Digital transformation initiatives are happening at nearly all companies.
However, the ultimate success of these initiatives runs the gamut.
McKinsey research found that manufacturing companies are pursuing – on average – eight digital transformation-related pilots. However, when it comes to scaling those projects, digital transformation stalls – only 30 percent of organizations rolled out these initiatives company-wide.
Recently, PTC business leaders, Craig Melrose, Howard Heppelmann, James Zhang, and Scott McCarley, wrote about how to develop a digital transformation program that not only emerges out of the pilot state, but also achieves double-digit improvements across key metrics, like cost savings, capacity, and efficiency.
“While there are promises of a bright, digitalized future, executing successful pilots is one hurdle while realizing value at scale is yet another and where future leaders will emerge,” states the Manufacturing Leadership Journal article. “At PTC we’ve had the benefit of working with 1000s of clients and the majority of stalled initiatives share a common theme – technology, rather than financial impact, is mistakenly at the center of transformation.”
When building out a digital transformation strategy – one that has longevity – businesses need to align Industry 4.0 projects with their strategic plan and goals is the first step toward generating measurable value.
“What an industrial customer wants above all is a solution that solves an expensive problem they are suffering from, or perhaps a solution that captures an opportunity they can see,” says Jim Heppelmann, CEO and president of PTC.
To get to that ultimate solution, manufacturing leaders first need to clearly articulate that challenge or opportunity, identify the potential value to the company, and then seek out the right digital manufacturing solution and partner(s) to achieve that goal.
In looking at a starting point, there are three distinct components to unlocking measurable digital transformation value: impact, speed, and scale. Let’s walk through each one.
Impact
Identify value by getting broad, cross-functional senior leadership team involvement from the start with a focus on the financial-impact first approach and a commitment to prioritize resources and eliminate potential obstacles.This graphic below for examples of how a DX initiative that creates additional production capacity at a plant can impact a business in three different ways, depending on the company-wide strategy and goals.
Take the first column, with the additional capacity created, a manufacturer is able to introduce more volume to the line to meet demand, which may mean in-sourcing products, manufacturing additional products (with no new capital expenditure), or taking on volumes from other plants. The impact could translate to new revenue (if the business used the additional capacity for more volume and/or new products).
Speed
Capture value by identifying production bottlenecks and prioritizing the most pressing problems that realize impact in as little as just a few weeks.
With a financial-first analysis, time-to-value is a critical component.
“With limited company resources, it’s important to focus on the highest value use cases that can be rapidly scaled across the manufacturing network,” describes the
Manufacturing Leadership article.
While there are likely many use cases that will benefit from the digital manufacturing solution, narrowing the focus of the initial pilot to a challenge that can be solved quickly is essential for the success of the long-term project.
A short-term win that demonstrates significant impact garners enthusiasm and is the key to getting digital transformation out of “pilot purgatory.” Our State of Industrial IoT report found that 89 percent of respondents expected to move from pilot to full production within a year of purchase.
Scale
Expand value by building a foundation for enterprise scalability, including people, ecosystem, capabilities, and a digital backbone to iterate quickly and achieve high impact.
It’s not enough to have the ability to scale a project, it must be done continuously and at a pace to gain a competitive edge. Executives play a key role in this shift; they need to have the future vision – and DX strategy in place – to rethink scalability across operations.
Traditional transformation approached deployment on a plant-by-plant basis, rolling out optimizations at a single plant at a time. To achieve significant business value quickly, manufacturers need to plan for simultaneous rollouts of impact-creating technology. It’s the most effective way to achieve payoffs in an accelerated timeframe.
Final Thoughts
As manufacturers take the financial-impact first approach, there needs to be a strong team in place to execute and lead. This includes both internal stakeholders and solutions partners with manufacturing expertise.
By considering impact, speed, and scale as the essential components to digital transformation success, manufacturers put themselves in a position to challenge the business-as-usual and execute on a strategy that will influence the business for years to come.
