The 5 Pillars of a Digital Transformation and IoT Strategy

Digital transformation means different things to different businesses. Whether businesses are seeking to optimize manufacturing,  improve an in-store experience or create a new business model, the transformation required crosses multiple lines of business. I believe to succeed, enterprises need to use a company-wide framework for their digital transformation and IoT strategy. Transformation, if done right, will require alignment across the entire business - including investment dollars, priorities, measurement and metrics, and the path to execution.

There are five pillars that I believe provide the framework needed to achieve success in large corporations:

• Vision
• Customer Understanding
• Technology Alignment
• Metrics and Measurement
• Governance

There is a great deal of information and learning to be shared in each of these pillars.  My first draft at this post turned into a lengthy white paper; for now I will just address a few high level concepts to optimize your reading time.

Vision

Establishing a vision, and a strategy to achieve that vision, is the most challenging pillar.  The vision needs to have buy-in from across the company, starting at the CEO.   It is critical to create a foundation by which everyone can agree to prioritize funding and resources, and agree to the processes that need to be changed along the way.  Digital strategy impacts legal, finance, and in the case of changing business models, it could impact sales and quota structures.  Digital transformation impacts everyone from IT and Marketing to Customer Service and Sales.  Companies have dozens of touch-points, hundreds of applications and backend systems, and hundreds of legacy processes. In parallel, there is an ongoing business to run and operate. Existing products and services drive immediate revenue targets and are required for companies to keep their commitments to the market.  To create a vision and strategy,  it starts with getting everyone in the same room. Yes. The same room. There are different methodologies and workshops for how to drive out a vision and strategy - it could be Design Thinking or Innovation Games, it is about getting people to be a part of the thought process.  Evaluate macro/global trends that will impact the business, walk through a day in the life of your customer, figure out what things will help you move forward faster and what is holding you back.   You will be surprised at the alignment that exists and the alignment that is created by the nature of the face-to-face process.  Jointly create a high level roadmap that addresses both near-term wins and a path to achieve longer-term wins that begins now but the value is realized further out.   Derive a mission statement for your digital transformation - “Our mission is to get the right information, at the right time and place, to the right person (or machine). “

Customer Understanding

Customers are at the core of every business's digital transformation.  Creating the roadmap and priorities should start with the customer in mind.  The initial roadmap considerations that came out of your Vision discussion now need to be validated. Your roadmap should be prioritized based on outcomes; near-term wins with customers and cost savings, while working on the new business model which will more than likely take longer to execute but needs to be done in parallel.  

Begin by addressing customer pain points.  Do a detailed analysis of your business - call center data, net promoter scores and verbatim’s, analytics from the online and physical stores, and areas with high or increasing costs in the business such as services and manufacturing.  Evaluating, correlating, and understanding the pain points should drive the priority. Use your customer advisory councils to correlate and test your findings.  

One example might include looking at Net Promotor Score (NPS) and verbatims which might highlight something as simple as “we want to be kept informed of the status.”  The longer term problem to solve might be cycle time reduction, however, the near term solution could be as simple as a notification to inform a customer of the order status.

Once you have identified the quick wins, and the priority areas that will take longer time and investment, it is important to model the new processes and experience. A Journey map is a visual interpretation of the overall story.  It is  the view from an individual’s perspective of their relationship with an organization, service, or product, over time and across touch-points.  That individual can be a customer, a partner, or an internal employee.  Journey maps will save you time and dollars, ensuring that you have thought through the steps of the new processes created or automated.  They should be done for everything -  including IoT process changes.  The journey maps should be used as the foundation for user stories, architecture discussions, and prioritization. They architect experiences that drive value to the business while enabling prioritization of strategic initiatives.  

Technology Alignment

There are more than 350 companies that are over 100 years old, Nike is 51 years old and eBay is 20 years old.  The collection of underlying technology at these companies spans decades and is a daunting challenge in itself.  Any collection of acquisitions or years of existence will bring legacy technology and the need for thoughtful planning. A technology roadmap will be at the forefront of any digital roadmap.   Technology is at the core of customer-facing channels (online, mobile, and in store), IT platforms (inventory, billing, service/ticketing), and manufacturing environments (PLC, SCADA, MES).  Every company is a software company.  

