What does digital transformation mean in 2022?

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By Garry Hamilton, Chief Growth Officer and Founder, Equator

Amid global economic gloom, the manufacturing sector remains a beacon of hope that a second “Roaring Twenties” decade of industrial investment and unrestrained productivity might still happen.

Central to this positive outlook is the promise of the vast sums that are set to be spent on intelligent manufacturing. According to ABI Research, a global analyst, worldwide budgets for digital transformation in the sector will reach $950bn by 2030, almost three times the figure of $345bn recorded in 2021.

Such confidence speaks to a greater understanding of digitisingindustrial systems and the strategic benefits that they can bring. But even as we embrace the new “white heat” of Industry 4.0, and plan for the productivity revolution of Industry 5.0, it’s important to note the limitations of the term “digital transformation”.

Confusion and complexity surrounding the phrase can result in some digitisation initiatives missing the mark. If you’re unsure what a digital transformation programme looks like, how can you set and achieve goals under its banner?

Even the experts can only offer an unhelpfully flimsy definition. Analyst firm Gartner, which has done more than most to recogniseand showcase technology-based change, says digital transformation can mean anything from updating part of an IT system to completely overhauling digital business models.

Because of this, it’s helpful to go back to the drawing board and consider the four core components of digital transformation.1. Process – Processes are the activities and actions that determine how tasks are completed within an organisation. A clear view of the current processes shows businesses how technology could be used to fix broken processes, reduce process duplication, save employees time and form the basis of a good customer experience.

Most processes are designed and built to meet the needs of the systems a company deploys. That means that if the organisation relies on legacy systems, the processes will be legacy oriented. Every company will have many “official” processes – that may not be adequately documented – it will have just as many unofficial ones.

These processes need to be identified and mapped; in doing so, they may reveal ways of working that could be scaled as part of the overall transformation.2. Data – The importance of data to businesses has been talked up for some time. We are now reaching a point where companies are starting to realise the potential of having access to real-time insights they can understand.

The establishment of a data-driven approach is the foundation of any transformation. Once in place, the services designed to drive efficiency and experience excellence can be delivered. These will typically be designed around initial findings and represent, to a certain extent, a hypothetical view of what success looks like. This implementation is continually reviewed and evolved to enhance effectiveness and improve the offering to consumers as it learns about their behaviours.

But this is only the first step. As organisations mature, they begin to integrate automation, freeing up teams to focus on more complex problem solving by taking on standard tasks and roles. This is a classic example of digital transformation not being about efficiency or experience. Still, the two combined: employees with time to focus on more significant challenges – in a customer service setting, for example – will be able to deliver greater levels of experience, because they work more efficiently.3. Technology – Having the appropriate technology in place is non-negotiable. Customers expect seamless interactions, powered by the latest technology. Changing business models are lowering barriers to entry and allowing businesses of all sizes to rapidly access the technology they need without significant Capex.

It means the era of being wholly tied to one vendor is ending. No more accepting limitations in one area because said vendor meets the needs of most of the rest of the organisation. Instead, the right technology stack can and should be tailored to specific business goals, and even the requirements of smaller units within the organisation.

This more agile architecture helps businesses realise significant efficiency gains and provides a foundation for driving experience innovation and creating new intellectual property. It empowers organisations to transform continually, thereby future-proof against new disruptions and market changes. 4. People – Many people remain wary of the term “digital transformation”. They believe
it means cutting jobs and improving employees’ ability to do their roles. Plus, it means change, something the vast majority are not inherently comfortable with.

The value must be sold to both customers and employees alike. The only way to ensure that happens is to know what people, or users, need – and how they need it. This intelligence must be enhanced with systems that continually develop a deeper understanding, so that the product or service keeps pace with changing expectations and meets needs on an ongoing basis.

This process of building knowledge of what users need not only informs the transformation’s eventual outcomes but also helps tackle any concerns, changes preconceptions and clears up the misunderstanding. Once this progresses to implementation, change management training, collaboration, and future support are key workstreams to include alongside the service design itself. 

A focus on these four areas should help your business define the goals of your digital transformation programme. But remember, in this instance, all factors are created equal. Prioritise one or some over the other aspects, and digitising your manufacturing business might not be as transformative as you hoped.

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