Welcome to The Week in Digital Transformation, our regular roundup of interesting news, ideas, research and other stories from the vast and varied realm of digital transformation.
(Many thanks to my editor Ben Davis for holding down the fort last week while I was away!)
This week, we’ve got multiple stories about digital transformation coming out of the manufacturing sector: John Hitch of IndustryWeek makes the argument that “digital metamorphosis” is an easier concept for manufacturers to get on board with than “digital transformation”, and we look at how chemicals manufacturer Covestro is implementing a truly people-focused digital transformation.
Plus, we’ve got two sets of 2019-and-beyond digital transformation predictions, which forecast what the future holds for Enterprise Resource Planning and IT, respectively; and the president of Fujitsu explains why collaboration is key to digital transformation.
Why digital transformation should be called digital metamorphosis
John Hitch, Senior Technology Writer at IndustryWeek, published an intriguing piece this week which makes a case for why “digital transformation” should in fact be called “digital metamorphosis”.
Hitch’s article, “The Butterfly Effect: Digital Transformation Gives Manufacturers a Nimble New Look” focuses on the manufacturing industry in particular, but has thoughts that are applicable to digital transformation in industries across the board.
In his opening paragraph, Hitch argues that while CapGemini might be credited with coining the term “digital transformation” for manufacturing in its 2011 Digital Transformation Review, “they really just put a name to something that had been going on since the 1940s and the birth of digital computing.”
From the biggest industries all the way down to businesses and even the individual, computers have been transforming the way we get at our money, schedule our lives and how we communicate. “Transformation” isn’t quite apropos to what is going on now. With how the benefits of the cloud, artificial intelligence, Industry 4.0 and blockchain are already impacting plants and factories on every level, the more correct term may be digital metamorphosis.”
– John Hitch, Senior Technology Writer, IndustryWeek
Hitch points out that the term “digital transformation” might be worrying to some manufacturing leaders because it doesn’t necessarily imply change for the better – and what if, after investing in all of this new hardware, integration, and training, they’ve just traded in problems they knew how to manage for problems that they need someone else to fix?
Whereas going through a metamorphosis “implies the company realize their caterpillar-like shortcomings, like being too slow and nibbling on the same old leaf. The concerted effort to become more digital signifies that they choose to become more like a quick and nimble butterfly. It’s an oftentimes laborious, resource-intensive process, but one that results in new abilities, like being able to rise above the dense foliage and pick out the best customers and suppliers.”
Hitch also uses the “cocoon stage” of metamorphosis as an analogy for the period in which a company waits to see the results of its transformation investment – a period in which it can be extremely vulnerable, and during which many companies do see their digital transformation efforts fall flat.
“The World Economic Forum recently revealed that 70% of initiatives in AI, big data and other advanced digital technologies fail. And an IFS study found only 16% of its 200 manufacturers surveyed had connected their IoT data to their ERP [Enterprise Resource Planning] software.”
Some of Hitch’s butterfly/metamorphosis analogies are a little strained, like the comparison of company data with a butterfly’s brightly-coloured wings (because “your data should ultimately tell something to your customers or provide an edge against competitors”). But on the whole, the concept is a worthwhile alternate perspective that might help manufacturers and other sceptical company leaders get on board with the idea of digital transformation – or rather, metamorphosis.
How polymer manufacturer Covestro is using humility to drive transformation
With any company transformation, it’s as important to nurture employees and embrace humility as it is to use technology to make things faster, according to Laurie Miller, CIO at high-tech polymer manufacturer Covestro.
At the recent International SAP Conference for Chemicals in Prague, Miller gave a presentation on “agility meets humility”, and spoke about how Covestro is investing in people and culture, as well as embedding the core values of “curious, courageous and colourful” into its organisation.
The write-up by Tim Clark, VP, Brand Journalist and Head of Native Advertising for SAP, of Miller’s talk on Medium is well worth reading as an example of how to be genuinely “people-focused” as a digitally transforming company – the idea of people-first digital transformation is often bandied about, but what does that really mean in practice? – while also pushing digital boundaries.
Most interesting is the fact that Covestro lacks a Chief Digital Officer to helm its digital transformation, instead relying on a guiding coalition. As Miller acknowledges, “it’s a very decentralised approach” that “takes humility, being humble and connecting to one another” to make it work.
Seven digital transformation predictions for the ERP market in 2019
As we approach the end of the year, the traditional round-ups of predictions for what 2019 will hold are appearing with increasing frequency.
