How to Start Your Digital Transformation...

How to Start Your DigitalBuilding the digital thread—from customer order through delivery and beyond—sounds expensive, time-consuming and fraught with risk, but it doesn’t have to be. Here’s how to do it.

Transformation Journey

How to Start Your Digital Transformation Journey 1

For many mid-size manufacturers the idea of a digital transformation sounds daunting. The phrase itself serves up a double whammy of uncertainty. The word “digital” portends a step into the unknown, while the word “transformation” implies an all-out sprint to automate the entire business in one, big, chaotic, bet-the-company project. Together, they suggest the potential for upending existing and, frankly, dependable systems that have served companies well for decades.

For others, the potential investment—of funds and staff—is the hurdle. Such automation, they think, can only be attained by the largest manufacturers with the money and resources to experiment. Mid-size manufacturers don’t have the extra funds or staff to play around with IoT or experiment with artificial intelligence, even when they understand the potential benefits. Nor do they want to risk anything negative happening to the business during the implementation of technology they are not as familiar with. Besides, they’ll tell you, it’s difficult to calculate the return on investment (ROI) for such significant changes, and who wants to make changes that aren’t certain to pay off?

The good news is, early movers—those already on their digital transformation journey—have shown the way to overcome these obstacles.

They’ve demonstrated how mid-size manufacturers can plot a course to their digital future by mapping out and executing a steady, step-by-step plan.

It’s easy to get overwhelmed by the sci-fi sounding claims of digitalization’s biggest backers. True, large solutions exist, but they're cost-prohibitive and often overkill for mid-size manufacturers. Worse, they’re a distraction. There’s little value in considering the big, complicated options that have more features and capabilities than you will ever need. Instead, turn your attention from the outside hype to your company’s internal business needs. Then look for a right-sized, robust solution that can support an incremental, modular digital transformation—one that will not require that you transform instantly, but that you can build on as you learn and gain confidence.

Critical to this approach is identifying a solution that’s based on a modern cloud platform, such as Microsoft Azure, which offers the ability to scale as your business needs require.

Ignore the Hype


Another potential cause of confusion is the sheer number of opportunities. Digital technology can improve virtually every business process, so it is impossible to list all of the possible use cases. Instead of focusing on all of the possibilities, start automating a part of your operations where you’re already looking to improve or is a problem area that needs fixing. For example, think about the productivity gains that can be realized by automating your accounts payable/accounts receivable processes—moving from a paper-based process to a paperless, automated workflow. Think about increasing machine uptime and overall equipment effectiveness (OEE) by automating preventive maintenance. Or think about reducing the time between order and delivery by digitally connecting the buying process to the production process, reducing the number of manual steps between the two.

Another piece of advice is to identify a smaller project, one that can be implemented—and generate a solid ROI—in months, not years. Instead of automating preventive maintenance on all the equipment in a plant, consider automating one line that’s been particularly

troublesome or has the most potential to grow revenue. Instead of digitally integrating every step between order and delivery, automate customer order management.

By ignoring the hype, concentrating on your business, and starting with a small project, you’ll gain many benefits. You’ll learn and gain confidence; there’s no better way to learn than by doing. You’ll earn a quick ROI that you can use to fund your next digitization project. And most important, you will have started your digital transformation journey. This approach is in keeping with advice from those already on the journey: You need to slow down to speed up your digitization efforts. Their common refrain is: crawl, walk, run.

The trick to following a step-by-step approach is that there’s no one set of steps that will work for every organization. Every successful company must chart its own course based upon its specific business model and unique selling proposition. Where you start will depend on what you most need to improve to fulfill your customers’ expectations and your company’s strategic objectives.

Follow a Step-by-Step Approach


Many leading companies already on the journey say they first simply identified a problem and then set out to solve it using digital technology. They used this pilot project as a trial run, to gain an understanding of how the digital technology works and what it can do. Common first projects include preventive maintenance of machines or equipment and remote monitoring of delivery trucks or other constantly moving assets.

