Transformation of an organization to be future-ready is the outcome of a well defined strategy. In the era of digital disruption, it’s more important to focus on the right set of imperatives. In this article, we discuss the critical components that shape a holistic digital strategy and the right approach in defining one.

Holistic approach to Formulating a Digital Strategy

E-B OOK

Sharad Nigam, Vice President - Hitachi India Pvt. Ltd.

Akhila Kakeri, Senior Consultant - Hitachi Vantara

Niket Malpani, Senior Consultant - Hitachi Vantara

Madhu Juvvanapudi, Manager - Hitachi Vantara

Unravelling the steps to a sustainable Digital Strategy

Collaborative Robots

The global collaborative robots sales was valued at 66 thousand units in

2019 and is projected to reach at 508 thousand units by 2023, growing at

a CAGR of 66%, from 2019 to 2023.

Industrial IOT

Shift towards predictive

maintenance applications, heavy

customization of machine interface

and edge computing by 2021

Remote Monitoring

Fast paced shift towards enhance

supply chain optimization, remote assest tracking and

monitoring, enhanced

surveillance, sustainability and

cost optimization as an aftereffect of

COVID-19

Arti�cial Intelligence

Market size of AI in manufacturing is

expected to exceed $2 Billion by 2025 up by 40% from 2019

Cyber Physical Systems and Digital Twins

Up to 89% of all IIOT platforms will contain some form of digital twinning by 2025

Pervasive Blockchain

Blockchain in being explored to offer solutions around

supply chain monitoring,

counterfeit detection, asset tracking,

quality assurance and data validation

Figure 1. New Elements of Digitally Optimized Shop Floors.

‘Digital Transformation’ as a buzz word, has been taking the manufacturing industry by storm in recent years, but the fact remains that technology has always been at the fore-front of advancements in factory improvements and has led to the transformation of shop floors into giant digital machines . This is clearly validated from the adoption trends of various technologies during these years.

As manufacturers learn to tackle the new pandemic situation along with the ever-increasing pressure to reduce costs and enhance quality; digitalization offers real opportunities for faster recovery, robust growth, and greater productivity.

Different manufacturing companies fall under different levels of digital maturity, given their level of adoption. The variations in digital adoption highlight that there is significant room for beginners and learners to progress towards the next level of maturity in the digital spectrum – which calls for a focused thinking on the depth and breadth of digital solutions. As manufacturing industries (highlighted in Figure 2), stride towards truly digital and optimized shop floors, this article will delve into the one key ingredient that sets the successfully transformed ones apart from the laggards, which is a well-articulated & holistic “Digital Strategy”.

Why do organizations need a digital strategy? Even within the continuum of digital maturity, the understanding around digital transformation is evident and clear in some companies while not so much, in others. This might be because most manufacturers understand digital transformation as an application of one or more technologies such as IoT, AI, ML, Digital Twin etc. in silos. While the presence of some or all of these in a factory setting might indicate a level of digital adoption, manufacturers that want to transform into a full-fledged, digital organization need more than just a set of technologies.

Studies indicate that a staggering 70% of digital transformations fail, as there is a huge difference between planning and putting the plan into action. Of the $1.3 trillion that was spent on digital transformation last year, it was estimated that $900 billion went to waste.* Organizations trying to embark on a digital transformation journey have a gap between their digital ambition and execution, thus needing a roadmap to guide digitization efforts and processes.

The key steps leading to a successful journey of digital transformation entail, envisioning a digital future, defining objectives and putting a strategy in place. Then evaluation of implementation options, building a proof of value, and partnering along the journey. In other words, Strategize, Execute and Sustain. The most important lever among these, which also acts as the first and foremost step according to many experts, is defining a digital strategy.

Digital strategy is the outcome of an organization’s planning exercise that defines new business strategies supported by digital capabilities and a specific action plan to implement them. Apart from bridging all the important gaps, a digital strategy ensures the organization is taking the rights steps, looking at the right data, implementing effective technologies, and guiding the application of business decisions.

