Getting Fit for Growth–a Three Step Strategy for Digital Transformation

Getting Fit for Growth–a
Three Step Strategy for Digital Transformation

Terri Hiskey, Vice President, Product Marketing, Manufacturing
at Epicor Software Corporation

One of the key findings of a recent
PWC report found that the buzz
around Industry 4.0 has moved on from what some saw as marketing hype in 2013
to investment and real results today. But preparing for a digital future is no
easy task. It means developing digital capabilities in which a company’s
processes, people, culture, and structure are all aligned toward a set of
organizational goals. And for most companies the ultimate aim is growth.

In manufacturing, the challenges for
companies are multifarious because digital transformation impacts every aspect
of operations and the supply chain, from equipment and product design, through
to production processes, logistics and service. 
Industry 4.0 trends now require new, more sophisticated levels of collaboration
across geographies on everything from product roadmaps and engineering
specifications to production line management and information about parts.

From talk to action

The PWC study found that companies expect
to significantly increase their portfolios of digital products by 2020. In
addition, our own research has highlighted the importance
businesses are placing on digital transformation today, with two-in-five
industry professionals agreeing that digital transformation will offer them
strong opportunities for growth in the future.

Whatever manufacturing model they are
working to, such as engineering-to-order (ETO), make-to-order (MTO) or make-to-stock
(MTS), manufacturers are increasingly working with an ever-broadening range of
software systems. The challenge is to ensure that software integrates properly
and data is shared effectively across all systems.

Another challenge is that migrating to
new solutions can incur heavy costs. Many manufacturers have existing legacy
systems and technologies that do not provide the functionality, integration and
upgrade capabilities required to become a truly digital organization. These organizations
should be prioritising what technology is needed at different points on their
digital transformation journey. 

The reality is that digital transformation
is an ongoing process for most companies–they are required to continuously
assess when and how fast to migrate their technology. For some this means
struggling with digital debt that can restrict the potential of the business
for growth.

Digital debt embodies itself in IT cost
burdens, due to decisions taken on legacy technology years ago, but also in
terms of unsupported old releases, or isolated systems that may hold a business
back from its potential–in fact, in a recent report, Forrester defines digital debt
as: ‘the opportunity cost
resulting from retaining technologies, systems, and processes that constrain a
firm’s ability to become a digital business.’

To avoid being constricted under the
strains of digital debt, manufacturing businesses must adopt technology that’s
customer-led and insight driven. Forrester recommends three steps for manufacturers
to migrate from legacy systems in support of a customer-centric operating
model.

1.       Identify migration priorities

The first step is to understand the role
of digital transformation and how it can help your manufacturing business grow.
 The best way to do this is to analyze the current state of all systems, from
R&D, procurement, production, warehousing, logistics, and marketing to
sales and service. Assess these systems for their ability to put the customer
at the centre of business operations—for example, do they allow for customer
engagement? Do they help a customer achieve what they want to achieve?
Businesses should also assess systems for their ability to provide and act on
insights, and work in real-time, whilst connecting with other areas of the
business.

Crucially, however, make sure you assess
the capability of technology against your business goals. Once this assessment
has been done, manufacturers can identify migration priorities in their journey
towards digital transformation.

2.       Estimate costs one pain-point at a time

It’s important that organisations don’t
try to radically overhaul all of their systems at once. A report by Accenture suggests that for organisations to shed
systems and behaviours that are relics of the past, they need to establish
spending priorities based on what will yield the best returns, and help them
keep pace with growth objectives.

Invest in technologies that add strategic
business value and develop organizational capabilities that are aligned to your
business goals.  For example, investing
in cloud can expand collaboration along the value chain. For some systems a
complete and immediate replacement might be the best option. But for others,
such as for applications that work well but simply look a bit out-dated, a full
replacement might not be necessary straight away. Here, an update might be a
more cost effective and immediate solution.

3.       Map the remediation journey

As Forrester recommends, manufacturers need to ‘build
your migration road map consistent with your migration urgency – your digital
debt.’ Those that attempt to retain complex, disconnected, networks of legacy
applications and systems will limit their ability to put customers first,
constrain their digital transformation and restrict business growth. That’s why
it is so important for organisations to set out clear goals for legacy
migration and constantly re-evaluate their progress.

Turn insight into action and empower your
business with the right people, processes and culture to foster change. Digital
transformation has already had a profound impact on the manufacturing industry
and it shows no sign of slowing down. Remaining competitive means being able to
put customers first, and putting customers first requires manufacturers to grow
and work in the digital landscape.

The digital model fuels key competitive
differentiators, including the ability to extend transactions into experiences,
to connect with customers and suppliers anytime and anywhere, and to translate
data into strategic insights. Manufacturers that embrace digital transformation now are set
to pave the way for business growth tomorrow.