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Reaping The Benefits Of Digital Transformation

8 min read

Transformation

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Digital transformation brings significant strategic, operational, and financial benefits to industrial companies worldwide. These tangible benefits are rapidly driving mass adoption of Digital Transformation. In this article, Digital Leadership will go into 12 primary goals of digital transformation, talking you through the benefits of digital transformation in business and digital technology.

Digitalization is a holistic approach that goes far beyond process improvement or an enhanced customer experience. Our 5 Building Blocks of Digitalization offer a powerful framework that enables you to reap the benefits of digital transformation: From strategy, ecosystems, structures, processes, and technologies to people, culture, and values.

Building Blocks of Digitalization
The UNITE Building Blocks of Digitalization
Designed by: Digital Leadership AG

Why digital transformation?

Now that we know that companies are recognizing the opportunities of digital transformation, the obvious question is why? Why digital transformation and what are the benefits of digital technology? The answer is nuanced, but analysis shows that there are 12 primary, tangible goals of Digital Transformation in business.

These goals are evenly distributed across three critical business areas: Reduce Costs, Achieve Growth, and Improve Experiences.

In the following, we will talk about the benefits and goals of digital transformation and show why industrial businesses are taking advantage of digital transformation and technology in 2022.

digital transformation benefits
Digital transformation benefits

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Reducing costs with digital transformation

Many manufacturers first look internally for ways to leverage digital capabilities to improve their operations. They choose to test the value of technologies before rolling them out to customer-facing operations. This puts them in a more advantageous financial position as they can then focus on growth and experience-driven goals. Unsurprisingly, 62% of companies have adopted this cost-first mentality as a result of COVID 19.

There are five key cost-oriented goals that manufacturers cite as critical to Digital Transformation.

  1. Asset efficiency: Improving the availability, reliability, and performance of machinery, equipment, and other industrial assets.
    Manufacturers have countless assets in production facilities and industrial environments. They operate in fragmented and unpredictable processes that largely limit the ability to optimize their performance, Even gaining small preventive insights into a single machine can dramatically improve OEE (between 11-30%), reduce downtime (up to 30%), and improve the overall reliability of the entire production line. Digital transformation can help address these operational costs through more efficient use of existing assets.
  2. Workforce Productivity: effective onboarding, streamlining, optimization, and empowerment of field staff.
    With a looming skills shortage, manufacturers are looking for ways to optimize their workforce to improve time-to-impact, overall labor effectiveness, and other productivity metrics. Providing digital insights can help them with their physical tasks, such as assembly, maintenance, and quality inspection. Through digital transformation technology companies can provide accurate work instructions in real-time and augmented reality as an immersive lens for the worker into their physical environment.
  3. Cost of goods sold (COGS): reduction of direct costs, including materials and labor necessary to produce the goods sold by the company.
    Reducing the cost of goods sold is a core digital transformation goal. Using digital technology to optimize inventory, reduce waste in manufacturing products, and leverage labor can directly improve this financial impact for manufacturers. Artificial intelligence can identify areas in the supply chain where costs can be optimized, and new software brings benefits by providing a platform to link these typically disconnected supply chain processes.
  4. Operating and manufacturing costs: reduction of production costs associated with maintaining operational continuity or the expense of manufacturing a product.
    This cost category includes reductions in labor, material, energy, working capital, and capital expenditures.
    Digitally driven insights help to better balance energy use in the factory across all assets and reduce energy costs. Digital transformation technology also helps to optimize existing production capacity.
  5. Service costs: reduction of labor, equipment, parts, and customer costs over the entire service life cycle. 
    There are significant costs associated with maintaining a deployed product, which can be significantly reduced by improving service team metrics. Optimization opportunities for the technician are possible by matching skills and proximity to service issues in the field. Remote problem resolution through smart, connected products can also improve metrics across the service lifecycle – another benefit of digital technology. Manufacturing offers a huge area for cost savings through digital transformation. Identifying the most urgent and achievable goal is usually the best place to start.

Driving growth through digital innovation and transformation

The main challenge of manufacturers is the need to achieve high growth targets whilst having limited resources to do so. Incorporating digital transformation technology into product development has driven innovation and provided a path to achieving increasing growth.

  1. Time-to-market: Shortening the time it takes for new and existing products to reach customers.This includes improvements in both areas of product development and manufacturing. Digital transformation technology creates continuity between these functions so manufacturers can deliver products faster.
  2. Introducing new products: Reduce allocated time in product development processes, including new product introductions and development rates. 
    New digital technology equips engineering teams with the means to rapidly create innovative product designs. Generative design autonomously creates thousands of design variants based on requirements and goals. These modern methods of innovation help manufacturers to bring new products to market at unimaginable speeds.
  3. Introduce new business models/ revenue streams: Form alternative methods to create new revenue streams, such as products-as-a-service.While digital transformation offers manufacturers the opportunity to optimize existing processes, it also helps to establish new strategies and methods. Through products-as-a-service, manufacturers mirror the software subscription model and sell product usage and business outcomes. These digital transformation programs help traditional business models to deliver recurring revenue streams and significant service margins.
  4. Time & Yield: Reduce the time it takes for a product to move through a manufacturing process, For some markets, growth means producing large volumes of products quickly. Manufacturers are increasingly turning to IIOT-driven digital transformation solutions in their factories to support these production processes and rates while minimizing defects.

