In 2020, it seems that digital transformation has moved from an industry buzzword to an industry standard. The onset of COVID-19 has forced the hands of many companies to pivot their entire business approach and launch digital initiatives, with a limited amount of time and resources.
While the notion of digital transformation has gained acceptance, doing so at scale remains intangible for many industrial enterprises. Research from McKinsey has found that companies run on average, eight digital transformation-related pilots, but less than a third are implemented at scale.
Global pandemic aside, the escalation of Industry 4.0 for manufacturers is a once-in-a-generation opportunity for significant value discovery. With that said, there are countless digital transformation efforts that never come to fruition because value is not at the center of their plan of action – and pilot purgatory has yet another victim.
At PTC, we have seen long-term success stories when financial impact is at the epicenter of the transformation journey, and as a result, substantial business value across many critical areas of the operation is achieved.
An article published in the Manufacturing Leadership Journal, authored by PTC’s Craig Melrose, Howard Heppelmann, and Scott McCarley, takes a deep dive into a prescriptive framework of how to move beyond the pilot stage and achieve scale for industry 4.0 manufacturers.
Taking inspiration from the article, there are three components identified that can yield double-digit payoff – impact, speed and scale.
At PTC, we have first-hand observations of the paybacks a financial-first, versus technology-first, approach to digital transformation can unlock. Even with the increased interest and pressure at the executive level to go all in on Industry 4.0, many initiatives do not withstand the enterprise scale.
By aligning with cross-functional senior leadership and the existing top-level financial strategies, the pursuit of Industry 4.0 becomes part of the focus to prioritize resources and eliminates potential obstacles. Lack of executive support may lead to slower decision-making and a drawn-out deployment. Ultimately, these sort of initiatives that are not thought of through the impact lens do not deliver significant value.
With executive alignment, organizations establish the basis for increased deployment speed, business adoption, and overall success. We refer to this mapping as the “Value Framework”, as illustrated in the figure below. Consider this the core blueprint used to discover, capture, validate, and communicate value through the journey of digital transformation.
This closed loop approach is key when communicating value to the broader senior leadership team to accelerate momentum and gain greater competitive advantage.
After an organization assumes an impact-first strategy to Industry 4.0 use cases, speed and scale become the close second in terms of business prioritization. As to not overwhelm the process, it is important to focus on the highest value use cases that can scale across the organization.
When considering your bottlenecks, an element that must be factored into the use case selection is that not all factories, lines, and equipment share common constraints. This means you must keep the focus of deployment on constrained resources. Rather than focusing on the entire production system, identify the bottlenecks within each specific setting.
The result? By focusing on significant bottlenecks, the organization will be better positioned for quick wins in weeks, not months.
With a focus on the critical bottlenecks and applying digital technologies, factories now can unlock measurable value to then improve efforts. Meanwhile, the information learned, coupled with the value framework, delivers validated financial impact data that can be used to update executives and get multiple factory sites on board.
The more value that is being realized, greater are the chances for scale – and game-changing value only occurs when scale is achieved.
In a conventional factory setting, a new initiative would be first deployed to one of the front lines, for around three to six months. Keeping at that rate, additional pilots may take three to five years for the entire factory, and a 100-year approach to digital transformation is a plan designed for disaster.
To fast-track pilot deployments and experience value at a realistic rate, manufacturers must plan to concurrently roll out capabilities across multiple sites and, in the meantime, continuously reduce the deployment time in subsequent sites. This allows for the length of time it takes to deploy enterprise-wide to be condensed from 100 years, to 24-36 months in total.
Companies that efficiently pilot valuable digital transformation initiatives, while also nurturing a foundation for transformation across their operation, will benefit from competitive lead. It requires the right mindset and competences to embrace the digital factory and the transformation that comes along with it.
This framework enables manufacturers to deliver great value, measured against business goals to reduce operational costs, support revenue growth, and increase efficiency. By adopting a financial impact first perspective, aligning with the executive agenda, prioritizing high-value use cases and thinking about maximum payoff, it is possible to achieve double-digit impact at scale.