Digital Intensity as a Transformation Tool

Digital Intensity as a Transformation Tool
November 7, 2016 Digital Intensity
Digital Intensity as a Tool for Transformation

Digital Intensity as a Tool for Transformation

~ Abstract ~

To remain competitive, businesses must stay abreast with their technology capabilities and digitize both their business operations and IT architecture. This is no trivial issue and digitization must be approached from a strategic perspective to avoid just another upgrade of the old system. Or worse, a single point solution that is not integrated. We use our Digital Intensity Assessment as the reference point to redesign the operating model. We see the digital enterprise as a catch-all for redefined business processes (thanks to transparency and collaboration), an optimized structure that increases production volumes per person employed, and to merge your operational (OT) and information technology (IT) infrastructure. The goal of this transformation is to become a fast moving, agile, digital enterprise.

 

INTRODUCTION

The rapid digitalization of businesses is the key change activity in the industrial world today. But, the underlying technologies became available so fast and from so many fronts that most people just have not had the time to connect all the dots. Nobody foresaw with any convincing clarity that a business can operate in a fully integrated, visualized and real-time fashion, with all the component divisions and departments digitally linked and optimized. As many more industries transform, including our own, and learn how digitization adds value, we are getting more comfortable with planning out enterprise-wide digital solutions. The fears relating to “letting go” are rapidly being replaced with “must do.”

Now that people know digitalization is happening, and that the transformation is a company-wide imperative, the questions regarding “how” surfaces. When employees say that they go to work “to use outdated technology and applications to slow down work,” we should be concerned. It seems that people personally own technology that is more advanced than their company’s technology. People also use their personal aps much more creatively than how they use IT at work. People are frustrated by how poorly business applications are designed compared to the personal apps they are running on their phones. This creates a huge dissonance between the relatively easy and friction-free personal digital world and a chunky, bureaucratic and often unworkable business world. We observe how people get their personal apps updated, and replace their hardware frequently and somehow cannot comprehend nor translate this construct to a business practice.

Companies are in a sense trapped by their installed systems and the slow pace of upgrades over the last decade.  We also saw most of the IT budgets consumed by “issues driven” fixes, not long term strategy. The current increased merger and acquisition activity will further exacerbate the situation as systems integration becomes a critical part of our digital future.

Digital transformation does not refer to some sort of a large scale systems upgrade – that is not what digitization is all about. This transformation is very much about digitizing the operations processes of the company’s money-making engine. It is about surfacing the Business Process Maps (BPM) as the fundamental “wiring” of the company and designing an operations (OT) and information technology (IT) architecture focused on production to disintermediate slow, friction-causing physical tasks. This includes the design and deployment of multi-functional collaboration work environments as decision making is improved and decision cycles are faster.

We are thus defining our Digital Intensity Assessment as an opportunity to understand the current company’s operational system as seen through a digital lens. The assessment allows us to develop a rational roadmap that the company can use to redesign and rebuild its operations business processes, redeploy people more effectively and re-architect OT/IT infrastructure.  We prioritize issues covering visualization, data integration and removing disjointed apps. This represents a breakaway from the past with real implications for the operational infrastructure. As a new cultural philosophy, digitization must be owned by all levels of management.

Digital transformation should start with an investment in understanding the current infrastructure seen through a digital lens: We call this the Digital Intensity Assessment. The results from our Digital Intensity Assessment enable the company to create a gap analyses and a roadmap. With the roadmap as an approved guide, the company can plan its transformation via a Program Management Office (PMO) within the boundaries of its aspirations and constraints.

Fig. 1: VCI Digital Transformation Framework

Fig. 1: VCI Digital Transformation Framework

 

This Digital Transformation includes:

  • A customer centric business that has been designed around customer facing edge devices, clearly mapped business processes, digital capabilities and collaboration – a supporting IT infrastructure and hardware that is designed to fit into the architecture
  • A streamlined business operation based on visible digitized BPM including simulation opportunities, with multi-functional collaboration activities
  • The convergence of IT and OT to form a holistic business process solution – simplifying OT, IT and business operations

 

Defining Digital Intensity

Our Digital Intensity Assessment leads to an index that describes (classifies) the relative deployment of digital tools, models and work methods within the company that enables faster, better decision cycles and work processes to gain a competitive advantage.

