Building an Organizational Culture for Digital Transformation

Written by: David Immerman

Read Time: 5 min

Throughout the industrial enterprise, roles and tasks are extraordinarily different vertically (from executives to frontline workers) and horizontally (engineering, manufacturing, service departments). For example, a factory operator may be predominately responsible for the throughput of a single production line and a manufacturing executive’s chief concern could be increasing product volume.

In many instances, digital transformation has largely initiated in siloed efforts as a result of these different roles and responsibilities. Factory operators and general managers may only implement brownfield integrations into the facilities and lines they serve, creating a patchwork environment of disconnected information unusable for other use cases or by other departments.

Meanwhile, executives will rollout digital projects to achieve financial outcomes and improve stakeholder value without the frontline worker in mind.

While some of these initiatives may produce short-term gains, these ‘top-down’ and ‘bottom-up’ approaches operating irrespective of the other do not create a culture to support long-term successful digital transformation.

The key to driving successful digital transformation is creating an organizational culture that fosters collaboration and alignment within the organization. According to a PTC survey, organizations with a ‘top-down & bottom-up’ culture responsible for digital transformation, are two to three times more likely to beat digital transformation ROI expectations than those who solely opt for one or the other.

We’ll dive into these culture mishaps and illustrate the typical misconceptions of industrial companies for their digital transformation projects.

Top-down: Misguided assumptions deter project success

Executives or the ‘Top Floor’ are undeniably critical to driving enterprise-wide initiatives and digital transformation isn’t an exception. Nearly 90% of manufacturers cite CxOs as the leaders of digital transformation, from both a strategy and budget perspective. Even with this executive commitment, digital projects continue to stall and/or fail: Manufacturers on average start with eight digital pilot projects and three-fourths fail to scale.

For example, take an executive with the goal of increasing product revenue and recognizes digital as the most promising tool to achieve it. They notice a cumulative sub-optimal overall equipment effectiveness (OEE) rate across their factories, which is limiting throughput and correlating revenue. The executive rolls out a digital program and use cases based on the assumption that solving this universal challenge by improving equipment availability and performance will help them reach their financial goals. But what if the actual throughput challenges weren’t equipment related, they were worker related? Because insights from the frontline weren’t taken into account, the wrong solution was implemented. Instead, the factory workers continuous improvement process relied on historical data, limiting their insights into progress, and information required to make corrective actions.

Implementing a Digital Performance Management (DPM) system would’ve alleviated these workforce challenges, improved throughput, and generated the desired revenue outcomes for the executive.

The point being that while enterprise-wide digital transformations is enacted by the ‘Top Floor’ it is enabled by the frontline workforce. Digital adoption and success come when it ties directly to pain points on the shop floor.

Bottoms-Up: Don’t DIY with digital

The frontline workforce is also guilty of misusing digital capabilities and contributing to bottoms-up failures. While frontline workers are the change agents to actual digital transformation adoption, they can also be the creators of culture chaos through one-off highly-customized siloed brownfield projects without executive oversight or long-term strategies considered.

For example, take a factory manager who has a production line with significant bottlenecks from an array of legacy machinery. The manager instructs an engineering team to bootstrap these machines with IoT connectivity modules and build an application to collect, monitor, and analyze data from them. Building this ‘DIY IoT project’ requires mores resources and costs more than anticipated largely outweighing any benefits; a DIY project’s total cost of ownership can be almost 4x greater in a factory setting when compared to adopting a third-party IIoT platform. Additionally, an executive announces a few quarters later that they are rolling out a third-party IIoT platform across the enterprise with more powerful wrap and extend capabilities, collection of other relevant industrial use cases, and DX frameworks and processes for success. Meanwhile, the factory has sunk its resources into a one-off Frankenstein IoT project.

Frontline worker staff shouldn’t be considered at fault for attempting to improve their operations via technology, but when it occurs in fragmented and decentralized strategies it often costs more money to the company than it saves or generates.

DX organizational best practices create culture change

Connecting the “Top-Floor” to the “Shop-Floor” is an exciting mantra to say, but what are some ways to put it into practice and within context to a digital transformation strategy?

  • A good starting place is meticulously mapping out how a digital project could initially create value across different departments and roles, as well as over subsequent phases. How could both a VP of Service and design engineer leverage product usage data from a condition-based fleet monitoring use case? Measuring this potential value by establishing a baseline sets some expectations for anticipated improvements to metrics or dollars.
  • Executive commitment to DX projects is critical in part to allocate and organize resources to fuel success. These could be gaining program funding, issuing formal teams, centers of excellence, adjustments to roles and responsibilities and organizational realignments if necessary. The majority (77%) of manufacturers digital transformation programs spend over $1 million annually.
  • Establishing agile and repeatable processes ensures additional sites, teams, and users can seamlessly implement the digital program. Repeatability is key to maintaining governance while achieving scalability, as is the processes’ flexibility to be constantly optimizable and continuously improvable.
  • Partnering with digitally native companies and forming a technological ecosystem brings in the out-of-house expertise that would be too expensive to source or build the software they provide from scratch.

Taking these actions to set a strong foundation for digital transformation puts a culture in place to scale it across the value chain.

Final thoughts

Industrial enterprises are ridden with organizational matrixes where their complexity is multiplied by fragmented processes and siloed decision-making. As digital strategies centralize, these teams, departments, and roles must converge to create a culture capable of driving program success.

Finding a common language across the organizational hierarchy that coincides with a digital transformation strategy is key to nurturing the culture change to drive it.

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Tags: Digital Transformation Digital Thread Industrial Internet of Things Augmented Reality

About the Author

David Immerman

David Immerman is as a Consulting Analyst for the TMT Consulting team based in Boston, MA. Prior to S&P Market Intelligence, David ran competitive intelligence for a supply chain risk management software startup and provided thought leadership and market research for an industrial software provider. Previously, David was an industry analyst in 451 Research’s Internet of Things channel primarily covering the smart transportation and automotive technology markets.