Soon thereafter, it is important to create a digital vision based on your company’s business vision. As with all vision statements, this helps everyone understand where the effort will lead and how it will improve company processes. It also serves as a guide for deciding which parts of the company to digitize in what sequence, which is the next step: to sketch out a roadmap.

To build the roadmap, companies advise plotting the series of projects that will move your company toward its digital vision. Basically, the point is to have a game plan to get started—one that defines the steps needed to accomplish your goal. That isn’t to say you can’t veer from your roadmap. Indeed, most companies that are en route to digital transformation recommend that you build in checkpoints to review whether or how you might want to alter your roadmap to meet unexpected needs.

However, the road map is critical to keeping your team focused, according to companies already on their digital journey. They caution that once you start digitizing—and improving—processes, you’ll find everyone clamoring to digitize and improve

other processes. A plan will help you stay focused, complete your projects, generate ROI and build momentum for the next steps.

Finally, organizations that are further in their digitalization journey note that common reasons that projects fail are because they were too ambitious, moved too quickly, or tried to add in too many extra, unplanned objectives into an already agreed-up project.

Early in your planning to decide where and how to start your journey, you’ll want to consider three fundamental building blocks: an ERP system, the Cloud, and an eCommerce Website.

Consider 3 Critical Components


ERP System: The benefits of having an ERP system as the foundation of your digital transformation journey are too numerous to list. Fundamentally, an ERP system allows organizations to manage their business functions within a centralized and integrated system. It stores all entered data in a single database, which promotes collaboration across departments, improves data analysis, and automates (read: eliminates) tedious tasks like generating reports, tracking timesheets, and monitoring inventory.

The Cloud: There are three reasons the Cloud is so critical to a digital transformation. First, having your data, that is, your ERP system, in the cloud makes it easy to serve the widest variety of other applications that consume that information. With an eCommerce solution, for example, the data can easily be used by all your sales channels, enabling a digital omni-commerce strategy. With all the data coming from the ERP system, all channels will deliver a consistent, branded experience no matter which channel the customer uses. The customer will see a branded presentation of the product catalog, including the product description and pricing. Changes to any part of the catalog can be made with a single entry that simultaneously updates every channel.

Second, the data in the Cloud, and especially ERP in the Cloud, becomes the single source of truth, which eliminates error-prone updates required when data are stored in multiple databases.

Third, Cloud ERP makes information more easily accessible to more stakeholders in more ways. Factory-floor operators can access data from the single source of truth via HMIs (human machine interfaces), while more mobile managers and executives check in from their laptops, iPads, and smartphones from the office, airport, or home. Even other software and equipment can access the same data from your sales channels, whether from kiosks, POS, EDI, and direct sales or Website, online markets such as Amazon and eBay, and mobile.


An eCommerce Website: For some manufacturers, building and selling through a website seems unnecessary. They’ll argue: “My buyers want to talk to real people.” That may be true but does not obviate the benefits of having an eCommerce website. Even if your business is based on face-to-face sales calls, think about how you might have a customer service representative work with the customer, then place the order via ecommerce. Or perhaps, the CSR could take the customer through a guided sales process, showing how they can place their order online. For the customer, this will not only provide personal service, but will also help your customer see the benefits of and potentially adopt a new time- and cost-saving digital buying process. For the business, it will eliminate the errors caused by the multiple hand-offs that plague a manual order process.

It’s important to note that, even as these three components serve as the foundation of a digital transformation, there’s no need to immediately go all-in on any of them. Companies well along their digital journey likely still have on-premises ERP, but have cloud instances of ecommerce.

Others have hybrid ERP systems, whether because they are not comfortable with what they perceive to be the risk and/or loss of control of moving everything to the cloud, or are progressively moving toward a full cloud solution.

Likewise, you can incrementally roll out digital omni-commerce. You might first connect your ecommerce sites, starting with a website and then add other online storefronts, mobile and social. Or you can connect to offline commerce, including your stores, kiosks, POS, EDI, direct sales and call centers. Ultimately, all of the data, transactions and interactions, whether online or offline, can operate via the single data thread.

