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Industrial digital transformation aims to reinvent design, engineering and manufacturing -- a tall order.
Emerging technologies such as IoT, 3D printing and digital twins, along with shifting customer demand, have compelled companies to explore new ways of doing business or risk being stranded on the sidelines. The task of industrial digitization, however, has its pitfalls.
Accenture has found internecine competition and poor communication among departments result in redundant projects and duplicative technology spending. And, to complicate matters, industrial leaders aren't always prepared to take on the challenge of transformation.
In this Q&A, Nigel Stacey, managing director and global lead for Accenture's Industry X.0 unit, discusses the challenges of organizational silos and how to overcome them.
In industrial organizations, who -- or which group -- is responsible for digital transformation projects? It sounds like different departments go in different directions. How do you get those projects to cooperate to avoid redundancy and adopt a common set of standards and technologies?
Nigel Stacey: Usually, a member of the C-suite is in charge of a company's overall digital transformation. The actual projects are then planned and executed across different departments. And yes, here's where things tend to become messy.
Accenture Industry X.0 is soon to publish a study in which we're looking at this exact issue -- competition rather than collaboration, and shared goals among departments when it comes to digitization. For example, we're seeing many departments within organizations install different software platforms in similar areas, disregarding potential synergies. Or, they store complementary data sets in different places and formats that aren't compatible or easily shared. This siloed approach can wreak considerable collateral damage across the enterprise.
One way to prevent that from happening is by having leadership pay more attention to whether a department's digital project drives value at the enterprise level -- and not just for its individual business unit. It requires adding a layer of hands-on work to the executive responsible for leading the overall digital transformation.
Additionally, executives should look to support digital projects that stimulate enterprise value by digitizing engineering data and experience design. Another example of a stimulus project is connected device management, where a variety of devices generate and exchange data into actionable insights. These types of projects require production, operations and the security function teams to work closely together to ensure business continuity and reliable production.
Industrial digital transformation is all about business processes and business value and not technology, analysts say. But recent studies show that enterprises view technology as critical to their digital transformation projects and often times the barrier to digital transformation -- technology debt and issues with legacy systems, for example. What are you seeing in the industrial sector?
Stacey: Technology is a vital part of a company's digital transformation. AI, IoT, robotics, digital twins and digital threads, to mention just a few, are transforming the factory floor. They can help make production processes more efficient and flexible, support higher-quality products, and increase the safety and sustainability of their plant operations. So, adopting digital technologies is mission-critical to achieving and securing competitiveness, in the short term as well as long term.
However, we often see companies that are too focused on technology when undertaking a digital transformation. They hear a good pitch, and everything seems so easy to implement. The hype cycle around new technologies such as IoT, AI, 5G, etc., contributes to this trend. Then they do a proof of concept and a pilot, but without having mapped a clear path from pilot to scale. If there isn't a clear case for implementing a project, and people become tied up in the promise of new technology, then it can be easy to forget about the big picture.
My view is that it's not 'either or' -- technology or business process or business value. They're all critical parts of the digital transformation equation. What it comes down to is strong leadership and effective leaders.
What are the necessary skill sets for maximizing digital investments and why are they currently lacking among industrial leaders?
Stacey: In a study we did last year, we found that only 22% of industrial companies were able to make the expected returns from their digital innovation projects. The key differences between these "champions" and the other companies in the sample can all be linked to issues of execution and leadership.
Nigel StaceyManaging director and global lead, Accenture's Industry X.0 unit
To maximize their digital investments, companies must exercise their execution muscles.
First, they must clearly define the value they hope to achieve for their organization. Then, they should implement these digital changes in waves so that their employees can adapt as needed. This process can't happen overnight.
Second, they must prioritize the growth of new digital capabilities and talent within their organization instead of outsourcing it.
Third, leaders must strategically analyze their businesses and implement technological changes where they will yield the most use and the best results for their organization.
Fourth, leaders must treat digital spending as an investment, not a cost, which means giving the people who use the funds the time and space to experiment and build. Effective leaders should expect things to go slightly wrong before they get massively better.
Leadership plays a pivotal role here. But leaders often fail to see the importance of their role in driving digital change, and companies tend to appoint people to leadership roles assuming they would naturally have the required skills. Sadly, often this isn't the case. Digital transformations are massive undertakings and they are doomed to fail from the beginning if they are overseen by inexperienced leaders.
Senior leaders, on the other hand, tend to develop and deploy digital using the playbooks of decades past -- from the days before technology had such a significant effect on our lives. Industrial companies are no exception. In fact, they might be extra prone to it, considering the long lifecycles of the machines and systems they use. As a result, leaders can become set in their ways when it comes to how things are properly planned and executed.
Above all, leaders need exceptional execution skills -- most importantly, staying power. They must have the ability to keep the organization and its people energized. Particularly in industrial companies, where many projects cost hundreds of millions and take years to plan and do. It also means not giving in to a certain corporate laziness that tends to affect large transformations and claim success too early.