- January 15, 2020
- ARC Advisory Group
By Mike Guilfoyle, ARC Advisory Group
Digitally transformed organizations will be able to transition to and thrive in digital economies, making digital transformation a matter of not ‚Äúif,‚Äù but ‚Äúwhen.‚Äù Given that industrial digital transformation is necessary to remain viable and competitive, why are mistakes, false starts, and dead-end investments all too common?
By Mike Guilfoyle, Vice President, ARC Advisory Group
More than ever, digital transformation is mission critical for the health and viability of industrial, infrastructure, and smart city organizations, both short- and long-term. New business processes, services, and models are being pursued.
This energy and investment are a rational response by organizations (and even countries) to digital economies that present new and very real opportunities—and threats. Digitally transformed organizations will be able to transition to and thrive in digital economies, making digital transformation a matter of not “if,” but “when.” Given that industrial digital transformation is necessary to remain viable and competitive, why are mistakes, false starts, and dead-end investments all too common?
Digital Wisdom Still Eludes Many
In talking with many companies undertaking transformational initiatives, I’m struck by the mound of evidence of how hard it has been to achieve success, particularly in contrast to the rosy picture often painted by executives. Despite monumental efforts and resources, data is still hard to access, organize, and use. Companies continue to organize around tech stacks, getting lost in fruitless technology comparisons. Leaders struggle to connect strategy and execution. Workforce and organizational culture barriers remain. Return on investment is difficult to demonstrate, leading to an endless cycle of vendor testing. Where investments are made, use cases often don’t scale as anticipated.
These are all real issues, and they also happen to signal an underlying problem that companies need to solve: the digital wisdom necessary to transform simply isn’t being accumulated. In my opinion, that reality should neither surprise nor, frankly, scare anyone off—It’s an obvious but often overlooked reality that industrial digital transformation by its very nature presents drastically new possibilities to companies that are hard wired by controlled and stable operations and transactions.
Like anything else transformational (think of the moves to e-commerce or mobility, for example), digital wisdom is an outcome of experimentation. And as knowledge is accumulated through experimentation, the organization can speed how it prepares for and reacts to external signals from customers and markets. That speed and accuracy of how a company recognizes and reacts to opportunity using its unique expertise is how companies will differentiate in digital economies. The loose phrase, “business agility” is often used to describe this move from transactional to operational to competitive excellence.
Learning from Peer Groups
As companies seek to accumulate digital wisdom, they increasingly look to their peers for input. In ARC’s opinion, this is a very good trend that provides a pathway to success for those that are willing to engage with and learn from others. However, most companies currently limit their peer group to the ecosystem in which they have traditionally operated. In age-old fashion, they believe that they can avoid errors by imitating the success of others that they feel have similar problems.
For example, I’ve seen a recent spike in how often I’m asked by executives for benchmarks or competitive comparisons. Often, these questions tend to focus on use cases, data, or technology around things like asset performance, process efficiency, and cost within a specific industry or process. What these executives really want to know is how competitors are identifying and solving business needs common to their markets, with the hopes that they can replicate those efforts.
The challenge with replication in digital transformation is that what works at one company may not provide a competitive advantage for another. Consider that it your competitors have access to the same solution, and they apply the exact same blueprint, where’s the competitive difference?
The Right Peer Group Accelerates Accumulation of Digital Wisdom
There are two main things that separates leaders in digital transformation from the pack. The first is their focus on external market and customer signals, which enable them to view transformation as a means for competitive superiority, rather than just operational excellence. The second is their acceptance that digital transformation is, well, transformational. They need to learn how to think about this instead of just trying to replicate the efforts of others. Because of this, they are open to expanding their sources of wisdom beyond their traditional ecosystem.
By expanding their peer network beyond those they know well, they are naturally forced to bring a more open perspective. This can help them quickly learn “why” others do things than simply “how” they are done. Instead of simply seeking to imitate, they learn how to problem solve better when it comes to digital transformation. Armed with that wisdom, they are much more willing and able to tackle entrenched issues around data, organizational culture, and the like. They are also more patient in doing so, realizing that return on investment will come as they improve their ability to compete.
Digital Transformation Council
In January of 2018 and at the behest of its customers, ARC formed the Digital Transformation Council. The Council is a member-driven community for industry, energy, and public-sector professionals who are interested in sharing their experiences and practices to mutually support each other. The Digital Transformation Council community has grown to include a global peer network of more than 200 professionals across nine industries. To help ensure open and unbiased dialog among end users, technology suppliers are specifically excluded from participating in the Digital Transformation Council. There is no fee to participate.
The Digital Transformation Council will be holding its third Annual Meeting on February 3, 2020 at the Renaissance Orlando Hotel at SeaWorld in Orlando, Florida (in conjunction with the 24th Annual ARC Industry Forum). At this meeting, DTC members will have an opportunity to share strategies, experiences, and practices with an expansive group of technology end-user peers. End users who are attending the ARC Industry Forum can register for the DTC Annual Meeting at no additional charge by clicking here, as can other interested and qualified individuals. For more information, email [email protected] or view this brief informational video about the Digital Transformation Council.
About the Author
Mike Guilfoyle is a Vice President at ARC Advisory Group. Michael's expertise is in analysis, positioning, and strategy development for companies facing transformational market drivers. At ARC, he applies his expertise to market developments and buinsess strategy related to Industrial Internet of Things (IIoT) and advanced analytics, including machine learning. Founded in 1986, ARC Advisory Group is the leading technology research and advisory firm for industry, infrastructure, and cities.Learn More
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