Don’t Rush Digital Transformation: 8 Considerations in a New Era

The current crisis has severely disrupted the business world. Entire sectors have shut down, and many companies are implementing partial sleep mode to focus on customer-critical operations and business continuity plans.

Digital transformation programs are not immune to these abrupt changes. While consultants are rejoicing about the increased sense of urgency for firms to get on board the digital transformation train, I posit it is going to take some time for them to do, and it will require a different type of digital transformation, especially in the industrial world.

This is what I call digital transformation 2.0. The new normal will be much more practical, realistic, and focused on impact. This is what was lacking in digital transformation 1.0, especially considering the poor track record of success.

Here are eight considerations for manufacturing leaders to think about as they redesign their digital programs:

Focus, focus and focus: Focus is the name of the game. Many digital transformations were well-financed without a clear pipeline of innovation. As a result, the digital teams were “chasing” opportunities and creating busy work that brought little value. This is a typical case of capital chasing opportunities, as we witnessed during the internet bubble of the earlier 2000’s. In the past three to five years, industrial firms poured billions in digital transformations trying to strike gold. For many of them, the lack of focus led to many failures and false starts. The next three to five years will be about focus, impact, and profitable growth.

Keep it simple, stupid: Global digital transformations can no longer be complex organisms with multiple entities, dozens of workstreams, and hundreds of projects running in parallel. Many of them are set up as parallel organizations suffering from lack of leadership, of accountability, and a certain level of disconnect with the core business. The future is more about agility, fluidity, and clear accountability to business stakeholders. Removing that unnecessary complexity is a necessary step to match the level of market dynamism.

Forget about legacy versus digital business: Digital transformations need to focus on true innovation around the core business and generate growth for that core market verticals. This is a hard lesson to learn, but a necessary one. The implication of this is a greater level of integration and coordination between the core legacy entities and the digital business. There cannot be that great divide between the two organizations. It is no longer us versus them.

Prioritize better and faster: The times for “me-too” commodity digital projects, pet projects, theoretical ideas, unrealistic futuristic dreams, and “boil-the-ocean” programs are gone. These opportunities need to be killed before they enter the innovation pipeline. They create complexity and burn cash resources. The digital future is about true innovation and executable opportunities. The proof is in the pudding! We must go back to the basics and focus on customer pains, customer problems, true differentiation, willingness-to-pay, and pricing power. This implies that digital teams must do their homework early in the process and kill projects if they do not meet the impact requirements.

Address the internal typical organizational bottlenecks: Some of the behaviors we see in digital transformation teams must be addressed and fixed as soon as possible. These behaviors include: “We should go at it alone”, not-invented here, “I know better that the best in the business”, “we can build this software ourselves”. Enough already with these! The wheel has already been invented. IoT has been around for 20 years. The focus on speed and impact requires partnership, open-innovation, and working with commercial partners.

Digital opportunities start with new business models: True digital innovations must be thought of as new business models. They should not be business-as-usual. They should focus on the attractiveness, feasibility, and viability of the opportunities. A digital transformation might include a dozen new business models that need to be managed as a dynamic portfolio. That also implies a requirement to look at commonalities among business models and approach the portfolio with a platform mindset.

Monetize and leverage data: Successful digital transformation are first and foremost data transformation focused on customers and ecosystems. The management and leveraging of data cannot be an afterthought or part of the 28 other projects running as part of digital transformations. Do you have a robust and long-term data strategy? Are your data projects well financed? The future of digital is to extract, integrate, and mine data. This is the core of your innovation pipeline. Along the same line, monetizing and extracting the value of your data is equally essential. This is often overlooked.

Solve your internal inefficiencies right now: This 2020 COVID crisis is a stress test of your internal digital capabilities. It is the opportunity to test your communication capabilities, your IT infrastructure, your collaboration tools, and your bandwidth. But it is also a test of your digital mindset among IT and engineering teams. Your ability to drive internal digital transformations is a make or break point in your overall digital transformation. Take a realistic look at how you are doing in this crisis and make sure you modify your road map accordingly.

This crisis offers new beginnings and opportunities. Digital is not dead. It is resetting like many other processes and functions in business. Digital transformation 2.0 is focused, less complex, customer-centric, profitable, differentiated, and grounded in data monetization. Digital transformation 1.0 is dead. Long live digital transformation 2.0!

Stephan M. Liozu, Ph.D. is chief value officer at Thales Group (www.thalesgroup.com), research fellow at Case Western Reserve University, and founder of Value Innoruption Advisors, a consulting boutique specializing in value-based pricing, digital pricing, and industrial pricing. Stephan wrote nine pricing books and is a frequent keynote speaker at industrial and digital conferences.