Innovations

Back to Digital Basics: The key to digital transformation lies in people and not technology

‘The rate of increase of industrial devices being connected to the internet is up 25% per year, but customers don’t really appreciate how the capabilities and benefits of the IoT are relevant to their business’

So says Dave Hammond, Product Manager at MAC Solutions. And he should know, as he sells and manages the market leading eWON router, which enables industrial equipment to be accessed securely and remotely, across the Internet. For business leaders, his ‘grass routes’ observations are far more insightful into the challenges of monetising data, then the many articles routinely churned out on the subject. It highlights the importance of mind-set above all else, which is all about getting back to management basics, a point that many commentators have lost sight of.

What becomes clear from talking to industry people like Dave is that are excited by the opportunities pitched around Servitisation, Industrie 4.0 and Digital Economy, but struggle to imagine how to apply to their business. Just this week I was at an industry event in London, and came across a number of experienced managers who have the task to explore these opportunities and they all expressed the same challenge: that of precisely identifying the opportunity so as to justify the investment.

Many industrial companies are enabling their equipment for remote connectivity with a business case solely based on savings and cost reduction. They can easily imagine and demonstrate a return on investment based on a reduction in costly service visits through remote diagnosis, especially during the warranty period, where they bear 100% of the cost. I frequently talk to OEM’s who have used remote diagnostics to reduce the number of service calls by anywhere between 20-30%.

Now this is all good news for the solution providers. With the number of devices being put on-line booming, everything sounds pretty good with the market. But Dave and his colleagues at MAC are concerned at the lack of ‘market understanding’ from their client base of small and medium sized companies.

In their ‘Connectivity Roadmap’ most customers are stuck at level 2 – ‘Get Connected’, which is all about cost!

m2m-maturity-curve

They struggle to justify moving to the next phase of delivering proactive service revenues and ultimately transforming their business.

So what are the underlying causes that are stopping businesses from stepping up to this challenge?

Part of the reason lies in the lack of maturity of the tool sets being developed by IoT providers such as GE, Microsoft and PTC. In the last 3 years, huge investments have brought these tools into the realms of reality, but they are still relatively cumbersome to integrate into business processes. Despite what you might read, it is only larger businesses that have the resources to invest in developing their own bespoke infrastructure; and even then, most of the tangible gains remain in the area of cost reduction.

For many in the industry, another challenge is around culture. Most industrial companies have struggled to imagine the full potential of what digital technologies can do for their business. They have become trapped in product-centric thinking, rather than deeply analysing where the value is delivered within their customer and industry value chains.

The good news is that the business case to ‘Get Connected’ is so inequitably clear, that at least many engineers have been encouraged to pilot the technology and learn for themselves what it can do.

A second challenge is the conservative nature of many industrial businesses in adapting to fundamental change. Together these represent a significant mind-set issue.

The message for many businesses is that to maximise their return on technology investment, they would do well to challenge their current culture to become more outward orientated and service focused. This means not only better understanding customers’ needs and their immediate problem. But moving deeper into how to harness their inherent know-how and technology to help their customers make money. We first started talking about this two years ago, when it struck us that that the promotion of the IoT was a classic piece of technology led thinking. In our article ‘The IoT: Worthless without the S for Service Thinking! we stated that the key to monetizing the IoT would be through Services. And key to seeing the true benefits would be through a developing a ‘Service Thinking’ culture where businesses understand that value is created by applying their technical or business knowledge to improving whatever it is their customer is trying to achieve. An indeed this is what we are slowly seeing, as industry understands that to monetise data, you have to 1st know what data is valuable to collect.

By moving emphasis away from technology towards outcomes and operational excellence, many businesses will be able to deliver more value and hence profitability. There is nothing new in this and essentially it is a ‘back-to-basics’ approach, based on common business sense.

The first steps leaders can take is to start encouraging an ‘outside-in’ approach in their organisation, taking a long hard look at the value they add to their customers and how they influence the industry value chain. This means going beyond asking customers what they want and being what many called ‘customer focussed’. It is necessary to go deeply into the customers business and understand how they make make money, and even what drives their customers. This is a skill set that many companies are short of. It not only requires combining excellent business acumen with contextual industry knowledge, but also an ability to probe and develop conversations that lead to deep insights into the value chain. Many turn to the sales force for these insights, but to do this alone is a mistake. Sales bring important perspectives, but are also rather narrow in their view and influenced by their compensation. It is important to probe the outside world from all levels of the organisation. Only by using the many different channels and support mechanism available to businesses, can a company gain true insights into the industry value chain.

The second step is to experiment with these technologies so as to experience their capability and develop an understanding for their potential. Innovation managers increasingly use concepts around ‘Design Thinking’ where emphasis is placed on prototyping ideas, so as to succeed or fail fast. These small pilot projects can quickly identify potential, yet ironically having a pilot that fails is an anathema to many product thinkers. Used to Product Development processes aimed at ensuring the protection of investments in expensive prototypes, shifting to a Service Design process represents a significant challenge in organisational culture.

By combining these experiences, companies can gain understanding into the customer problems they can solve through the wide variety of digital technologies that are becoming available. Successful companies are following this path and enhancing their mind-set so as to develop the insight and confidence to turn data into intelligence and then profits

If you sense your digitisation initiatives are slowing down or not meeting your expectations, perhaps there are three basic challenges for you to review.

  1. Do you have the right level of insight to use your know-how to make your customer more profitable?
  2. Do you know how to use data & information to make your operations more cost effective?
  3. Are your people encouraged to explore new ideas, with an environment and processes in which innovative ideas can be turned into reality?

Get these right, and your business will start to move along the path to monetizing the digital opportunity.

Nick Frank is a Co-Founder of Si2 Partners and this article is based on one first published in Field Service News in January 2017.

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