There is a consensus amongst most companies, especially industrial companies, that embracing digital transformation will be the key to success in the future. Yet achieving such an embrace proves to be elusive for many companies today. There is a myriad of issues in terms of curating innovation internally. There is also a myriad of problems in acquiring innovation externally. This does not mean that either path is doomed from the start. It does mean that continuing to try the same approach with poor results makes little sense. It is probably worth looking at some of the most foundational elements of corporate leadership in the industrial space and the considerations that can contribute to greater success in embracing digital transformation. Here are five considerations that all leaders of industrial companies should understand.
One: Your only option is to embrace cyber-physical transformation. This is an existential progression, and you cannot avoid it. Companies that take the time to understand and adapt to an increasingly connected world will benefit from such efforts. Companies that believe they can defer or bypass these imperatives will suffer. The market moved from digitally recorded tapes and DVDs to streaming services. Combustion engines will give way to electric vehicles. There are elements in our lives that may be today’s way of life that will undoubtedly change tomorrow, just as we have seen the same happen in the past. Cyber-physical transformation is a change that will occur everywhere, and the industrial space is absolutely no exception.
Two: People will make (or break) you, starting with leadership. All of the “cool ideas” and “progressive thinking” in the world will only support your progression if your team is capable of shepherding this process, and the team starts most notably with leadership. Therefore, this will mean that the team in place will need to learn and grow in the context of digital transformation. This is not to say everyone on the leadership team needs to become cyber-physical specialists. Instead, they must grasp the basic concepts and understand the opportunities and existential threats for not acting accordingly. Strong executives must not only have a working command of the implications of digital transformation. Still, they must build their teams with experts in digital transformation and the specific domain elements within the company’s core business to adapt to the imperatives ahead strategically.
Three: You’ll need to reach beyond your walls. This is not going to happen organically magically. It is unlikely that you have all of the people and processes you need to succeed in the organization today. With the rate of change associated with digital transformation only increasing, there is a critical need to develop internal talent and reach beyond the walls of the corporation to bring in additional people with the capabilities of enhancing this progression. This will extend to corporate development and strategic activities in the context of acquisitions and investments in solutions that can provide a higher level of adaptability for your company. And while the people in your company will have the institutional knowledge to see gaps and opportunities that can be exploited, and these ideas should be nurtured, the best possible results will likely come from combining internal expertise and external innovation to leverage combinatorial elements of such innovation.
Four: Think Holistically. The transformation will entail many interdependencies, and failure to understand these will most certainly create issues. Think of a cyber-physical solution as a car. You can’t view the capabilities of the car strictly in the context of the tires, or the brakes, or the engine, or the instrumentation. There must be an inherent understanding that the solution is a system of linked elements and, as such, must be understood and optimized holistically. For cyber-physical solutions, this means understanding the foundational elements such as chipsets, communication choices, security choices, power choices, data governance, a tiered architecture, and most certainly security. It also extends to how the data is curated and propagated and to which constituents to provide the best possible datasets that can be absorbed by increasingly powerful artificial intelligence and machine learning models. This holistic understanding can deliver the true vision of autonomous, adaptable systems. This is where we are headed, and getting this right is essential and will be a powerful tool for companies that prevail.
Five: Ideas do not equate to commercial success. Great ideas seldom, if ever, translate into excellent results without execution. As corporations reach within and beyond their walls to curate startups, there is the notion that a good idea equates to commercial success. Not only is this not true, but in fact, 90% of startups fail. An even higher number of corporate intrapreneurial projects fail. But what most people don’t understand is that 70% of the startups fail in the commercialization phase. This is the part of the trajectory in getting from a developed solution to a scalable, repeatable, and hopefully profitable state. This is the execution phase. Again, this is where most startups fail, and corporations must emphasize as they evaluate transformative solutions. The key will have less to do with the innovative idea than the ability to map that idea into a go-to-market plan with the right team, the appropriate business model, and the focus and execution needed to reach scalability.
To say that success will extend beyond these five foundational considerations is an obvious understatement. There are many more dimensions to this challenge. But it is also fair to say that as leaders of industrial corporations, not embracing these five very basic concepts will put you at a significant disadvantage at a time when you can least afford it. While frightening to some, the future can deliver more energy-efficient, safer, more effective solutions to the benefit of all.