How to Create Innovation is a practical and comprehensive workbook for students, innovators, designers, government, and corporate leaders who appreciate and are curious about the pace of innovation and emerging technologies. It challenges the status quo of our mindsets and beliefs and provides the strategic approaches required for the next part of the journey. Leverage the UNITE Innovation & Transformation framework to build your own story and create a world worth living in! www.digitalleadership.com/createinnovation

Customer Experience and Engagement Transformation

Becoming a customer-centric company is a core goal for many manufacturers, but achieving it has been a challenge for many. Here are some ways to leverage digital transformation to keep existing customers and attract new ones:

  1. Product Quality: Consistently create high-quality customized products,
    Delivering a product that doesn’t perform as intended certainly won’t win over customers. Internal fixation on quality metrics helps to ensure the product’s resilience in the customer’s operating environment. Mass customization and product complexity increase the need for digital transformation to manage the vast amounts of information and maintain the highest product quality throughout the lifecycle.
  2. Customer Experience & Engagement: new or added products, features, or services for customer delivery models. Digital transformation provides manufacturers with insight into how their products are actually being used, and more importantly, how customers are using that product. These data-driven insights provide a rapid feedback loop with feature usage rates for product designers working on the next iteration. Digital-native experiences have also been shown to better engage customers.
  3. Service quality: reliable, responsive, and understanding service operations. Digital transformation can deliver direct cost savings across the service lifecycle, but it can also ensure reliability and trust with customers. Manufacturers that can achieve this level of trust in servicing products or ensuring uptime in customer operations become a powerful digital ally to the customer, which quickly leads to financial benefits.

Many have identified with the customer-first mindset, only to find that most of their ambitions in terms of customer engagement or experience could not be achieved using traditional methods. Digital-first thinking provides a new platform to engage with customers and deliver tailored experiences. Digital transformation is constantly evolving and the strategic business objectives it supports will expand accordingly.

In this article, Digital Leadership has gone into the 12 primary goals of digital transformation and how digital transformation in business and technology benefits companies immensely. For more detailed insights into the benefits of digital transformation, have a look at the Digital Leadership UNITE Strategy model called Building Blocks Of Digitalization. This guide helps you gain a complete understanding of the holistic and integrated nature of innovation and digital transformation initiatives. Get access to the 50+ UNITE Innovation & Transformation Models which are fully OpenSource and entirely free to download! https://digitalleadership.com/unite.

The UNITE Business Model Framework: A Framework for Innovation Success

How to Create Innovation includes a number of canvases that focus on value creation and finding the right business model to meet your customer segment and customer needs. The framework is built to inspire drastic changes that help you find a competitive advantage. Our hope is that your company grows through business model innovation, and so we again encourage you to look deeper into our website and the book.

Here is a summary of the key ingredients of the Business Model Framework:

Business Model framework
The UNITE Business Model Framework
Designed By: Digital Leadership AG

Business Models

The centerpiece is the Business Model Canvas, which covers the six main areas of a Business Model (the Operating, Value, Service, Experience, Cost, and Revenue Models).

The eXtended Business Model Canvas adds the immediate business context, including Business Drivers, customers, and the team, as well as the Unfair Advantage.

Detailed Models

A Business Model can be broken out into its numerous aspects. Depending on what challenges you face, you can zoom in on your area of interest using an appropriate tool or canvas:

  • Your Business Intention and objectives as well as your Massive Transformative Purpose summarize your drivers and give direction to what you do.
  • The Value Proposition Canvas details the central components of your offering (the product or service).
  • To dig into your Customer Segments, work with data-driven Personas.
  • The JTBD Customer Job Statement and Job Map frame the JTBD of your customers.
  • The Business Model Environment puts your Business Model in a market context composed of emerging trends and disruptive forces.
  • The Innovation Culture Canvas helps you understand and consciously shape a culture that supports innovation.
  • The Innovation team structure enables you to draft a team structure for your innovation initiative.
  • Using learning and growth metrics, you can measure progress at the initial stages of development. These metrics help you focus on what really matters instead of creating a detailed business plan that will not really help you. Later on, you can expand the financial aspect of the Revenue and Cost Models with a full business case.
  • The Operating Model Canvas helps you think through the Operating Model.
  • Business Capability Map: A Practical Business Approach

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