Part of the confusion that mid-size manufacturers face when trying to understand how to begin a digital transformation journey comes from the biggest, loudest, most ubiquitous marketers. These vendors target the biggest, most global companies, and therefore offer more bells and whistles than mid-size manufacturers need.

Lean on Vendor Expertise


However, the industry has reached a tipping point, where new and modern solutions are now becoming affordable and accessible to midsize companies. Midsize companies would do well to seek out those smaller, more focused vendors that have developed deep expertise in manufacturing, or other particular industry. These companies offer not only right-sized solutions, but also significant experience implementing digital solutions for mid-size businesses.

Still not convinced that transformation can be achieved in increments? Consider the “overnight” successes of two companies that transformed—and in many cases continue to transform not only themselves, but the industries in which they compete: Walmart Inc. and Amazon. While it sometimes seems that these two retail juggernauts burst on the scene, each in its own way disrupting retail overnight, the truth is their transformation from start-up to national dominance evolved over decades.

Though Walmart became a national force in the mid 1990s, the retailer’s history dates back to 1950, when Sam Walton purchased a store and opened Walton’s 5 & 10 in Bentonville, Arkansas. It wasn’t until 1962 that the Walmart chain was founded as a single store; it first expanded outside of Arkansas in 1968 and then throughout the rest of Southern U.S. by the 1980s. The company introduced Sam’s Club, its warehouse club chain, in 1983 and its first Supercenter stores in 1988. It wasn’t until the 1990s that Walmart became the nation’s No. 1 retailer, with stores in every U.S. state and its first stores in Canada by 1995. In the new

century, Walmart continues to expand and introduce new industry capabilities. It topped the Fortune 500 for the first time in 2002.

Amazon is an example of how a step-by-step approach doesn’t have to mean a slow one. Rather it suggests that a leader with a vision, along with a relentless incremental advance toward achieving it, can move fast. From the beginning, founder Jeff Bezos reportedly had a vision of becoming “an everything store.” Now one of the largest online retail websites in the world, Amazon started selling books in 1994 from Bezos’s garage in Bellevue, Washington. Pretty quickly thereafter, it added a feature to enable readers to post book reviews for all customers to view. In 1996 it created its Associates program, which allowed other Websites to sell merchandise and have Amazon fill the order and pay a commission. In 1998, Amazon started selling movies and music, and by 1999, it was selling consumer electronics, video games, software, home improvement items, toys and games, and more.

Note Two “Overnight Sensations”

Also in 1999, it introduced 1-Click, which, by using information previously entered, allowed purchasers to complete their purchase with one click. Amazon continued to add features and services through the 2000s, notably the Kindle in 2007 (by 2011 Amazon announced that Kindle e-books were outselling printed books), Amazon Encore for self-publishing and out-of-print books, and Amazon Publishing to publish its own books.

A digital technology strategy is no different from a business strategy. These companies, like most companies, didn’t transform themselves and their industries all at once, but through steady, consistent steps over time. The lesson for manufacturers sitting on the fence, still considering their first digital move? Get started: Decide a strategy, make a roadmap, and execute.

If you don’t have a digital transformation strategy in place now, you’re behind. According to a mid-2017 survey conducted by The Economist’s Intelligence Unit and sponsored by Prudential Retirement, “The vast majority of manufacturers surveyed have recognized the need for industrial transformation, with most already taking action.”

The survey, which polled 537 manufacturing executives across eight industry segments from companies varying in size and geography, found that 27% of respondents say their companies have experienced “substantial transformation” and that 36% of companies were “in the process of transforming some parts of our organization.”

But there’s no need to panic. You do not need to launch a massive transformation effort to catch up. If you act now and proceed in a step-by-step approach—get your strategy in place, a roadmap sketched, and a project started—you will begin to transform the way you interact with your customers, the way you build your products, the way you manage your back-end processes—and the way you run your business.

That means 63% of surveyed manufacturers reported having experienced some measure of industrial transformation.

Of the remaining 29% of respondents, 19% are developing strategies, according to the report, while only 10% say they “have not yet developed a coherent strategy.”

Understand the Urgency


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