by Willie Ackerman
The subject of digital transformation and the threats and opportunities the trend poses currently dominate executive-level discussions in industrial companies in the mining, manufacturing, energy and chemicals sector. Business leaders understand that to remain relevant and competitive, they need to create digitally-empowered companies.
At an operations level, company technicians and engineers already have a clear understanding of the value that technologies such as cloud computing, artificial intelligence (AI), machine learning, big data, analytics, automation and the internet of things (IoT) can deliver to the organisation.
It’s clear that everyone within the organisation understands the strategic importance of a digital transformation strategy, yet the majority of South African companies, to their detriment, lag global benchmarks in digital adoption.
Survey results in the 2018 Dell Technologies Digital Transformation Index found that only 8% of South African businesses are ‘digital leaders’. A similar picture emerged in Accenture Strategy’s Digital Performance Index, which in 2017 found that only 39% of local companies were investing comprehensively in digital technologies as part of their overall business strategy.
More recent research from the Vodafone IOT Barometer 2019 found that while 34% of global businesses now use IoT, with 95% of adopters realising benefits from their investments and 53% reporting reduced operating costs, the Europe, Middle East and Africa (EMEA) region has the highest percentage of companies in the ‘still considering’ stage and the lowest share of companies in the top three IoT ‘sophistication’ bands, at only 22%.
The country already has access to the technologies and solutions required for true end-to-end digital enablement, including pervasive fixed and mobile connectivity, the roll-out of high speed fixed and mobile internet connectivity networks, and the data centre infrastructure needed to enable future-ready businesses. But with buy-in at the highest organisational level and bottom-up pressure from the teams on the ground, why do local businesses remain such digital laggards?
While major barriers to adoption include budget constraints, regulatory requirements and security concerns regarding cybercrime, based on our industry engagements, one of the most prolific impediments is a misalignment of strategy and expectations between C-level executives and the company’s operational teams.
We have witnessed an especially potent gap between expectations and outcomes within the mining and manufacturing industries in South Africa, in this regard. And disastrously, such disconnects lead to digital transformation failures and an inability to realise the intended business value.
But rather than a fundamental flaw in the technology itself or a lack of understanding regarding the benefits of digital solutions, this gap in digital comprehension seemingly stems from miscommunication.
Given the technical speak of mining and manufacturing engineers, and the business lexicon of executive teams, the digital transformation conversation is often lost in translation. Before any attempt is made to construct a digital transformation strategy and roadmap, what more companies should do, is create an internal platform for constructive dialogue.
Funnel down to consensus
To close the communications gap and mitigate this disconnect, internal digital transformation champions must facilitate a platform for dialogue between executives and operational teams to reach mutual agreement and secure commitment to a strategically-aligned digital transformation roadmap.
Internal discussions should follow a funnel-like structure. As discussions elucidate the different concepts and align these with the business’s specific objectives, the discussion can progress to the narrower portions in the funnel, until discussions reach the end and mutual understanding is achieved.
If stakeholders commit to a linear process, numerous missteps can be averted. We recommend and work according to three pre-digital-transformation steps to ensure a deep alignment between operations and executives.
Step 1: Establish current capabilities
Initial high-level discussions as business leaders enter the funnel should determine where the organisation is positioned on the digital transformation spectrum.
Based on current capabilities, organisations will generally fall into one of five levels according to aspects such as digital strategy, customer experience, data quality, technology, processes and people.
Once consensus is achieved on where the company finds itself on this digital transformation continuum, the team is ready to progress to the next step.
Step 2: Clearly define the strategic objective
To drive the digital transformation agenda forward, every level of the business must align their objectives and contextualise their technology requirements in a universal language that everyone within the business can understand, based on where the company currently finds itself along the digital transformation spectrum.
Any misalignment in messaging causes unnecessary friction within the business and, therefore, a chasm forms between departments in how they understand the context of digital transformation within the organisation.
For example, mining executives want to save costs amid a slump in commodity prices. They understand that digitalisation can help, but often lack the technical expertise to know which solution is best.
Conversely, engineers know that an investment into advanced process control (APC) solutions would streamline production processes to boost throughput. However, they lack the ability to contextualise the benefit of investing now to realise returns and cost savings down the line or demonstrate to the executive team the real return on investment in monetary terms.
What both groups often fail to effectively communicate is that they can realise both objectives with the appropriate solution and application of technology. APC solutions, for instance, can fully automate plants, using artificial intelligence and machine learning, which can realise cost savings of between 15-20% almost immediately, with a ROI of less than 6 months.
Engineers understand the technology but struggle to justify the capital expenditure in terms that resonate with the business executives’ finance-oriented minds, which are currently focused on cost containment.
To assist organisations with this alignment and guide the next phase of the internal process through the funnel, organisations can adhere to a strategic discussion framework that seeks to compartmentalise digital transformation outcomes within three distinct categories. These are: improve revenue or productivity; retain revenue, contain costs or maintain productivity levels; or minimise costs.
Step 3: Establish common ground
Determining whether the objective is cost savings, increased revenue, or improved operational efficiency will help to inform which digital solution is the best to meet the business’s strategic objective.
In this regard, the applied strategic discussion framework helps to align the two different viewpoints and effectively bridges the gap that currently exists between executives and operational teams to help the organisation reach consensus. It’s all a matter of perspective and how the digital transformation discussion relates to the strategic requirements within each aspect of the business.
The strategic take-out
In summary, for any business currently grappling with the complexities of digital transformation, here are five key considerations to help bridge the gap the currently exists between boardroom talk and a business’s operational reality:
Insight #1: The starting point for any digital transformation journey requires open and honest internal dialogue between executives and operational staff.
Insight #2: To ensure a constructive outcome and facilitate the process, organisations should adhere to this three-step process:
- Step 1: Establish current capabilities
- Step 2: Clearly define the strategic objective
- Step 3: Establish common ground
Insight #3: Once everyone shares a common understanding, the business can define the specific objective.
Insight #4: Establishing a clear business objective will inform which digital solution is the most effective enabler to achieve the desired outcome.
Insight #5: With a clear understanding of the specific solution required, the business can secure the commitment from all stakeholders needed to define a strategy and approve the budget to finally realise its digital transformation ambitions.
- Willie Ackerman is chief sales officer at 4Sight Holdings