The first wave of digital transformation reached the shore in the early 2000s, at a time when many new technologies were in their infancy. Cloud software, collaboration tools, and social media were all in a nascent stage, and although there was a call to digitize various business elements, the movement failed to take off.
Digital transformation at that point was expensive, and numerous risks were associated with untested technologies. Data wasn’t proven to be secure, and lots of holes needed to be plugged with expensive fixes. As a result, only the companies that stood to gain the most joined the movement, while the rest proceeded with business as usual.
In the past 15 years, however, many of the technologies that made that first wave possible have matured into stable, secure, and scalable solutions. The world is entering a new phase of digital transformation: digital transformation (DX) 2.0. With some careful preparation, this is the perfect opportunity for organizations, particularly manufacturers, that missed the boat the first time around to hop aboard.
Defining DX 2.0
While the technology itself hasn’t changed drastically from the first digital transformation, it is faster, cheaper, and easier to adopt than ever. Plus, even more functions have the option to be digital today.
Tools such as Google Docs enable easy digital sharing and collaboration, while project management tools like Asana help keep teams on the same page. Social media platforms including Facebook have played their own role in the digital transformation, changing how companies interact with their customers, and social networks like Yammer have been created entirely for businesses.
In addition, the emergence of low-code and self-service platforms has allowed companies to digitize many of their core functions without requiring a significant strain on IT resources, plugging the holes that plagued the first digital transformation. The “let’s wait and see” crowd has finally won out; they’ve waited long enough for solutions to become crystal clear.
The Case for Digitization
General Electric has estimated that, by 2030, businesses operating in the “industrial internet” could contribute as much as $15 trillion to the global GDP. Manufacturers that aren’t taking steps to move toward digital are taking a risk; this wave of transformation will be more like a tsunami, and organizations that don’t find a way to ride the wave will be washed out beneath it.
Even at some manufacturing companies that utilize robots on the production line, business operations and communications continue to be run in a manual, paper-based environment. For partners, clients and vendors, this process is becoming increasingly frustrating as it prevents them from being able to share data.
It’s also less economical to handle processes manually. Hiring additional employees is a large expense, and it doesn’t offer the same scalability of digital processes. The manufacturing floor gets more technical on a daily basis, and the business office will need to keep up. Purchasing, sales, finance, administration, and human resources departments will all need to undergo a complete digitization in order to keep up.
Preparing for a Transformation
A true digital transformation requires more than merely investing in technology. Truly becoming digitized requires a cultural shift, and companies striving to be successful need to be ready for it. A study of more than 70 executives by GT Nexus found that only 5 percent of respondents were “very satisfied” with their digital progress. If you’re not among that group, here’s where you can start to turn things around:
• List your business areas currently outside of DX. These could include anything from purchasing and procurement to inventory management.
• Rank those items in terms of importance. If you connect with your customers directly online or sell via platforms such as Amazon, digitizing inventory management is probably more important than digitizing employee satisfaction surveys. Both should be taken care of by the end of the digital transformation, but this step is about prioritizing which will make the greatest impact if addressed first.
• Make a complete master plan. Digitization will affect every department in your organization. Instead of putting it together piece by piece as you go, create as complete a plan as possible.
• Identify sequential action steps. You might be interested in an enterprise resource planning system, a process management tool, and a customer relationship management system, but you can’t successfully pursue them all at once. Pick an area, and start there before moving on.
• Don’t fear double-work. When you begin a digital transformation, you’ll probably need to maintain two parallel systems. Unfortunately, this is a necessary evil — just ensure that your employees know they’re getting off the sinking boat and onto the ship and that the sinking craft will be let go once the change is complete.
The first wave of digital transformation saw small-scale adoption, largely due to holes in systems and a lack of trust in new technologies. This time around, adopters will be in the majority, and manufacturers who want to stay relevant and competitive need to take advantage of the benefits digitization offers or risk being left behind.