Digital Transformation: Leverage Technologies with Purpose

Industrial companies must improve growth and profitability with a portfolio of innovative digital solutions that work together to transform how physical products are engineered, manufactured, and serviced

What is digital transformation?

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Digital transformation (DX) is a broad business strategy, applicable across all industries, to solve traditional business challenges and create new opportunities using technology. It requires acceptance of entirely new ways of working and delivering value to customers.

A solid foundation for DX success begins with identifying the most pressing problems impacting financial and operational goals and measuring the value of resolving them.

Digital transformation is rooted in the physical parts of the enterprise – products, processes, people, and places – and through the strategic adoption of technology, it’s enabling competitive advantage.

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Why is digital transformation important?

Digital transformation is important because disruption is a given and competition is fierce. Digital technology has disrupted every industry, from media and energy to healthcare and transportation. As a result, it is imperative industrial companies reimagine their work methods, workforce, and even workplace. Investment in digital transformation has been proven to improve efficiency, maximize revenue growth, and reduce operational costs so they can be prepared for the next disruption.

Investment in digital transformation has been steadily growing; industrial companies are investing at least 5% of their annual revenue on digital transformation projects and are increasing budget every year. IDC forecasts $3.9 trillion in global spend on DX technologies and services for these programs by 2027. Industrial digital transformation is leveraged to achieve strategic, operational, and efficiency goals across the enterprise. The most successful strategies align DX goals with business value.

What are the drivers of digital transformation?

Why is digital transformation a business imperative for industrial enterprises?

Why is digital transformation a business imperative for industrial enterprises?

Worker shortage

The industrial markets have millions of jobs unfilled due to a growing skills gap.

The industrial markets have millions of jobs unfilled due to a growing skills gap.

Risk and cost pressure

Global companies are facing increasing macroeconomic and cost pressures.

Global companies are facing increasing macroeconomic and cost pressures.

Digital disruption

Traditional enterprises are threatened by the rise of digital business models.

Traditional enterprises are threatened by the rise of digital business models.

What are the benefits of digital transformation?

Our research shows 92% of industrial companies are executing digital transformation initiatives—but what is the goal? Across a wide range of projects, the goals focus on three areas of benefit: cost and efficiency, growth, and quality paired with customer experience.

Our research shows 92% of industrial companies are executing digital transformation initiatives—but what is the goal? Across a wide range of projects, the goals focus on three areas of benefit: cost and efficiency, growth, and quality paired with customer experience.

Reduce costs to improve efficiencies

The lowest barrier to entry with DX is finding efficiencies, driving productivity, and reducing costs. According to Gartner, 62% are adopting a cost-first mindset for digital transformation initiatives.

The lowest barrier to entry with DX is finding efficiencies, driving productivity, and reducing costs. According to Gartner, 62% are adopting a cost-first mindset for digital transformation initiatives. Read the Related Survey Read the Related Survey

Drive exponential growth through product innovation

Organizations are investing in areas with high growth and attainable market share. Initiatives include reducing time-to-market, introducing new products and business models, or increasing throughput.

Organizations are investing in areas with high growth and attainable market share. Initiatives include reducing time-to-market, introducing new products and business models, or increasing throughput.

Improve quality and engage customers

Becoming customer-centric is essential to remain competitive. To differentiate, companies are improving product quality, creating unique customer experiences, and delivering higher levels of service.

Becoming customer-centric is essential to remain competitive. To differentiate, companies are improving product quality, creating unique customer experiences, and delivering higher levels of service.

The vision of digital transforms physical

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With digital transformation, the power of digital technologies is being used to transform what is and what will remain physical. In this video, President and CEO Jim Heppelmann offers a glimpse into our evolving product line-up and its powerful capabilities. Learn how CAD, PLM, IIoT, AR, and SaaS are powering digital transformation now and into the future.

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What are the types of digital transformation?