This week, we’ve got two different sets of digital transformation predictions: one from CFO.com, forecasting what lies ahead for digital transformation in Enterprise Resource Planning; and one from the IDC, as reported by TechRepublic, on how digital transformation will shape IT in 2019 and beyond.
Eric Kimberling, who has worked in ERP consulting for the past 20 years, outlines seven predictions for how digital transformation will affect the ERP market next year. Among them, he predicts that more companies will focus on “two-tier” approaches to digital transformation, instead of relying on a single software solution or vendor; and he predicts that ERP implementation readiness will become a prerequisite for digital transformation success.
He also predicts that cloud ERP will reach the tipping point of adoption in 2019, noting that, “Software vendors and the entire ERP ecosystem are all investing too much money in their flagship cloud products for this not to influence adoption rates.”
While this might seem like a positive trend, Kimberling foresees a less-pleasant knock-on effect from this adoption: an increase in digital transformation failures.
“Customers are being forced off their legacy systems simply because vendors are investing a disproportionate share of research and development dollars on the newer cloud solutions,” Kimberling writes. “Vendors aren’t yet explicitly saying they need to get off the legacy systems, but customers are seeing the writing on the wall.
“Also, vendors and implementation teams are spending a disproportionate amount of time trying to sort out the complexities of these new technologies. This is taking away focus from important things like change management and process improvement. This has always been a problem in the industry, but even more so now with all the new cloud technologies.”
Eric Kimberling predicts that cloud computing will be a double-edged sword for ERP
While Kimberling doesn’t directly offer a suggestion for how organisations can avoid this, in his next prediction, he highlights the importance of organisational change management to success with digital transformation.
“Advances in technology have made transformations more complex. Changes to business processes, organizational cultures, and business models have made change management strategies indispensable to success. Organizations will continue realizing this as predictive analytics, artificial intelligence, machine learning, and other technological advances put more “people” pressure on digital transformations.”
10 digital transformation predictions that will shape IT in 2019 and beyond
Next, we have a set of predictions from the IDC’s digital transformation report for 2019, written up by TechRepublic. The IDC analysed survey data and market research from more than 3,000 companies worldwide, and used it to determine whether they would fall into one of two groups: leaders, or the “digitally determined”, and laggards, or the “digitally distressed”.
Here are some of the highlights from the IDC’s predictions, which are broadly optimistic – some might say too optimistic, but they definitely provide interesting fodder for debate.
- According to the IDC, at least 55% of companies will be “digitally determined” by 2020, transforming markets and reimagining the future through new business models and digitally enabled products and services.
- The “paramount importance of customer advocacy” will result in 60% of B2C companies using Net Promoter Scores as their leading success metric by the end of 2020.
- Also by 2020, 30% of Global 2000 companies – the world’s largest public companies – will have implemented advanced digital twins of their operational processes, enabling flatter structures and fewer knowledge workers.
- The IDC predicts that by 2021, around 30% of manufacturers and retailers worldwide will have built digital trust through blockchain services that enable collaborative supply chains and give consumers access to product histories.
- By 2022, the title of Chief Digital Officer will be in decline, as “digital will have become fully embedded” within organisations.
- As many as 95% of companies will have adopted new digital KPIs, focusing on things like product/service innovation, employee experience, and data capitalisation, to navigate the digital economy by 2023.
The key to digital transformation: co-creation
If you’re new to these roundups, “the key to digital transformation” is a recurring feature in our Week in Digital Transformation column in which we look for the latest idea, technology or approach that is being held up as the Holy Grail of digital transformation – the one thing that you absolutely must have.
This week, Tatsuya Tanaka, president of Fujitsu, declared in his opening keynote at Fujitsu Forum 2018 in Munich that “digital co-creation” is the key to digital transformation and technological innovation.
What does Tanaka mean by “digital co-creation”? In Fujitsu’s particular case, it appears to mean a willingness to work with other people and entities to achieve transformation and innovation, rather than trying to tackle everything on its own.
During his keynote, Tanaka described how Fujitsu is moving away from its traditional hardware offering towards becoming a software services-oriented company. Fujitsu is no stranger to reinventing its business model: before it became a hardware company, it was a telecoms company.
However, said Tanaka, “no one company can do everything” – and Fujitsu plans to work with customers around the world, across a number of different verticals, as it evolves. Microsoft, Natwest and Securitas were all mentioned as examples of companies with which Fujitsu will collaborate – for example, Fujitsu and Microsoft have already worked together to develop biometric security solutions for laptops.
“All over the world, co-creation has now become a new standard in building business success,” said Tanaka, adding that Fujitsu will “generate many successes both for you and for society” by “connecting people”.