Beginner

• Lack of digital vision• Top management believes

automation equal to digitization

• Leadership is unclear about ROI

Passive

• Digital vision exists• Siloed digital thinking• Limited digital capability to

execute a full-fledged transformation

Optimized

• Digital strategy is defined, well understood, business objectives & implementation approaches are aligned

• Organization has tested the waters through proof of values

• ROI and impact of digital transformation is clear to stakeholders

Integrated

• Digitally integrated value chain

• Digital strategy is executed as per the envisaged roadmap

• Digital capability is continually enhanced

Best-in-class

• Organization is setting benchmarks with respect to the operational and financial performance models in place

• Digitally enabled business models in place

Aerospace &Defense

Pharma

Textile &Manufacturing

Metals & Mining

MobilityAgriculture &Agribusiness

Automotive

Consumer Goods

High-Tech

Food & Beverage

LEVEL OF DIGITAL MATURITY

Figure 2. Digital Maturity Continuum

4

What are the typical challenges in building a digital strategy? While being the most important aspect of the digital journey, defining a digital strategy is perceived to be a challenging task. Studies have highlighted that only 23 percent of manufacturers admit having a well-defined corporate-wide strategy for their digital transformation. This a startling insight into the quantum of organizations that do not have a digital strategy in place. On the other hand, Hitachi Vantara has also seen organizations that begin a digital journey but cannot take it to fruition. In our perspective, the following can be cited as the top 5 challenges that become a bottleneck.

● Lack of vision or destination for the leadership to pursue

● Non-alignment amongst stakeholders on objectives and return on investment (ROI)

● Siloed thinking on digital use cases (divides between geographies and organizational layers)

● Lack of clarity on business issues, current maturity level of the organization and the potential impact

● Lack of insight at the level of frontline workers

At the outset, these five challenge areas are controllable and when solved for in a systematic way, cease to be the bottlenecks.

For companies, a digital business strategy is viewed as a means of transforming their business, streamlining processes, and making use of technologies to enhance their interaction with customers and employees, while delivering excellent customer experience at the same time. Failing to plan comes with a great price. One of the biggest obstacles to becoming a digitally mature company is the lack of a digital transformation strategy.

Bimal PuriVP & CIO SRF Technical Textiles

What is the right approach to defining a holistic Digital Strategy? Having a digital vision in place is foundational as manufacturers begin to think about putting together a digital strategy. A digital vision brings clarity as to where the organization wants to go and what they want to become. Once there is a clear vision, then laying down a strategy to get there will be possible. Reflecting upon the definition of a digital strategy – it is evident that a set of focused as well as structured activities lead to making one.

At Hitachi Vantara, we follow a three-step process to define a holistic digital strategy.

Step 1: Determining key competitive levers for the businessThe first step is strategically aligning to the organization’s vision and key objectives. Manufacturers should identify the levers of improvement that aid in achieving their mission and anchor the digital strategy to the same. For example, if the vision and mission of an organization is to provide sustainable and affordable products, then sustainability and product levers become foundational to the journey ahead. Most organizations

Strategy-led digital transformation in operations is a need to catch real-time data and information for a predictive approach which is important for robust manufacturing systems. It gives leverage not only to arrest quality and process variations early, but also reduces costs to avoid unplanned activities.

Ravinder SharmaPresident India Nippon Electricals

Determine key competitive levers for the business- Growth and profit- Compliance- Sustainability- Risks- Market & Brand- Product & Services

1

Perform selective assessments- Business & Systems- Process & Data Maturity- Organizational Capability- Technology Stack

2

De�ne 4W1H* of Digital Strategy- What?- Why?- Where?- How?- When?

3

that do not align on this step end up having a digital strategy that is not aligned to the business objectives, the impact of which is seen in the envisaged outcomes.

Step 2: Perform selective assessmentsOnce the key business levers are identified, you should conduct selective assessments within your business units to understand your current digital maturity when compared to best in class organizations. An outside-in study of competitive digital maturity, challenges across the value chain, expectations of the customer base, regulatory compliance and level of disruption impacting the industry would undoubtedly highlight what should factor in from a transformation perspective. An inside-out assessment across process, systems and organization can unearth the gaps across key business processes, interdependencies, asset intelligence, and flexibility to adopt a new technology as well as the current organizational capabilities. The gaps identified through these assessments should then be put through a series of use case identification and solutioning workshops to arrive at digital initiatives that bring value and relevance. At this stage, the manufacturer gets clarity on scope for the transformation and builds a high-level perspective on the nature of interventions required.

Step 3: Define the 4W1H (What, Why, Where, How and When?)of Digital StrategyDigital interventions that are identified during the assessment stage are further defined before making them part of the mainstream digital roadmap. The critical components that fully define a digital strategy are use case definition, technology stack, detailed business case, scope of implementation, execution methodology and milestones. For all use cases in scope, it is imperative to identify key digital technologies with business relevance.

The selection of technology should be based on delivery impact as well as potential for maximizing return on investment. It is not necessary for a specific technology stack to address all identified requirements and hence the right technology mix that strikes a balance between current and future needs should be considered.

