Honest questions and answers will make digital transformation successful
Digital transformation is the most important activity happening today for businesses. Leading CEOs will tell you the issue occupying their time is digital transformation. But tease that out and it means different things to the numerous people you speak to.
And this is to be expected because to be a true transformation across all the sectors these CEOs are going to be on a different part of the journey, facing different sector challenges and issues. And some people ask is this a digital story or a transformation story? Whether it’s about investing in the back end, or digitising the analogue approach, or connecting the unconnected machines, or finally using all that data that has been stored all these years – in the end the digital and transforming have to intersect or there hasn’t been a successful investment.
The first question a CEO or Board will need to ask is - do we need to have a digital transformation? If your organisation is facing disruption (most are), a growing demand for real time analytics and predictive decision making (customer identification or machine maintenance), facing cost imperatives (energy or supply chain) and increasing safety risks – then the answer has to be a yes. Because your competitors will be looking at weaknesses and looking for jump-in opportunities. Even the competitors you don’t know yet will be building themselves to better answer those questions.
Australian technology company Telsyte, as the source of the data and DXC Technology as the sponsor of the research, found in a survey last year that 52% of IT and business leaders believe their industry is being digitally disrupted. But only a portion of those business leaders were being proactive with many only ‘keeping an eye’ on disruption and reacting ‘if and when it begins to impact us’.
Whether you are B2B or B2C the need to prepare for a changing business model is now a way of life. Just ask GE, Kodak, Nokia, Ford, Microsoft, travel and hotels sectors or any Australian retail business.
But the question may then be asked, is this an expensive exercise? A recent report sets out to address the concerns that digital transformation is an expensive capital expenditure proposition involving new systems and difficult integration.
A global player in digitalisation, Schneider Electric, released at Davos in January, the Global Digital Transformation Benefits Report. The report used evidence from a repository of 230 customer projects Schneider Electric completed in the last five years across 41 countries.
The study shows that digitisation of engineering processes, for instance, can save businesses and organisations an average of 35% in CapEx costs and time optimization. Further, commissioning costs of new systems and assets can be reduced by an average of 29%. The study also reveals that digitization, by harnessing IoT, can result in significant savings in Operational Expenditure – leading to step change improvements in efficiency, reliability, safety, and sustainability. Businesses and organisations report an average savings of 24% in energy consumption, as a result of digitisation.
The next question will be what will the digital transformation set out to do? The options are many, but focus will make the difference. Is it about connecting directly to your customers and knowing more about them to predict their behaviour? Or is it to connect all your machines and assets so that you can for the first time have real time data on how they are each performing, so that maintenance changes from an arbitrary timetable to a predictive maintenance that saves time, money and down time?
Another area that is growing in this world of thinking is the connecting of buildings to make them smart for those who inhabit them; that is more comfortable, more energy efficient, enabling engagement between the end user and the buildings services. The traditional approach has been to fill buildings up with systems that were not connected and were centrally managed, and limited in how they could be adjusted to suit the end user or enable the response time of the facility manager. But now with open systems and applications sitting on top we have facility managers being able to run not just one building but a collection from their iPad, whether they are in the building or 1000 kilometres away.
That enables more productive workspaces and more energy efficient buildings. Established buildings are terribly energy inefficient, with the ability to improve that efficiency by 70-80%. Fixing that approach requires a digital transformation of our cities and building sectors so that the end users are not paying high energy costs, a critical issue in Australia, and importantly can stretch to meet the increasing high bar for sustainability now embedded in the leading global corporations.
An end question will be – who do I get on board to make this happen? Well that is going to have to be your people. Redefining your culture and your values is a key success factor to drive digital transformation within your company. It is a long and painstaking trajectory that requires a lot of patience, with great effort to be put in continuous and clear communication. That is why Microsoft’s CEO Satya Nadella named his book “Hit Refresh”. His transformation plan puts individual empowerment at the centre of its cultural change. In this model, he wants to see Microsoft employees bring solutions to their problems.
In the new world once digital transformation has completed its first cycle, customer-centric organisations are the only ones to survive and thrive. For businesses to truly be customer-centric, they must educate and empower their employees to have their customers at the centre of their worlds.
*Nancy Rademaker is an international expert on commercial digitisation and its impact on customers. Nancy will be a keynote speaker at Schneider Electric’s Innovation Day in Sydney on April 2nd.