At PTC, we define digital transformation as a broad business strategy, applicable across all industries, to solve challenges and create new opportunities using technology. It requires acceptance and adoption of not just new technology, but new ways of working and delivering value to customers as well.
Digital transformation – sometimes referred to as DX – is happening at some level in nearly all companies. Industrial companies are investing at least 5% of their annual budget on DX projects – a number that is only increasing. As technologies advance, the ways in which digital transformation can drive business value expands as well.
While digital technology is part of the deal with digital transformation (it’s in the name, after all), the “transformation” part takes place in the physical aspects of the enterprise – products, processes, people, and places. And where digital transforms physical is where the true magic happens.
So, what exactly is that “magic”? In other words, what are the benefits of digital transformation? Of course, there are many – and we’ll get into a list – but keep in mind the DX strategies that will bring the most value to your organization must be aligned with your company’s financial and operational goals. DX will look different at each organization, depending on core values and objectives.
It’s table stakes now to have digital transformation initiatives that enable improvements in cost, quality, and time-to-market. Companies are looking for digital solutions to help them make products faster, better, and cheaper than before. These baseline benefits often pave the way for digital transformation to do more within a business, be more sustainable, more data-driven, more compliant – so we’ll discuss those as well.
Cost reduction is the most popular starting point for digital transformation; nearly two-thirds of digital transformation initiatives start with cost-related goals, according to Gartner. With cost in mind, companies are using digital to improve asset efficiency, support worker productivity, reduce overhead and production costs, and streamline after-market service.
The good news is when businesses start here, there are usually other measurable benefits as well. If you’re able to run a more efficient factory floor, then you can avoid costs stemming from inefficient energy use, prolonged downtime, and more. If you’re able to address service issues with customers
Product and service quality is a clear differentiator in any market, regardless of industry. Digital transformation helps businesses deliver closed-loop quality by putting strategies and technologies in place to reduce rework and scrap, increase traceability and consistency for data management throughout the value chain, and improve first-time fix rates.
By driving quality improvements with software like product lifecycle management (PLM), businesses can streamline product development processes, while providing stakeholders across the enterprise (or product lifecycle) with access to the most accurate data relevant to their role.
The pace of business (and change) has accelerated. Customers have expectations for new and improved products on a regular basis, plus there are increasing challenges around timely manufacturing and supply chain management. As a result, there are two areas where digital transformation efforts can help with time-to-market: acceleration of product development and manufacturing and supply chain execution.
Development of a digital thread can help on both counts by establishing an authoritative source of product and process truth across the enterprise, and can extend to suppliers, customers, and field service. In creating data continuity with a digital thread, businesses can ensure accurate product and process information is available to the right person, at the right time, in the right context.
Agile methodologies and tools are being adopted to further drive innovation and shorten time-to-market. Using collaborative tools that allow for flexible and agile product development is key; software like Onshape and Arena leverage a cloud-native infrastructure that allows for simplified access for users, eliminates bottlenecks earlier, and streamlines collaboration.
Often tied to product innovation, growth initiatives have transformative potential for a business. Digital transformation isn’t necessarily about incremental improvements to existing products and processes; it’s focused on identifying new avenues for profit within the business. This may take the form of new products, new business models or revenue streams, or additional throughput and yield.
Often digital transformation headlines are about internal benefits but, ultimately, companies need to consider (and prioritize) how their efforts will transform the customer experience. How will the transformative changes made within the business impact the customer – better service? Improved quality? More innovative products or features? Faster delivery? These are just a few of the possible outcomes. By looking at customer pain points and feedback, businesses can identify a solid starting point for digital transformation initiatives.
Another avenue is using digital transformation to enable a closed-loop engineering, essentially feeding real-time product performance and product usage data back to product developers so they can make design improvements faster and more aligned to customer preferences and needs.
A recent PTC survey of both executives and end users found that 90% were more likely to work for an organization embracing and investing in digital transformation technologies. It speaks to how digital transformation can shape the employee experience and support retention and recruiting efforts.
Being a part of a company that is not stagnant but is continually looking for ways to improve their ways of doing business is inspiring. Plus, in many DX efforts, the daily tasks of employees are often improved, streamlined, or enhanced. It also can offer employees more flexibility in their day-to-day roles, including working remotely.
Digital tools are being called upon to support a more sustainable future, which starts in the design and engineering of products. There are two key areas where digital transformation is having an impact.
First, decisions in engineering lock in carbon footprint impacts downstream in manufacturing, use, service, and disposal. Sustainable by design means engineers are more carefully considering materials, processes, and logistics – using digital technologies like CAD, simulation, PLM, IoT, and more. With this upfront work, the output is the reduction of material and energy consumption, lower emissions, and less waste throughout the product lifecycle, from manufacturing to service to the end of its useable lifetime.
Second, there is increasing efforts on sustainable manufacturing and service – how can companies reduce emissions across business operations? With technology like IoT and digital performance management, companies are getting greater insights into inefficiencies, and making data-driven decisions that optimize operations and improve resource utilization.
Siloed organizations (and data) have a host of negative impacts: inefficiency, stymied growth, increased risk of error, and reduced competitiveness in a fast-changing market. There are many digital transformation strategies and technologies that improve collaboration within teams, across teams, and with partners and vendors.
By building continuity across the enterprise – often through a digital thread – companies are more flexible, responsive, and deliver higher-quality products in less time. With better collaboration, both the business and the customer benefit.
Another way to improve collaboration with digital transformation is through the adoption of cloud-based tools specifically designed to enable more frequent and flexible communication. SaaS solutions are more easily accessible by distributed and remote teams, enable real-time collaboration, and reduce friction between departments.
Regulatory compliance is increasing for manufacturers across multiple industries. It may be related to greenhouse gas emissions, safety, quality, distribution, or other industry-specific regulations.
Because of this, companies need greater visibility and access to data around their products, processes, and performance. There are two key technologies to support this type of transformation: PLM for hardware and application lifecycle management (ALM) for software. Together they are the backbone of product development strategies for achieving regulatory compliance
Better data – data that’s more complete, more accurate, more contextual -- can inform all functions of the business and result in improved decision making. Often in DX, companies are looking to not only get better analytical insights from their data, but also deliver closed-loop product lifecycle feedback across the enterprise.
Technologies, like IoT, offer real-time insight into factory processes and product performance once products are in the customer’s hands. Using this data, businesses can make informed decisions to target inefficiencies and better understand how a customer uses the product to improve future iterations.
While not a complete list, the above captures many of the most impactful benefits of digital transformation today. A successful digital transformation strategy leads to quantifiable advancements on one or more of the outlined benefits. What benefit(s) would bring the most value to your company?
For more specifics on why companies are pursuing digital transformation, read The Complete List of Why Companies Are Pursuing Digital Transformation.
Nancy White is the content marketing manager for the Corporate Brand team at PTC. A journalist turned content marketer, she has a diverse writing background—from Fortune 500 companies to community newspapers—that spans more than a decade.