In order to peg the initiatives on a timeline and assist the decision making on investments, we recommend every use case to be looked at through three perspectives - investment, impact and implementation feasibility – which is what we call the 3i analysis to defining your digital imperative. Based on the 3i analysis, the manufacturer can pinpoint the initiatives that are must-haves

Digital strategy requires cultural change and most often companies are not ready for it. This could be enabled by proper change management. Another challenge being faced is to have proper business cases with both concrete and abstract business benefits in front of decisions makers.

Arvind Agarwal VP & Executive Partner RICOH Inc.

and ones that are good to have from a strategic perspective. While defining the execution methodology, a fair assessment of organizational capability should also be done to assess how strong the internal team is to execute the digital transformation agenda. Based on the capability assessment, a dedicated digital team or a capable vendor must be identified to execute the plan. A thorough vendor evaluation and selection process based on project requirements, delivery capability and technical competency will help narrow down the right execution partner in the transformation journey.

The implementation roadmap should also factor in the risks envisaged, solution availability and envisaged uptime, data security, risk mitigation plans, milestones (short term, midterm, and long term) and a change management plan alongside the identified initiatives. Most often, we see that the desired outcome of a digital transformation program is compromised due to a lack of, or an ineffective change management plan. While strategizing technology, process and systemic shifts, the people component should not be overlooked in the digital transformation journey. True success is when people use the envisioned digital environment for operational excellence.

While the governance and sponsorship for driving such initiatives might vary across organizations, it is imperative to have a dedicated cross-functional team in place to drive the digital transformation agenda effectively. Their roles and performance metrics are to be defined and acknowledged as the transformation initiates. The cross-functional team should hold not just the reigns of program management but also be responsible for the defined KPIs that reflect the ability to deliver on the digital transformation.

Today, Digital is essentially a walk rather than a transformational journey. When your employees, customers, suppliers, partners and public at large are using digital technology at their fingertips, an organization, being a core and integral part of the value chain, cannot fall behind. Hence making effective use of technology which is on “anywhere & anytime” is an essential goal for the digital strategy of an organization.

Robin Joy VP & CIO V Guard Industries

Digital Strategy

What? Identified Digital Technoligies

Why? Establish Business Case/ROI

Where? Scope of Implementation

How? DCoE, Ecosystem/Partners

When? Clearly Defined Implementation Roadmap

Figure 3. Defining A Holistic Digital Strategy (4W1H)

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Reference ExamplesHere are two examples of digital strategy work amongst the many that highlight the effectiveness and impact of the 3-step approach.

Heavy Equipment ProductionA large global tractor manufacturer, who embarked upon their digital transformation journey with aim to reduce the number of defective units, had very low insight into the right metrics defining their success. Their existing key performance indicators (KPIs) across departments were not linked to operational performance. The impact of which was visible in the way they worked, executed priorities, and collaborated across groups. Hitachi Vantara worked with them in defining their digital strategy, carved out new KPIs that were reflective of their operational performance and built a premise for developing digital dashboards that give insight into quality and other operational metrics. This digital strategy gave progressive transformation steps towards the desired outcome and when implemented, the organization transitioned from being excuse-based to action-based and imbibed a collaborative work culture and demonstrated enhanced ownership with respect to quality on the shop-floor.

Metals ManufacturingA leading aluminum manufacturer with a rolling mill and large single-can sheet facility in North America, embarked on a digital transformation journey to maintain a competitive advantage in a rapidly evolving market. While generating a significant amount data within their plants, they were using less than 5% for handling machine operations and customer inquiries. They also had limited insight on how to go about changing their business with digital solutions. The holistic digital strategy approach led by Hitachi Vantara helped them garner new possibilities for leveraging their operational data. The approach yielded solutions that led to optimized production, enhanced safety, and quality that boosted their competitive advantage.

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GEN-68-A BTD October 2020

Hitachi Vantara

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For more information or to discuss how Hitachi Vantara can help in your digital transformation journey, you may visit https://www.hitachivantara.com/en-us/solutions/industry-solutions/manufacturing.html or reach out to manufacturing@hitachivantara.com

We Are Hitachi Vantara We guide our customers from what’s now to what’s next by solving their digital challenges. Working alongside each customer, we apply our unmatched industrial and digital capabilities to their data and applications to benefit both business and society.

SummaryA well-defined digital strategy avoids the pitfalls of siloed approaches, the impact of delayed digital adoption and the ambiguity around ROI. It spearheads business objectives through meaningful digital considerations and provides a holistic digital strategy that gives clarity, focus and direction towards achieving the organization’s goals.

Hitachi Vantara has been a digital partner to various leading manufacturing companies bringing the best of its information technology (IT), operational technology (OT) and industry domain capabilities to the forefront along with strategic advisory services to accelerate digital journeys. We invite you to explore Hitachi Vantara’s perspective on the right way of defining a digital strategy.