.
- Decide how you will leverage those resources. Do you need to train up existing staff members. Do you need to install more sensors in advance of the transformation? Should you hire independent consultants?
- Create a roadmap and communicate it to the business. Most of the pitfalls I’ll be speaking about later in this article occur in this step. The kickoff of your digital transformation needs to be a Big Thing, communicated with full endorsement of the leadership team. You should outline a plan to either up-skill the staff or bring in external contractors and set up an oversight cycle that you stick to. Finally, while you don’t necessarily need to share your plan for scaling the transformation, you should have one in your back pocket for when everything goes right.
- Get to work!
Why do digital transformations fail?
The first thing that folks need to know about digital transformations is that 70% of them fail. Here are some of the common reasons for those failures:
- People don’t buy in. The CEO of the company needs to build conviction in the company that the digital transformation needs to happen and it needs to happen now. They need to set a shared direction that everyone from the most junior hire to the most senior board member needs to pull towards.
- Digital replication instead of digital transformation. A digital transformation is not simply taking what you do now and moving it online. It isn’t developing a website (though that might be a part of it). It is the potential to unlock new business models from the insights you gain from the data you already have.
- Focusing on strategy rather than value. This is digital navel-gazing. A company becomes fascinated with the act of transforming rather than the value that is created thereof. A transformation should have both immediate and long-term goals.
- You don’t have the skills to make it happen. This is a problem that is especially prevalent in Heavy Industry, but any industry can suffer from it. While companies typically have an IT department, and they might even have a Data Governance and Data Quality Management strategy, they almost never “data scientists” on staff. Often there aren’t even any developers. The best strategy to overcome this problem is to look at the talent you already have. Train up a few talented engineers in data science skills–you might be surprised at what they can accomplish.
- Not enough leadership oversight. Companies don’t typically realise that digital transformations move quickly. Yearly oversight cycles don’t cut it. Companies need to foster environments of continuous improvement and have quarterly check-ins at the very least. You cannot underestimate the change management load on the staff. They need support on a regular basis.
- Not enough thought given to scaling the transformation. Even if the company does “everything right”, a transformation can get away from you. New insights and even business models can emerge from a transformation. A company needs to be agile enough to pursue those new insights in addition to continuing to focus on their core business.
- Assuming they will be “done”. Digital transformations are ongoing and continuous. Product development differs from project management in that projects have a beginning and an end. Products don’t, and neither do digital transformations.
What are the dangers of a digital transformation?
One of the unrealised dangers of a digital transformation is that customers get exactly what they want. The fact that folks can push a button on a website and have free, expert advice delivered right to them put travel agents, for instance, out of business. Your customers might find that they don’t use all of the services that your company provides (and is charging them for). I can remember spending long hours on a feature on a SaaS platform that we hadn’t properly instrumented. Imagine our dismay when we finally added some feature tracking to the app and found out that no one used it. This might very well be the case in your business. Customers might realise they are paying for services they don’t use.
Companies might also lose focus on their core business. In a rapidly transforming sector like retail or travel, this might be a benefit. But for Heavy Industry, which is what this article focuses on, there are potentially billions of dollars of investment in mining equipment, or ships, or cranes, or trucks. Business transformation should add to this core business not impeded it.
How can I tell if my digital transformation is a success?
Simple. Are you generating more value for you customers today than you were yesterday? At the end of the day, you can have the most successful transformation around, but if your customers don’t see any benefit from it, you have failed. Keep your eye on the prize, nurture a culture of innovation and agility and you can look forward to being a digital transformation success story like Chipotle, IKEA, and Starbucks.