The reasons and drivers of digital transformation are as varied and nuanced as the companies pursuing it. However, there are five main types and often these types are interconnected. For example, implementing a new technology-led process requires new thinking and collaboration from employees, which requires cultural transformation.

Process transformation

Redefining processes to achieve greater efficiency and reduce costs.

Product and service transformation

Driving faster product innovation and improving service delivery.

Growth opportunity

Expanding into emerging areas with high-growth potential and attainable market share.

Cultural transformation

Creating an organizational culture that fosters collaboration and alignment.

Customer experience

Improving product and/or service quality and building superior customer experiences and engagement opportunities.

Digital transformation challenges

Strategy

More than one-third of executives cite the lack of a clear DX strategy as a key barrier to achieving full potential. Developing a DX strategy aligned with business goals and built to enable measurable value is essential to success and program longevity. Our DX framework provides a 5-step process to identify value and kick-start your strategy.

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Data alignment

Three-out-of-four executives say improving the ability to leverage data across the enterprise would be effective at addressing disruption. Gathering, organizing, and democratizing your data unlocks greater potential for DX outcomes. Enabling a digital thread allows critical data to be accessible across functions and roles.

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Speed and scale

Manufacturers on average start with eight digital transformation projects, with 75% of these failing to scale. To overcome this pilot purgatory, combine a value-led DX strategy with strategic partners and out-of-the-box solutions. This will set the business on the right path to achieve impact quickly and scale across an organization.

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Digitization vs. Digitalization vs. Digital transformation

Let’s clear up some common semantic confusion around these three distinct efforts.

Digitization:
The capturing of information about the business, products, and processes in a digital form. For example, scanning a paper document, keying in datapoints into an Excel spreadsheet, etc.

Digitalization:
The application of digital technologies to improve or implement functional processes that take advantage of data being in a digital format. For example, designing a product in a CAD environment instead of on a drafting table or collecting and analyzing manufacturing data via an IoT platform instead of manually.

Digital transformation:
The large-scale reorientation of business processes, workflows, and even strategy made possible when several interconnected functional processes have been digitalized. For example, leveraging IoT and AR to reinvent your service business, or adopting digital performance management as a cornerstone of driving manufacturing productivity.


What does digital transformation look like and how to get started?

While each digital transformation journey is unique, there are best practices to follow and data-driven insights to inform the path forward. Understanding the latest trends and frameworks for success can lead to a more impactful initiative.

The State of Digital Transformation

The state of digital transformation

Read PTC’s research report for the latest trends and insights on DX. Benchmark your company’s journey and leverage our strategic guidance. The State of Digital Transformation
Value of DX

Identifying the value of DX

The value of DX needs to be aligned with business goals and objectives. Learn about our value lifecycle process, key value drivers, and use cases. Value of DX
Pillars of success for DX

Pillars of success for DX

In this data-driven digital transformation framework, there are three key ways to significantly improve success and drive better value and outcomes. Pillars of success for DX
Read the Volvo CE Digital Innovation Case Study

Volvo CE: Digital innovator

See how Volvo CE reduced design, manufacturing, and service complexity with a digital thread. Read the Volvo CE Digital Innovation Case Study
Read the Howden Case Study

Howden mixed reality

Howden transformed how they delivered service by leveraging their 3D models to create step-by-step mixed-reality instructions with Vuforia Studio. Read the Howden Case Study
Read the Landian Case Study

Creating process efficiency

Landian reduced lead times and improved efficiency by adopting out-of-the-box, standard digital product development processes. Read the Landian Case Study

Dive deeper on digital transformation

Digital transformation is an opportunity for industrial enterprises to lead their industries, capture market value, and drive efficiencies across engineering, manufacturing, and service. Ready to get started? Start with these blogs.

