The term digital transformation has been around for awhile – and, truth be told, it has many different meanings and interpretations, depending on its application and industry. However, we do hear many myths about the term (and its potential).
This blog highlights the five biggest myths about digital transformation. With a clear understanding of what digital transformation means – and what it doesn’t – industrial companies are in a better position to executing on it.
Truth: It boils down to this: Digital transformation helps companies to address critical business challenges created by using digital technologies to transform the physical, whether that's products, places, tasks, or processes. It’s a broad business strategy, applicable across all industries, designed to solve business problems (both big and small) and unlock new opportunities through the use of technology.
We put this one first because it’s often the first hurdle businesses need to overcome. Many companies are dissuaded from digital transformation because they can’t define it or feel it’s too complex, or it means different things to different people.
Here’s another way to think about it. For centuries, humans lived and worked without digital technologies and now, in the span of a few decades, digital has become an essential part of our world. At this crossroads, there is friction. Many companies struggle with integrating their long-standing processes and legacy machines with newer, digital ways of doing business.
More than digitization, digital transformation represents a cultural shift in how companies get work done, engage with customers, design and manufacture products…and on and on. With the Internet of Things (IoT) physical things are now connected, talking to each other, and able to communicate data about their work and their environment. The digital world in many ways is a mirror image of the physical things. In other words, digital transforms physical: With digital technologies, we can transform the physical aspects of work.
Truth: Digital transformation is driving incredible value for industrial companies, especially when vision, strategy, and use cases are aligned.
There are many examples of digital transformation reducing costs, improving quality, and uncovering opportunities for differentiation and new revenue streams across engineering, manufacturing, and service.
The benefits of digital transformation are real – and companies that are not actively executing on a digital transformation strategy are falling behind competitors that are. Understanding the potential value digital transformation can have is a realistic starting place for many industrial companies.
Here’s a glance at some of the results possible for industrial enterprises:
• 50% reduction in unplanned downtime
• 97% lower ramp-up defects
• 90% improvement in right-first time quality
• 3-8% reduction in service labor cost
• 40% reduction in maintenance cost
• 20% reduction in warranty costs
Metrics have been compiled from CIMData, Aberdeen Group, Gartner Group, IDC, and PTC customers.
However, it isn't a myth that many businesses are struggling to achieve significant value from digital transformation. From working with hundreds of industrial companies, PTC has developed a value lifecycle process, a five-step system to align, identify, and execute on scalable DX opportunities.
Truth: Digital transformation undoubtedly involves technology, but they are only tools, or levers, to unlock a greater goal. A DX strategy should begin and end with identified business value.
In many cases, manufacturers start with too many projects - an average of eights pilot project, according to McKinsey - and three-out-of-four fail to scale. As a result, momentum is lost, and funding is jeopardized.
One other crucial point is digitization does not equal digital transformation. Implementing new technology is not transformative unless it’s accompanied by cultural, process, and customer-centric initiatives. In other words, don’t pursue technology for technology’s sake.
Furthermore, digital transformation is very rarely, if ever, a single technology; multiple technologies -- or an out-of-the-box solution -- need to be leveraged to achieve business-critical objectives.
Truth: A strategic approach – with clear ROI goals tied to a clear business value proposition – is the groundwork for digital transformation success. The Proof-of-Concept initiative should be chosen with considerable thought and should be developed with a full vision and roadmap in mind; success should be both measurable and realistic. With a step-by-step approach, businesses can build on each success, learn from mistakes, and scale quickly.
This ones for the naysayers out there – for those leaders who don’t believe they have much to gain for going through the trouble, expense, and challenge of digital transformation.
As we shared above, enterprises are seeing real results from digital transformation – and as a result of initial successes have quickly moved beyond proof-of-concept (POC) projects. When projects are too ambitious, or ambiguous, the result is often failure. In a McKinsey survey of over 1,700 business executives, only 14 percent said digital transformation efforts have sustained performance improvements, with only 3 percent reporting complete success at sustaining change.
However, we’ve seen a pattern emerging from these failed initiatives – a lack of vision and short- and long-term strategy.
To support industrial companies in their execution of digital transformation, our experts have developed a digital transformation framework centered around value.
Truth: Digital transformation is an imperative for industrial companies, if they want to be in business in a decade.
Harnessing the power of technology to advance processes, improve products, and empower the workforce is what digital transformation is all about. With a clear vision and strategy, it opens up opportunities to create new business models and streamlines operations.
Learn how industrial companies are getting the most value out of the digital transformation efforts.