The term “Digital Transformation” accompanies a new wave of digital technologies, from driverless cars, to wearable electronics, augmented and virtual realities, and 3D printing. With that, confusion around the impact of digital technologies remains, and in the midst of buzzwords like ‘connectivity’, ‘IoT’, and ‘smart’- everything, it is easy to lose sight of the fact the Digital Transformation is not just another hyped term—it signifies a revolution bound to transform how businesses operate. Moreover, the Digital Transformation will not only impact IT; it is already shaping, and will continue to shape, all facets of a business: the way in which businesses sell, operate, interact with consumers, and even acquire talent. Understanding the Digital Transformation, its promises, and potential in driving growth requires an agile enterprise with a pulse on how its products and processes will change. Below we outline five calls to action that companies should take to survive—and grow—in the age of the Digital Transformation.
- Know your toolbox. Digital technologies are emerging at a dizzying pace. Leading organizations have a strategic imperative to understand, monitor, and evaluate emerging technologies, as these are what enable future products and processes. Does your enterprise know what is possible to sense, and at what cost? What new connectivity protocols are emerging to support the IoT? What differentiates robotics platforms from one another? What smart glass platforms are showing value in enterprise applications? Corporations need a dedicated effort and streamlined workflow to understand emerging technologies, for these are the tools that will dictate the products and processes of the future. For more information see the reports “A Detailed Breakdown of LPWAN Technologies and Providers,” “Learning to Work Together: How Collaborative Robotics are Changing the Landscape of Manufacturing,” and “Better than Google Glass: Finding the Right Smart Glasses for Enterprise” (client registration required for each).
- Establish a digital business model – but recognize the challenge. Winners in the Digital Transformation will be dictated by the adage that the “best business model wins.” Digital technologies unlock new possibilities for revenue generation that require a mind shift for most organizations used to selling widgets or that are traditionally far removed from the digital world. Those in the software and electronics space poised to benefit from the explosion of digital technologies must also understand these shifts, as that will ultimately dictate product adoption and will unlock new growth opportunities. The idea of shifting to a service model is already rippling through the corporate community as a future business model. Kaeser Compressor, for example, is experimenting with selling “air” rather than the compressor itself (client registration required). Still, while evolving business models like predictive maintenance are seen as obvious opportunities, enterprises must understand challenges in shifting over to such a model. For example, will customers be willing to pay for fixing something that hasn’t “broken” yet?
- Get the buy versus build decision right. Going digital will force many organizations into a critical decision – whether to build capability internally or look for the right partner or vendor. This is especially true of analytics, where every corporation is aware of the potential, but where the ability to execute well is out of reach. As a result, understanding internal limitations and seeking outside services or products to fill the gaps in your portfolio may be optimal. Even titans in the Digital Transformation have weaknesses, and in many cases the fastest way to a solution will be to purchase the services of a leading provider, or even outright acquisition, to strengthen position in the market. For more information see the reports “The IoT Platform Shakedown” and “A Tale of Two IoT Titans: The Curious Case of the GE – PTC Partnership” (client registration required for each).
- Incentivize cross functional cooperation. Executives must beware that the Digital Transformation presents the potential for conflict within the enterprise. A major consequence is a disparate strategy that results in purchasing the services of multiple vendors with redundant capabilities, lack of a full understanding of gaps to guide M&A, and failure to leverage the expertise already existing within the enterprise. Lux highly recommends a central corporate initiative to coordinate the multitude of divisions affected by the Digital Transformation, including R&D, Business Units, IT, and venturing activity.
- Beware the hype over AI. Generalized AI platforms are driving tremendous investment, promising to solve every conceivable business problem. Executives must beware – much of this is vaporware, and technology decisions must be made on the basis of evidence that a given platform actually solves a real problem, for example by increasing the efficiency of a process, reducing downtime for equipment, or making actionable recommendations that directly impact the bottom line. A general tool to solve multiple problems is an inherently difficult goal to achieve, making it important to first look at vertical driven platforms, that have shown a clear value proposition in a specific application such as agriculture, manufacturing, or oil and gas. From there, executives can assess the overlap between similar problems and map solutions for one application onto another.
The five calls to action we outline above highlight opportunities and pitfalls that corporations must beware of as the Digital Transformation ensues. Understanding the potential and promise of going digital is only the first step, however. The ability to execute well—and on all fronts impacted by digitalization—will be essential for growth, and will be the test to ultimately differentiate winners from losers.