Supported by ever-evolving digital technology, business innovation, commonly referred to as digital transformation, has become central to the market strategies of many process manufacturers. Progress has been made, both in terms of internal improvements in operational excellence and new ways to gain competitive advantage in the markets.
Use cases now abound, solutions are widely available, and process makers are improving their ability to harness data and deploy digital technologies at scale. And the transformation has been accelerated by the hard lessons presented during the pandemic, where the necessity and pragmatism of innovation became immediately apparent as being overdue. This acceleration has continued, still driven by the fragility of markets and supply chains, but now also driven by the global need to act on climate change. Environmental, social and governance (ESG) issues and sustainability performance are embedded at the heart of business strategies. Process makers see digital transformation, and the myriad of technologies associated with it, as inseparable from moving away from fossil fuels and improving environmental stewardship.
Despite the many advances made, the majority of the expected benefits of digital transformation are still ahead of most process makers, even as they mature in terms of building digital skills. How can process manufacturers continue to mature, getting to a place where digital transformation delivers competitive advantage and dynamic business agility while meeting energy transition needs and sustainability performance? Learning from the best practices of digital leaders is essential.
For digitally mature process makers, this report examines the roadmap market leaders are following to identify and develop the foundational digital skills needed to leverage transformation as a competitive advantage. It also outlines three critical goals they strive to achieve along the way. Additionally, it discusses their modern approach to a key technology tool that all consistently and successfully leverage: analytics.
Digital leaders run a distinct roadmap
For most businesses, and this goes for digital leaders when they first started out, determining an effective starting point for digital transformation is usually difficult. Without solid ideas on how to build strong digital skills, what the ARC calls “digital wisdom accumulation”, companies often experiment and fail. They get stuck in cycles of technology deployment and the resulting collapse of pilots and projects, leading to internal perceptions of wasted investment. So what are leaders doing differently?
The common thread is clarity around the starting points. For leaders, effective digital transformation only occurs if the organization links the change to certain external market or customer signals. They use these signals as a basis for identifying what needs to change within the organization, how it will change, and what incentives exist to do so. From these signals, these leaders create a roadmap that includes:
- Focus on business results that differentiate: The firm defines ideal outcomes that emphasize the speed and accuracy of how a firm recognizes and responds to these external market signals. It gives a vision of what needs to change.
- Transparency of objectives: Armed with an external view of change, leadership is transparent in communicating what transformation will look like and how it will affect people.
- Aligned incentives: By realigning incentives with vision, transformational leaders reward transformative behavior. This becomes the key step to realign the work culture, which is fundamental for transformation, but also the most difficult change for industrial companies to make.
Using this step-by-step process, it becomes clear what people, processes and data are involved as well as a clear picture of the states before and after the transformation.
Two key objectives achieved
When executing their digital transformation roadmaps, leaders inevitably identify two key objectives that must be achieved as innovation is implemented. Both are essential to fully mature as a digitally transformed business.
The first goal is to identify and secure critical intellectual property (IP), then amplify its use across the organization so that it delivers new value. This intellectual property resides in people (i.e. tribal knowledge), as well as in the massive volumes of structured and unstructured historical and real-time data inherent in industrial enterprises.
Leaders in digital transformation are aggressively securing, codifying and amplifying this expertise. By doing so, the organization can then extend this differentiating knowledge across the organization where it can be applied to achieve the most effective results.
ARC Advisory Group customers can view the full report on the ARC Customer Portal
If you would like to purchase this report or obtain information on how to become a client, please contact us
Keywords: Industrial digital transformation, Industry 4.0, Operational excellence, Manufacturing process, Competitive advantage, Sustainable development, Energy transition, Analytics, ARC Advisory Group.