Build an effective digital transformation strategy

Start your DX journey by developing a foundation for success. Learn the 7 steps necessary to create and execute an effective DX strategy. Read Now

Why companies are pursuing digital transformation

See the transformational ways DX is contributing to strategic, operational, and financial initiatives for companies worldwide. Read the Blog

5 digital transformation examples

With the right technology and partners, enterprises are leveraging a breadth of digital technologies to transform the physical aspects of their business. Learn about five real-world examples here. Read the Blog

How PTC helps industrial companies win

At PTC, digital transforms physical. Learn how PTC supports our customers in digital transformation—it is both our purpose and our passion. Learn More

Frequently asked questions

What are the five main areas of digital transformation?

The five main areas of digital transformation are:

  1. Process Transformation: Redefining a workflow process to either improve efficiency, reduce costs, or both objectives at once.

  2. Product and Service Transformation: Digital transformation with the goal of accelerating product innovation and streamlining service delivery.

  3. Growth Opportunity: Enables organizations to more easily and quickly expand into emerging areas with high-growth opportunities and attainable market share.

  4. Cultural Transformation: Realigns organizational culture to better promote collaboration and employee alignment.

  5. Customer Experience: Digital transformation initiatives focused on improving product or service quality, leading to superior customer experiences and engagement opportunities.

While these areas can be defined separately, their objectives often overlap. An organization investing in product and service transformation, for instance, will likely also improve its customer experience standards in the process.

 

How do you fund digital transformation?

Funding digital transformation begins with:

  1. Aligning with existing financial goals: Three areas that often stand out in manufacturers’ financial goals are revenue, operating margin, and asset efficiency. All applied digital transformation initiatives should be related to these areas, to better follow their impact on the bottom line.

  2. Identify value drivers: Manufacturers have a number of value drivers they leverage to unlock financial goals. Improving value chain collaboration, for instance, increases revenue, improves equipment availability and performance benefits operating margins, and creates better first-time fix rates improves asset efficiency.

  3. Start with high-value use cases: Once organizations have visibility into their financial goals and value drivers, they can prioritize use cases that are high-impact and have a faster time- to- value. This will provide quicker feedback on the digital transformation initiative.

  4. Measure operational impact: Before knowing that a workflow process has been improved, organizations must be able to measure the baseline. This performance baseline is critical when determining the exact impact and value of any investments. Know the baseline and have an idea of how the digital transformation solution should impact it, then measure expectations against reality.

  5. Determine financial outcome: These measured benefits on operational metrics inform financial goals with a net of recognizable improvements. Showing the documented impact on critical financial metrics is fundamental to securing organizational commitment and continued initiative success.

How to enable digital transformation?

Before any kind of digital transformation is attempted, organizations must align on the why of the initiative, identify the business needs, and understand how digital transformation is intended to improve the situation.

Once aligned, move on to anticipating a cultural change. People drive successful digital transformation, not just technology. The business must be ready and willing to change its processes to fully optimize the incoming initiative.

PTC recommends being strategic, choosing a small project to begin with—one that has easily measurable components to best track the initiative’s progress. Once this project is selected, it can help to map out appropriate technology, to achieve both short-term and long-term success.

With this vision now more crystalized, organizations can move onto finding the right partner for the project. The best digital transformation partners align with the overall vision, provide valuable communication, and have solutions that can integrate with existing software.

As the digital transformation initiative begins, be flexible and open to feedback. The project scope may change, as may the software needs. The important thing is to place the organization in a position to scale up digital transformation implementation from one small project to a company-wide initiative.

What role can AI play in digital transformation?

Artificial intelligence (AI) is just one of the technologies contained in digital transformation’s umbrella, but arguably its most powerful.

There are numerous types of AI technologies, including large language models, machine learning, and computer vision. Like digital transformation, successful implementation of AI begins with aligning to the why of the initiative. Why does your organization want to use AI and what value are you hoping it brings to the bottom line?

AI can be used to further a greater level of automation, in addition to providing advanced data analytics and more continuous information readouts.

However, many of the same barriers to digital transformation hinder AI as well. Siloed data will reduce its effectiveness and an organization without a robust digital infrastructure may not see the full benefits.

