Three days listening to and speaking with some of the world’s greatest manufacturers at the recent IMPACT event in Las Vegas proved one thing: senior executives are serious about undertaking their digital transformation journey.
They want to move beyond the reactive to the predictive. No more “rear-view mirrors.” Today, with sensors and real-time data on causal factors like machine performance, value chain availability and even factors like the weather, manufacturers can do more than analyze what happened. They can prevent what could happen.
For example, one manufacturer we’ve worked with on digital transformation is now so confident about their production plans that they are changing their customer value proposition, offering guaranteed deliveries, guaranteed quality and performance-based pricing.
Digital Transformation: Six Steps
My colleague, Dennis McRae, and I delivered a keynote address at IMPACT titled, “Smart Manufacturing: Digital Innovations for the Next Generation of Operational Excellence.” It seemed to strike a chord with the audience. In conversations after the event, executives were particularly interested in what we called the “six steps to digital transformation success.” Here’s a quick summary of those steps.
1. Set clear goals. Pick a couple of opportunities as a proof test of value. Be able to describe pilot projects in a few bullets. You’ll want to test more than one hypothesis and avoid falling in love with one pet project.
2. Validate your hypotheses with data. For example, if one potential project is to improve the performance of a line that relies on a machine that is experiencing unplanned downtime, collect data over a fixed period of time—your manufacturing load, staff load, labor, raw material load, planned orders, all of the key metrics that you gather today specific to that work cell or that line.
3. Build a business case. Is there a dollar value that makes sense in investing in fixing or replacing that machine? If solving the problem generates a few hundred dollars’ worth of impact, the ROI may not be justified. But if the data shows that downtime costs thousands with each occurrence, and puts customer relationships at risk, the business case is there. That’s a project worth pursuing.
4. Executive alignment. The traditional lecture-style monthly meetings and status reports aren’t sufficient for driving digital transformation. Instead, create an executive advisory board as a forum for education and foster a “roll-up-the-sleeves” attitude about possibilities and approaches where everyone is engaged as a team.
5. Focus on execution and results. Take on pilot projects with a strong business case and zero in on the barriers to execution. Perhaps your data repository lacks the capacity for relevant real-time information or your sensor data is inadequate. Addressing those interim issues will help ensure that you create the value you’re looking for and keep the energy up during the digital transformation.
6. Seek advice from leaders. Look outside your own organization, particularly leaders from other industries. Often what you thought was merely a distant possibility is actually standard operating procedure in another industry. Your team will start to get excited when they see the success of others on similar digital transformation journeys and have a deeper appreciation of the importance of their efforts.
We’ve seen the power of this approach at a number of clients. Identifying and executing on a series of manageable, high-value projects is the key to a sustainable digital transformation journey.
Hitachi Consulting’s new Point of View, “Accelerate Digital Transformation by Connecting Your Manufacturing and Supply Chain Data,” is a great place to start if you would like to learn more about driving digital transformation in a manufacturing environment. We’ve also produced a short video about smart manufacturing. We hope you find it useful.
But most importantly, we want to hear how your digital transformation is going.
"Digital leaders attain 49% better gross margins, 45% better earnings and 57% higher net income than laggards." The Digital Business Divide, Harvard Business School