New platforms will need to be implemented.  Application Programming Interfaces (APIs) will need to be implemented. Data cleanup will be necessary and planning end of life for legacy technologies will be required.  It all influences timing - and your ability to execute.  New platforms appear to be a great place to start, but the technology is new to the engineering team and depending upon the complexity, it will take time for the engineering team to build understanding.   With API enablement, build the abstraction layer to enable the migration from an old platform to the new one if you need to run both in parallel.   Data cleanup will be the thing that slows down the big wins.  Whether you are implementing IoT in a manufacturing environment and data is entered manually today from OT to IT systems, or you are trying to consolidate to a single customer ID, clean data is critical to any transformation strategy. Data cleanup is costly, but it is what will take the pain out of your processes you are trying to move to digital.  Outline an end of life (EOL) plan for each product and platform that will not be part of the future state of your business. Align the EOL plan with the prioritized roadmap.

New processes will be required. More than likely you will also have some legacy products that still follow a waterfall delivery methodology, and new platforms and applications following agile.  Plan upfront how to run these processes in parallel and in some cases merge concepts. Many organizations with large development teams and 20+ years of code through eras of programming languages and styles, and skills practice “wagile” (waterfall + agile) which tends to have an impact on the expectations.  Ensure everyone is clear on which teams follow which methodology and the overall impact that has on delivery.  

Metrics and Measurement

Every project needs to be outcome-based --increase operational efficiency by 15% or increase revenue by 3% YoY through a new business model. Establishing a baseline will be easy for areas of the business where data is already collected. The critical success of the program will be alignment on measuring areas of the business where there is no historical reference. New business models create measurement and metrics challenges as well. Is this revenue incremental or replacement revenue?  Is revenue shifting from one business unit to another?

Pay per use models are the big shift associated with digital transformation and IoT - selling compressed air instead of compressors, charging for hours of use of an industrial cleaner instead of selling the equipment, etc - these new business models may impact compensation structures in the sales organization, as well as how the revenue is recognized.

Setting metrics across each area includes development.  The metrics in development will require a great deal of patience and reassurance with your engineering teams that transparency is good for everyone.  When used to help improve the entire team, metrics will be a key part of managing your progress towards transformation. Information Technology (IT) metrics will vary based on the complexity of the work, and the age and complexity of the systems involved.  Transformation projects have several teams involved such as engineering, business architecture, design and UX, and software delivery teams - and production management/Operational Technology (OT)leaders.  

All of the team members need to understand how the development metrics are being measured and need to be included in the process, and be part of the overall target (win together). The IT and OT teams will also need to understand the business metrics to ensure priorities remain aligned.

Governance

Governance is a four letter word for most people within large organizations.  It carries connotations of being complex, time-consuming, and political.   There is an opportunity to make Governance help move your digital transformation strategy forward.  It will be a productive and successful endeavor if the previous areas discussed were done in a collaborative and transparent approach.  Openly sharing priorities, key drivers for those priorities, investment needs and timing will help as Digital Transformation is a multi-year program.   Governance can be used to remove roadblocks in processes. It can be used to re-prioritize when the market changes.  A global view of a dashboard is provided to each business owner.  The dashboard includes a view of the individual business unit  impacts, as well as that of their peers.  

The dashboard provides a view of investment dollars allocated and shared across business units.  It will include targets and attainment of the targets by each functional area.  This includes a view of priorities across the business related to revenue growth/new business models, and business efficiencies/cost reduction.  Everyone will need to be comfortable with transparency.   The governance model that gets put in place is the influencing body for the changes needed.

Digital transformation is really series of small and large projects across your business that will drive new revenue and create efficiencies.   In its entirety it is big. Really big.  Everything and everyone will not be aligned perfectly, however, sharing an understanding of the goals and providing transparency are paramount. And providing a mechanism for change, will increase your opportunity for success. I believe these five pillars of a digital transformation and IoT strategy are a foundation for alignment and prioritization that allow you to optimize investment in people, technology, and time.