It is easy to be caught in the excitement of new technologies, but AI and digital transformation have existed side by side for some time and the approaches to one generally reflect the approaches to the other. Many digital transformation technologies today incorporate some form of AI, and we suggest contacting your digital transformation partner to fully understand more.

For more on the connection between AI and digital transformation, read our blog.

How do you know if digital transformation is working?

It is paramount when making any investment—digital transformation or otherwise—to first create a measurable baseline for how the operation in question currently functions. It is impossible to know if a workflow has improved if said workflow efficiency was never measured in the first place.

For example, a manufacturer that wants to improve the output of their factories must first know what the current output is. If the manufacturer spends millions on a digital transformation solution designed to enhance productivity and does not know what that initial output baseline was, it is more likely to question the validity of its digital transformation investment. By contrast, an organization that measures its output at 2,000 units a month prior to the digital transformation initiative, and then at 2,300 units a month after, can fully see the improvement.

Again, this is crucial to any aspect of improvement. The baseline process must be fully understood and documented so that it might be measured against any change, and businesses can be confident they are making progress, not just investments.

What are the key leadership roles in digital transformation?

For manufacturers, digital transformation can impact every stage of the product journey—from design to manufacturing to service to end of life. As such, leadership in digital transformation initiatives must exist across the entirety of the organization.

It is a common pitfall to relegate digital transformation responsibility to a CTO, or even a Chief Digital Transformation Officer, but this puts data siloes and misalignment at risk. The key role starts with a CEO who understands the comprehensive nature of digital transformation and wants to encourage communication and data sharing between groups.

Each function will need advocates who understand what they want, understand the software they need to accomplish the goal, and understand that this software will likely always have implications beyond its primary use.

For example, there is no reason that CAD files cannot be used as a basis for service work, as they provide detailed readouts for the expected product properties and dimensions. To fully achieve the potential of digital transformation, advocates and leaders must be present throughout the organization who understand its benefits and champion its full integration with existing systems.

What is an example of digital transformation?

Digital transformation can mean many things. It can be as simple as moving a paper-based workflow onto a computer. It can be as complex as integrating computer vision into cameras to better process visual data and understand environmental shifts and movements.


Here are three brief examples of digital transformation use cases in manufacturing:

  1. Training: An organization is facing a crisis: Skilled labor is leaving and must be replaced without a significant loss in productivity. Augmented reality solutions like Vuforia allow businesses to create interactive, step-by-step instructions that are overlayed into the physical environment, providing nuanced instruction to new employees. In addition, Vuforia can also enable remote expert assistance, letting a remote expert more easily see a problem and assist in the solution without making a time and cost-consuming trip on-site.

  2. Collaboration: For many employees, hybrid work is now normal. Employees want tools that allow them to collaborate more easily, regardless of where they are. Solutions like Onshape enable such possibilities, creating an authoritative source of truth for CAD files and allows for real-time collaboration on the same file without a duplicate version being accidentally created. Productivity is increased while the risk of error decreases.

  3. Productivity: An organization wants to streamline its factory floor but is unsure where to begin. Utilizing IoT sensors and solutions like ThingWorx provides more information about exactly how hardware is being utilized, where it is being overtaxed, and where it is not reaching its potential. This transparency enables better utilization of resources and a greater degree of operational control.

Did COVID-19 contribute to digital transformation?

The COVID-19 pandemic continues to impact the pace of digital transformation, accelerating the need to work more efficiently with fewer logistical limitations. The pandemic drove the rise of hybrid and decentralized workflows, putting more emphasis on software solutions, many of which revolved around workflow and collaboration.

COVID-19 also increased the pace of older employees leaving the work environment, putting more pressure on developing new and effective ways of training, educating, and skilling an evolving workforce.

In addition, the pandemic created and exacerbated supply chain issues, some of which remain problematic in 2023, and likely will continue to be sub-optimal for the near future.

COVID-19 demonstrated the necessity to think differently and create new, more efficient ways of working. It is strong evidence of for the necessity for digital transformation.

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