Bedrock Principles for Industrial B2B Digital Transformation

Are existing B2B industrial manufacturers seizing opportunities in a more digital world? The answer I hear is MIXED – YES – we want to and NO – we are not quite getting there at the pace and success we envisioned.  A very low number of industrial companies feel successful in their endeavors of becoming Digital!

An unyielding, blinding spotlight on the “disruptors” and an awareness of the decreased life spans of the S&P 500 has pushed manufacturers to rethink their traditional business approach to meet the new digital era.  Industrials that are considering this shift often need to change a lot - their operational processes, their organizational structure and culture, their relationships with end-customers, suppliers and partners as well as their business models.

While many organizations have embarked on or are considering embarking on the transformation journey, how they cope with the challenges is not openly understood. My pulse check reveals companies feeling stuck in the planning or initial stages of Digital Transformation.  Fear of unknown and taking on risks of a new type often paralyze organizations from moving forward.  The opportunity loss of embarking on initiatives with emerging and risky technologies combined with “only success rewarded here” culture, often contributes to the lack of speed in bringing the digital transformation vision to life.  Open post-mortems of a fast-tracked Digital Transformation such as GE gone wrong often provide ammunition to risk-averse executives stuck in the “Innovators Dilemma”.

As per an article from Accenture, plenty of cash is flowing into digital initiatives at large, industrial companies. In fact, the executives we surveyed recently at 1,350 of these businesses globally reported investments in digital reinvention totaling more than $100 billion between 2016 and 2018.  The problem is that the expected results often fail to materialize. Most of the leaders we surveyed (companies representing 17 countries and 13 industries) reported poor returns on their digital investments.

There is of course no one-size-fits-all answer.  Based on my experience in customer success of adopting new, innovative technology adoption combined with the last 7+ years I have spent in Digital Transformation programs with various customers, I find the 3E’s below as essential bedrock framework to bring velocity and momentum to Digital Transformation projects.

E1 – Education

In my opinion, getting core business units “Digitally Educated” in a manner that delights and teaches to gain solid advocates is a key foundation element for the success of any Digital Transformation program. Digital Transformation initiatives often do not relieve business units to deliver on their core business goals.  While executives and operational teams are well-aware of the strategic importance of the initiative, their involvement is often at the periphery and many a times influenced by something they have heard or read about at the 50000-foot level.

An immersive, interactive educational approach, involving the digital technology experts, the digital initiative program members, and most importantly digital tinkerers within the business unit increases the knowledge of the business units and often enriches the overall program with astute realistic insight on priorities.  Executing such evangelism program fosters a community of insiders who understand and advocate for Digital.

E2 – Experimentation @ Scale

To successfully embrace Digital, experimentation around digital technologies – both existing and emerging - by cross-functional, cross-business teams needs to be an integral part of the program.  This implies having an environment where curiosity around the possibilities of digital can be explored unencumbered by large scale business cases.  Three pre-conditions must exist for such Digital experimentation (or any kind of innovative experimentation for that matter) to take root – 1) management encourages experimentation and encourages it even if not all experiments succeed 2) management acknowledges basing their next steps on data and not opinion, no matter how high up in the hierarchy that opinion exists, and 3) funding for experiments – albeit adjusted for tightened belts - to be made available to underscore its importance.

Starting with multiple, small sized experiments – which also tend to be less risky – builds the momentum and paves the path conduct larger scale experiments closely aligned with strategic Digital Transformation goals.  Involving a cross-functional, cross-business unit team conducting the experiments reinforces the innovative nature of Digital.  It brings everyone closer in understanding what can be accomplished immediately and in the near future to reach the Digital destination.  Large scale experiments are also key in demonstrating the organizations ability to move beyond early pilot experiments to larger ongoing capabilities.

E3 – Executive Alignment

If the executive team is not on the same page on the strategic purpose of Digital Transformation, no amount of education or experimentation will deliver success. Defining and articulating the Digital Transformation Opportunity, specifically for the organization is a critical success factor.  This does not imply that the executive team has all the answers and knows exactly what to do and how the opportunity is realized.  It does however outline the key areas and/or problems the organization is looking to tackle with Digital.  Having such a North Star is especially important for established, complex industrial businesses with a variety of business lines, differing expectations from various customer groups and geographies.

Ultimately, digital transformation is about an organization's ability to adapt, respond, and position itself for success in the face of and leveraging the rapid technology evolution.

Do you agree with these bedrock principles for Digital Transformation?  Any other principle you would add?