Digital transformation spans industrial products, operations, value chains, and aftermarket services. It augments people and knowledge through expanded use of sensors, data, and analytics.

Digital transformation requires a shift in approaches to deploying and utilizing technology.

To help identify these gaps, there has developed a maturity model for digital transformation based on multiple consulting engagements with end user clients. Companies can use the model to help answer the following questions:

• What is the role of the emerging digital organization?
• How can my company begin to transform?
• How can we leverage existing data without compromising security?
• How can we best prepare employees for digitization?
• How can we accelerate knowledge and competency?
• How can my organization scale up delivery?
• What are the metrics for success?

Several emerging technologies have major impact on the process industries, each in a unique way. Maturity model for digital transformation connects these with people, culture, technology processes, and business processes.   Industrial organizations have found this helpful to determine their respective organizational readiness for transformation.

Many of the newer technologies require changing the way technology leaders think about people, technology architecture, and process.  Many of today’s plant-centric approaches will not support new technologies and approaches.  Historically, plant-level operational technology (OT) systems have been procured and supported by plant engineering or operations staffs.  But new information technology (IT)-based systems require internal IT staff or cloud service providers to manage and host the platform infrastructure, with engineering and/operations helping define the operational and supply chain outcomes.

Key Factors for Digital Transformation

To determine readiness for digital transformation, ARC has assembled maturity models that cross the boundaries of technology, business process and most important, people. We use these to help our clients evaluate current business processes and human capital, benchmark against industry peers, and perform a gap analysis. The maturity factors considered include:

• Teamwork and culture
• Knowledge transfer
• Capability and competency
• Decision making
• Workforce performance
• Employee change leadership
• Business process governance
• Process improvement and agility
• Measures and KPIs
• Technology architecture and governance
• Transformative potential and risk tolerance
• Data management

 However, this will require a well-focused effort that includes preparing the workforce, implementing the appropriate IT infrastructure, and adjusting business processes. Research indicates that many management systems currently in place create barriers to digital progress. Often, hierarchical management structure, weak employee change management leadership, and organizational silos create artificial barriers to information, impeding decision making, and - ultimately - hampering business performance. “Factors of digital transformation” will help companies assess their respective readiness to transform. This consists of two main categories of organizational maturity: people readiness and business process readiness. Each factor has its own implications for digital transformation.

Many industrial organizations already acknowledge the need to better position the company to implement new digital and internet-enabled technologies without compromising cybersecurity.  But as the OT and IT worlds continue to converge, a different technical organization may be required. The company’s technology leadership teams must evaluate how to make better use of the existing infrastructure and data, create more value from existing applications, avoid duplication of effort, and make best use of OT and IT resources at the plant and enterprise levels.    

As we move to a digital economy, many industries are gradually shifting many IT services to cloud-based service providers like Amazon and Microsoft. Addressing this shift to the cloud will be a critical step for successful digital transformation by transferring some technology accountability to the business stakeholders.

Research and analysis, we recommend the following actions for industrial organizations:

• Assess your organizational readiness using the factors of digital transformation discussed in this report, paying particular attention to the cross-organizational process boundaries.  Engage with an independent consultant to assist, if needed.
• Examine the processes used by IT and OT groups and look for potential gaps that could slow progress.
• Do not underestimate the degree of work process change and develop methods for addressing this.
• Help your workforce become comfortable with the inevitable change and disruption by investing in people and change leadership.

Customer-focused Innovation.  "By using data, digital technologies, and machine learning we can ask new questions about our interactions with customers, then map those learnings back to how assets are deployed and managed in operations.   We optimize our business, respond quickly to customer needs and market trends, and improve profitability and shareholder value."

Identify New Boundary-crossing Business Processes.  Today's business processes are too-often constrained by what was possible, given the systems available, at the time they were instituted.  With the advent of new and disruptive technologies, new ecosystems can be supported, and new, efficient processes can be introduced.  It is vitally important to approach this by using a 21st Century model of operations, and not fall into the trap of using a comfortable, but possibly dated mental model thereby artificially limiting the ‘transformation’ that will be achieved.  A frank assessment of the organization’s capacity for change is also important in this process.  If you don’t know what you are capable of (and limited by) you can never understand what fundamentals must shift in order to transform.

Technologies, Security, and Architecture.  By themselves, new technologies do not justify a digital transformation.  However, they will play a critical role in the eventual end-state.  The Digital Transformation initiative must explicitly consider these technologies, together with associated architecture and cybersecurity requirements.  

Business Justification and Solution Selection.  As all of the above come into focus, it is time to zero in on specific solutions, costs, and ROI.   

Deploy, Build Expertise, and Create New Cultural and Workforce Norms.  Many of the changes will require the organization to adapt in ways that go beyond the usual 'change management' dictums.  For example, the organization may want to add data scientists in leadership roles to help the organization benefit more and more over time from machine learning or artificial intelligence systems.  

Digital Transformation Maturity: The transformation of industrial products, operations, value chains, and aftermarket services, enabled through cultural and workforce changes and through the expanded use of sensors, data and analytics, is driving new business models and step changes in performance.

Many newer technologies such as IoT/connected assets, wearables, augmented reality, artificial intelligence (AI), advanced analytics, and machine learning require changing the way technology leaders think about people and technology architecture and process.  But there's more to digital transformation than disruptive technologies.  It’s really about leveraging these technologies to innovate and optimize your business model and business processes - in a way that wasn’t possible before – to drive more value for customers and the enterprise. 

Leading Industrial Companies Embrace Digital Transformation. Leading industrial companies are actively engaged in transformation programs that will reshape their production operations to be more integrated, responsive, and optimized to meet business and customer needs.  Whether it is called Digital Transformation, Smart Manufacturing, or something else, there is clearly a significant shift underway.  Information-driven, highly efficient competitors with innovative business models will enjoy a competitive advantage in the marketplace.

Develop strategies for:

• Fostering Innovation
• Implementing as a Way to Learn and Scale
• Disruptive Technologies
• Culture, Organization, and Change
• ROI Matters – When and How
• Supplier and Solution Selection
• Digital Transformation Planning and Roadmapping

You shold do:

• Understand the significance of emerging IT/OT/IoT technologies and trends and the potential opportunities and threats they pose
• Compare your current production operations to modern/future practices and to other companies
• Determine a specific and appropriate next-generation technologies strategy for production operations that supports your business goals
• Plan to manage organizational change issues
• Identify a logical series of steps to take in order to move from your 'as-is' to your 'to-be' state
• Identify and select appropriate technology/solution partners for the digital transformation journey

ARC helps technology suppliers define and implement their competitive strategy for the Industrial Internet of Things (IIoT).  Our service helps core technology suppliers position their products for industrial markets, identify strategic partners, and target high potential market opportunities.  It helps software, automation, and implementation companies to identify and shape high value IIoT solutions for their industrial customers.

Guidance on:

• Go-to-Market Strategy
• Product Development
• Partnering
• Competitive Strategy