Change is hard. At enterprise organizations with thousands, if not millions, of moving pieces, implementing digital transformation is an enormous feat. If successful, it can bring significant value to the organization; however, there are many ways digital transformation efforts can lose steam.
In this blog, we will leverage PTC’s extensive experience working with industrial companies on digital transformation – as well as new market research -- to highlight the most common digital transformation challenges and how to overcome them.
Most industrial companies (92 percent) are engaged in some level of digital transformation, but the maturity – and success – of these efforts vary widely. According to McKinsey, manufacturers start with an average of eight digital pilot projects, but a mere 25% scale successfully.
Digital transformation attempted without a defined strategy will fall short of its potential. Taking it one step further, a digital transformation strategy attempted without aligning to business values and goals is throwing money (and your employees’ time) into the wind.
A strategic approach does not need to be all-encompassing to start. In fact, conducting a straightforward evaluation to determine the issues that, if resolved, will significantly impact financial and operational goals is the start of a strong foundation.
How to Overcome: Tying digital transformation efforts to measurable business value is the key to unlocking the greatest potential for your business. PTC designed a step-by-step digital transformation framework specifically to help leaders initiate this process.
To transform an organization, it is imperative to have c-suite leadership on board. No surprise there – they not only hold the keys to budget, but also exert an incredible amount of influence over business strategy and organizational culture. What we have seen over the years, however, is there is often a mismatch in how digital transformation (DX) is presented to the c-suite, in that functional leadership cares about one set of metrics (typically operations-related) and the c-suite prioritizes financial metrics. When this happens, it can be difficult to identify how much value was truly delivered.
How to Overcome: Creating a compelling argument for digital transformation starts with directly aligning your DX program to your company’s biggest business goals and challenges. In the initial stages of DX planning, map out which financial driver is a top priority for your business, which operational initiatives will drive financial impact, and which potential technology use cases will enable and enhance your operational initiatives. One of the c-suite's top concerns is the financial metrics of the organization. To get their buy-in, DX proponents need to be able to calculate – and then demonstrate – how digital transformation impacts those financial metrics. In other words, instead of thinking about improvements in terms of operational, such as overall equipment effectiveness or throughput, value must be presented as driving revenue, improving operating margins, and/or gaining asset efficiency.
Technology is a crucial tool for achieving digital transformation, but it is only one part of a greater effort. Oftentimes, companies will move forward with a technology implementation, thinking it will automatically solve one (or many) of their problems, only to create a whole new set of issues.
Identifying the most critical problem(s) to solve, then pinpointing the right technology (or technologies) to address them, leads to higher success rates.
But it is also about approaching the initiative with company culture as a core component. A 2021 report found that the ROI (return on investment) of DX projects was significantly impacted depending on the company’s approach to implementation. Companies that inspired a sense of ownership at every level of their organization were 2 to 3 times more likely to exceed their expectations.
How to Overcome: Recognize that digital transformation has far-reaching impacts and, as such, everyone needs to be involved and feel part of its success. Some companies have implemented a digital transformation governance body, a collection of stakeholders across the company who are responsible for project execution across functions. This ensures representation, information sharing, and alignment on the vision for the organization’s digital transformation.
Today’s industrial companies are rich with data, but is that data useable? Is it accessible? Are they deriving actionable insights with the data? Are multiple functions and roles able to tap into the data in a way that is relevant to their roles and responsibilities?
Consider this: Companies with a sophisticated approach to cross-functional data integration across the product lifecycle (engineering, manufacturing, and service) are 2.5 times more likely to exceed digital transformation expectations.
How to Overcome: If your company lacks the cross-functional integration that’s enabled through product lifecycle management (PLM), there’s no better place to start your digital transformation. Unifying your business’ product development tools, processes, and methodologies is a sound foundation for long-term transformation.
About 1,500 digital transformation projects were examined in a 2021 PTC survey and nearly half failed to show positive ROI. And when you don’t demonstrate positive ROI – the project isn’t going to scale.
This is a critical challenge with digital transformation; being able to scale successfully is the key to unlocking significant value for your company.
How to Overcome: PTC experts devised a five-step plan to overcome this obstacle and pave the way to sustainable, scalable DX. It includes some of the best practices we have already mentioned, but also offers practical advice based on hundreds of real-world project implementations. The steps – at a high level – include:
Digital transformation isn’t a one-off project to solve a problem; it’s a broad business strategy to solve traditional business challenges and create new opportunities using technology. In other words, it’s a long-term effort that organizations should be looking to continuously build and iterate on to reflect the company’s current needs and goals.
In the digital age, there are a host of options when it comes to technology solutions and finding the right fit for your business and DX goals over the long term is a critical piece to success.
In the 2021 PTC State of Digital Transformation report, analysts found that where a company is in their DX journey dictates their priorities when evaluating digital transformation partners – and those priorities shift as their DX maturity increases.
In the planning stage, organizations are looking at pricing models, security, and vendor size/stability as core competencies. In the piloting stage, the focus switches to breadth of technology, industry experience, and best-in-class solutions. For companies rolling out their strategy, they’re still looking for best-in-class technology but are also concerned with how the solution will scale globally, as well as thought leadership and continued innovation.
How to Overcome: While traditional vendor review due diligence is necessary, organizations also need to examine potential vendors with a clear understanding of their DX goals and ask pointed questions about how the vendor will enable and/or accelerate them toward that achievement. Examine potential partners with that lens – does this vendor’s technologies and/or services align with our core DX goals and overall vision? Will this vendor be able to support our DX strategy, and potentially even scale, over the long term?
No one is denying that digital transformation is often a complicated task and there will be challenges along the way. However, the challenge – and risk – of not executing on digital transformation is that an existing competitor or a newcomer will, and they will begin to take market share.
Digital transformation’s purpose is to enable your organization to lead in today’s market and prepare for future market evolutions. Whether your DX priority is improving the bottom line through cost reductions, driving growth through digital innovation in efficiency, transforming the customer experience or some combination of the three, digital transformation remains the best opportunity to achieve significant impact for your organization.
Learn the key digital transformation value drivers and use cases across manufacturing, engineering, and service.