With the rapid development in fields such as the internet of things, predictive analytics and machine learning, today’s business world seems to be on the cusp of a digital transformation, of which the effects are already noticeable in certain industries. But what does digital transformation mean and how can companies harness the potential of smart technologies to create new ways of doing business? Alastair Sorbie, chief executive officer at IFS, explains the possibilities and pitfalls of digital transformation.
As a concept, there is no one definition to explain digital transformation. For every company, regardless of the industry, the opportunities and challenges differ.
A preliminary definition would nonetheless claim that a transformative project is one that combines technology in new ways to enable a new and sometimes disruptive business model. Two very good examples of this are Airbnb and Uber, for which the use of existing technology such as mobile applications, GPS and dynamic maps have revolutionised the accommodation and taxi industries, respectively.
A summary of the topic would also mention the fact that more people and things are getting interconnected through the internet of things (IoT). And for people and machinery, the upshot is a dramatic increase in the amount of data that is captured around the clock. This, in turn, affords an entirely new realm of possibilities for businesses to optimise or even transform their operations through better customer intelligence, timelier maintenance, more efficient manufacturing and so on.
But before delving into the practicalities of these opportunities, it would be prudent to consider its flipside: information overload. According to IDC, "The installed base of IoT endpoints will grow from just less than 13 billion units by the end of 2015 to 30 billion by 2020. This equals just less than 400,000 units every hour of the day, every day of the year."
With endless possibilities for capturing and cutting data - be it machine or people-generated - it is easy to lose track of how this intelligence supports the overall business. In fact, research shows that a mere 15% of organisations completely agree that the data available for decision-making is of a high quality and only 18% completely agree that it's timely.
There is a clear risk that myriad siloed measurements of everything from customer engagement on Twitter to machine vibrations on the plant floor are not aggregated into anything approaching a useful, actionable overview that can motivate strategic decisions. Put differently, the data is captured mostly because it can be captured, and not necessarily because it adds business value.
A purposeful, intelligent business transformation
Digital business transformation, in its rather amorphous glory, can be conceived of as a journey through which a business typically adopts new technologies incrementally, primarily based on immediate needs, market trends and (surprisingly seldom) long-term strategy.
Industry research tells us that the most common reasons for adopting IoT technology, one of the most commonly cited concepts when discussing digital transformation, are aimed at improving day-to-day operations.
This indicates that digital transformation processes are likely to begin with incremental adjustments - a discrete tool or work process like BI or CRM moving up into the cloud, for example. Continuing the journey, we may see these initiatives continued and extended into a wholesale revamp of the entire business model as IoT and analytics complement and amplify each other to the point where product-centric businesses routinely sell availability rather than things, or drones deliver groceries to your door.
But for every mind-boggling example of where these technologies may take us lies an inescapable layer of reality.
Working closely with thousands of businesses in various industries, the team at IFS has a unique vantage point when it comes to business transformation. Reduced to its bare essence, it knows that for every desired outcome there are dozens or even hundreds of concrete steps and processes that must be changed, executed, managed and followed up. There must be a clearly articulated purpose for every incremental transformation and these must be joined into an over-arching direction that all employees can work towards. To return to the metaphor of the journey, not only must businesses know that the engine is running smoothly, they must also know that it is going in the right direction.
Enterprise operational intelligence: the nexus of digital transformation
To accurately gauge business performance and strategic direction, which is important for business-as-usual but absolutely critical in times of change, it is clear that enterprises are in need of another level of control beyond that offered by standard ERP, BI and CRM solutions - a level that brings it all together, as it were.
Enterprise operational intelligence (EOI) sits as the central hub of the connected value chain. Moving beyond traditional, transaction-based BI, EOI unites business applications, IoT sensor event streams, databases, business partner data, social platforms and other web services into one holistic cockpit that proactively alerts decision-makers to potential bottlenecks or other problems. But unlike traditional 'one-way' dashboards, the intelligent EOI solution lets the user execute any action, enabling managers to run their business from a single screen.
What transformation looks like: manufacturing
Manufacturing is one of IFS's targeted sectors and one in which it has the privilege of working with many companies that are global leaders within their respective fields. By virtue of the solutions it provides and the close relationships formed with customers over the years, it has witnessed a large number of trends and innovations transform the manufacturing industries. One of the most recent examples is the rise of 3D printing, a technology-led revolution that has enormous implications for the entire sector in terms of supply chain, environmental footprint, shipping and IP legislation, to name a few.
But the disruption caused by 3D printing or additive manufacturing rather pales in comparison to what is heading our way: 'Industry 4.0'.
With Industry 4.0, or smart manufacturing, manufacturers are moving towards a new level of interconnected and intelligent manufacturing systems; one that incorporates the latest advances in sensors, robotics, controllers and machine learning. This allows every aspect of the plant to be constantly accessible, monitored, controlled, designed and adapted through real-time adjustments.
According to the 'MPI Internet of Things' study, 76% of manufacturers will increase their use of smart devices or embedded intelligence in manufacturing processes in the next two years. The greater digital connection between various parts of the supply and production chains, as well as the higher reliance on automation in these smart factories, is going to make manufacturing ultra-efficient, ultra-sophisticated and ultra-productive.
Keeping pace with the evolution of these 'smart' machines will naturally require a highly skilled and nimble workforce to manage the increasing complexity and shorter mind-to-market product cycles. However, in order to truly capitalise on the opportunities of Industry 4.0, manufacturers must also make sure all these new streams of information are connected into a central hub, through which complicated sensor-captured data can be parsed and presented in an intelligible way. What is needed, and far too often lacking, is the ability to analyse data and make it actionable. Results from data discovery should be visualised through a top-level EOI platform that drives better and faster decision-making, in line with business objectives, across the enterprise.
EOI as an active ingredient
Looking to the installed base, there are numerous examples where EOI has been added as the driver, or the 'active ingredient', to help customers realise optimisation and transformation projects.
For example, IFS is currently working with a major player within mechanical engineering to help streamline maintenance planning and execution of its highly complicated assets.
Already a heavy user of IFS Applications' capabilities for maintenance, repair and overhaul (MRO), the company needed
to implement an additional layer of transparency and control to ensure optimal asset allocation and availability.
The solution, which is currently being deployed, is a mash-up of IFS's highly specialised MRO capabilities and the EOI platform. By tying together maintenance and equipment data streams with the EOI execution engine, we have created a product that offers a completely new way of planning, executing and monitoring the company's day-to-day operations and maintenance processes. The company, in turn, is able to provide MRO services in a completely reimagined way while making huge savings through better asset allocation and more efficient maintenance. The lesson here is that transformation projects, although disruptive in terms of habits and processes, should never be allowed to disrupt the bottom line.
Map, monitor and manage transformation
Looking at the projected spend in industrial IoT and related areas over the coming five years, it is clear that we are on the cusp of a major transformation. Industry 4.0, the example cited above, is really only one instance of what is in store; looking beyond manufacturing, we see the same appetite for change in sectors such as energy and utilities, oil and gas, retail, construction and contracting, and service provision to name but a few.
However, looking more closely at these opportunities and the value propositions being put forth, it is equally clear that setting out on any transformative project without a clearly articulated goal is akin to journeying without a map.
With endless technical possibilities for improving one's business, the real difficulty will be to distinguish the solutions that will offer true value and to reject those that will not, despite its glitzy bells and whistles.
Over the coming years, we will continue to see timely ideas such as Airbnb and Uber disrupt seemingly stable industries and threaten entrenched status quos. And the businesses left standing when the dust settles will be the ones that took care to articulate their strategies and map their operations before setting out on their transformative journeys.