A recent Gartner survey (reference below) identified “Digital Initiatives” as the top CIO priority for 2019, tied with Revenue Growth and ahead of other items including Operational Excellence, Customer Experience and Cost Reduction. Of course “digital” can support all these aspirations, but clearly the pressure is there to be a more digital business, even for those companies in the manufacturing space not considered digital natives.
As a result, every consultant big and small is more than happy to show you their slide deck - “Artificial Intelligence Enabling the Cloud of Digital Transformation in the Industry 4.0 Blockchain of Augmented Reality… as a Service” - with visions of collaborative workplaces, transformational apps, and big data insights. But you say “Well that sounds great, but I’m working for a traditional manufacturing company and wait to see my “debt” –20-year old ERP and MES systems, many manual processes on the plant floor, and an old school, non-digital, culture and organization. How am I going to chart a digital transformation path forward?”
First, while many can debate the meaning of the phrase “Digital Transformation”, make sure you define what it means for your company. In fact, it probably has a different meaning depending on what business unit or function you’re talking about. Maybe outside disruptors are a major concern and you need to rethink how you service your customers, or even who your customers are. Maybe your business, like Linde’s, is capital intensive and still has large barriers to entry, but you need to continue to improve quality and cost performance. There are no wrong answers, but you should be prepared to play a key role in setting the true north for your organization.
As we develop digital strategies for our businesses, here’s some key tenants. Don’t go technology first – this seems obvious, but every week there’s a Wall Street Journal article about some companies AI, blockchain or robotics strategy. While that may work if you’re a tech first company, in the manufacturing space that will typically only lead to a series of unfulfilling pilots that won’t scale. Start with your business strategy and consider how digital can complement that.
Second, have a bifocal view of future – experimenting with new ways to work are crucial for the long term, but in the short term don’t lose focus on ensuring your foundational systems are robust enough to enable change at scale. Third, make your you feel your customers experience – not just sales feedback or surveys, but walk in their shoes. See how they think, act and work. Remember, not everyone is interested in being digitally transformed.
Fourth, change your focus to products and platforms over projects. While this is second nature in today’s software companies, many manufacturer’s still follow the “fund one capital investment at time” approach. While that still makes sense when you’re putting equipment on the ground, it doesn’t fit well with the need for fast iteration and improvement inherent to the digital world.
Finally, know your path to value. Think about those nuggets of ROI that digital enables – more real time and granular data, reduced friction in getting things done, more connectedness with your ecosystem. And be ready to manage through changing people’s jobs. Remember that the focus is not to be more digital – it’s about changing how work gets done.
Let’s talk about some specific examples of our digital strategy ad how they connect to the business strategy. Industrial gas customers like ours view our products, such as oxygen, hydrogen and argon, as utilities just like water and electricity. When they open the valve, they expect the oxygen to be there, no questions asked. As a result, high equipment reliability and plant availability are key tenants to the industrial gas business. Our digital strategy follows suit, as we are continuously developing new IoT solutions that combine low cost sensing with advanced analytics to provide new insights into machinery performance.
Second, industrial gas processes are hugely energy intensive. The industrial gas business consumes about 2% of the US manufacturing industries overall energy consumption, so a 1% improvement in energy efficieny has large business and sustainability implications. Thus, a significant part of our digital strategy is to leverage advanced automation to maximize efficiency. We have designed and deployed systems that can fully automate all aspects of plant operation including startup. And we are beginning to leverage new sensing technology, like infrared images, to further optimize plant efficiency. Also, because our asset base is highly distributed (Linde operates well over a two thousand facilities globally), we rely on global remote access and robust digital tools so that the appropriate experts can easily monitor plant performance anywhere in the world.
In considering your digital strategy, besides aligning with the business objectives, it is also vitally important to remember the phrase “Culture eats Strategy”. Do you have a multi-pronged strategy to build a digital culture within your organization at all levels? Beyond executing on the key new products as described above, you need to have an aggressive strategy to communicate success stories to all parts of the organization so they too want to participate in the transformation. You also need to take steps to introduce people at all levels of the organization to digital technologies and processes. Small scale, cross functional workshops on subjects like design thinking and agile will help build that culture. For example, agile is a close variant on lean, so the lean practitioners supporting manufacturing operations can quickly pick up the agile development process and apply to digital and non-digital products alike.
Some final thoughts – Focus on the job to be done, not the technology; make sure you’re solidifying your foundational systems in parallel to experimenting with new technology; continue to expand your ecosystem of partners including academia, startups, your customers and suppliers; and avoid getting caught up in trying to make a big one time splash, but rather focus on what steps you’re taking every day to become a better business. Follow that path and you’ll be successful in the end.