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The 4 Major Roadblocks of Digital Transformation in Industrials/ Manufacturing
Most business-to-business (B2B) manufacturing leaders understand the importance of digital transformation. They’re open to exploring how to use technology to meet their customers’ ever-changing expectations and to keep up with the digital capabilities of their competitors, including new entrants. In the 2017-2018 National Association of Corporate Directors (NACD) Public Company Governance Survey, boards identified technology and business model disruption as top trends having the greatest effect on their companies over the next 12 months.
Blue Canyon has seen this display of eagerness to embrace digital innovation consistently within our client work.
However, from our perspective, while many industrial companies have started down this new path, few have made significant progress. These companies are encountering roadblocks at every turn, which frustrates company leaders and prevents their digital initiatives from making substantial impact.
Across markets, industries, and companies, Blue Canyon has identified 4 major roadblocks that commonly stand in the way of digital transformation. We have outlined these trends so you can anticipate these challenges, better plan your own initiatives, and chart a clear digital path—or know what steps to take to navigate around these roadblocks.
- Taking a Technology-centric, not Customer-centric, Approach
Company leaders can act in haste with new, digital technology before properly developing a strategic understanding of why, and who would benefit from this new capability. Many have bought into the concept of digital transformation and want to start reaping the benefits of process optimization, lower costs, and more powerful, insightful data—and they want to offer similar benefits to their customers. As a result, they don’t hesitate to jump into system implementations and begin introducing new technology solutions to their customers, who may or may not be on the same digital transformation track. They’re essentially leading with technology, not their customers’ needs.
Yet, when suppliers make an assumption about their customers’ digital readiness—and fail to explore the reasons why their customers would benefit from their digital solutions (or if they’re even ready for them)—they can create a costly disconnect. In effort to stay ahead of the unfolding digital disruption, leadership invests heavily in updating their infrastructure to support the latest and greatest in Internet of Things (IoT), eCommerce, or other digital technology. And, unfortunately, they’re not seeing a significant return because they haven’t created value for their customers.
How to Navigate the Roadblock: Company leaders, including the most tech-savvy among them, need to take a more strategic approach to not only why they’re investing in digital innovation, but for who and where as well. It’s critical to align IT investments, especially those that impact customer-facing processes and services, with customers’ needs. This requires focusing more attention towards learning how technology offerings can create welcome value for customers, and, of course, determining if customers would be willing to pay for this value.
- Getting Lost in a Clutter of Digital Initiatives
With new technology in place, company leaders often start experimenting with their new capabilities—piloting bright ideas and customizing one-off opportunities with customers. However, these experiments can quickly grow into an overwhelming basket of unconnected, random digital initiatives, many of which are scattered throughout divisions and across the globe. A company’s products, services, and even value proposition can become unwieldy and undefined, making business relationships more difficult to manage, as well as employee roles and responsibilities.
It’s easy for company leaders to lose focus when surrounded by new technology that can be used across a myriad of potential applications. And if a company is late to adopt updated technology and the accompanying capabilities, it’s even easier to see how they can be quick to create a la carte solutions for customers without stopping to address the need for an overarching digital strategy. Essentially, they’re reaching at low-hanging fruit instead of considering the larger digital opportunity that can have a far-reaching impact on the marketplace.
How to Navigate the Roadblock: Simply enough, businesses need to approach their digital initiatives with a firm strategy in place. If a company has already found itself spread too thin—grappling with a set of disjointed digital projects—leaders must step back, prioritize the key projects, and build a strategy to move these initiatives forward with more clarity.
- Failing to Address Scalability
Digital experiments borne from new technologies are sometimes difficult to scale up, and some tests even end up turning down blind alleys. Our clients often see that their investment of time, people, resources, and technology overshadows prospective returns—this occurs frequently when a successful pilot was so specialized or highly customized that it later failed to attract other potential customers.
How to Navigate the Roadblock: Before launching new digital products or solutions to customers, company leaders need to consider the potential demand. There may be a few ideas in the pipeline, as well as a few experiments in the works, but it’s a good idea to sort out which digital offers (including a bundled platform of digital offers) represent the best opportunity for widespread adoption.
- Underestimating the Impact on a Company’s Business Model
Digital transformation calls for a dramatic change in a company’s business model. It encompasses everything from creating a sharper go-to-market plan with an updated value proposition to building a digitally enabled team of experts and understanding how to monetize new offers. Many organizations struggle with developing a transformational business model because it’s complicated work that requires deep analysis and even deeper commitment. Digital transformation is inherently powerful—and it will change everything. Companies failing to recognize and prepare for it’s potential impact could fail to innovate in the right directions, or worse, fall behind entirely.
How to Navigate the Roadblock: It’s vital for a company to establish complete alignment, both organizational and strategic, around its digital efforts, including sorting out which challenges and opportunities need to be addressed and when.
Ultimately, leadership must understand where to play, and how to make informed technology investments, pursue the right opportunities, and adjust business models accordingly. We encourage you to conduct an assessment to determine if there are roadblocks to your current digital efforts, identify gaps and opportunities, and organize priorities and next steps.
 “2017–2018 NACD Public Company Governance Survey.” National Association of Corporate Directors, 2017, www.nacdonline.org/survey.