Every company in the modern world has some form of computing and communications capability, and most have a digital presence that includes mobile and other devices. But that really doesn’t make a company a digital enterprise. If we define digital intensity from a business process perspective, it becomes clear what the definition is. It’s not about the size of the ERP system, neither the ecommerce application, nor the O/T PLC’s in the plant. If the old mindset could be defined as “getting stuff done” and “make it work,” then digital intensity drives a new mindset that is focused on leveraging digital opportunities to improve operations, better interact with customers, increase revenue, and grow market share. In short, it is defined as “make it better.”

Digital transformation is primarily a strategic play. Following the Digital Intensity Assessment, management must define their transformation strategy and roadmap for the integration of operations and technology into a seamless, continuous improvement platform. This Agile design includes the digitization of operations in multi-functional collaborative environments where IT and Ops work hand-in-hand to improve internal work flows and external mobility applications through visualized BPM modeling and application generation.  We define digital intensity asthe degree of digital technology deployed in an organization that integrates people, processes and technology to gain competitive advantage.”

Unfortunately, the default position of meddling with mobile, cloud, edge devices, and collaborative screens is just making the situation worst. This causes the company to increase the complexity of its architecture and to make the support of legacy applications nearly impossible. This is how we used to do things. The paralyzing insight is that all this technology exists to support business operations – that are themselves a random aggregated set of activities that change constantly and evolve as they get driven by internal and external forces. Redefining this operating state is the purpose of our Digital Transformation.

Our Digital Intensity Assessment is a deliberate attempt to bring this random digitalization approach under control and leverage the new and emerging capabilities of people and technology to define a new business operating model that helps us redefine the IT/OT as a function of the business environment. Notice we have included the “carpet” side of IT as well as the “concrete” side represented by OT.  The tools for digitalization include mobile computing, enabled by cloud computing, real time visualization, collaboration tools, simulations and big data analytics, application generation (including the generation of social mobility apps), integrated Business Process Mapping (BPM) and a generation of people who are comfortable with technology.

Business has not really kept up with the broad social/technology revolution and we have spent far too much time and effort to fix the old by eliminating applications using a portfolio rationalization approach, restraining people from using homegrown apps, implementation of new ERP packages and so on. These efforts have, however, been largely single purpose and stand alone – with business area managers working on their own. The replacement applications and capabilities this has created are seldom part of a larger strategy and not part of any business operation and IT collaboration. They also seldom do anything to help simplify the IT infrastructure or application interaction maze that most companies deal with.

Digital Transformation is the recognition that business must get on with it. This will begin a process that will result in an Agile, continuous improvement centric company, capable of using technology to innovatively deliver a competitive advantage. Remember the culture we are trying to shape is not a “digital” culture, but an agile, continuous improvement culture.

The Digital Intensity Assessment helps to provide a single narrative about how to leverage current and emerging technology and how that will support constant change as the company adjusts to its external network’s technical sophistication and interaction requirements. The foundation of this narrative includes:

Fig. 2 VCI Digital Intensity Assessment narrative

Fig. 2 VCI Digital Intensity Assessment narrative

Improving the Company’s Digital Intensity

We know that any transformation project that is as widespread as Digital Transformation is not a short term play. So we must have a clear beginning point (the results from our digital intensity assessment) and a clear roadmap showing us the pathway. This transformation needs to be supported by executive commitment to its success. It should be continued through good times and bad, such as budget reductions and other challenges the company will face. It can flex its scope and time frame, but once it is started, it should not be stopped. Becoming a digital company is really about how you want to do business – how you want to interact with co-workers, collaborate between functional departments, vendors, customers and how “change ready” you want your operations to become. What makes this digital transformation different from classic change efforts is that it does not follow the pathway of “unfreeze – change – refreeze.” It follows the pathway of “unfreeze and operate.” As new technologies and work methods will continue to present new options, we have to get the culture to become that of not only “early adopters,” but also “easy adopters.” Thus, when we decide to adopt a new solution set, it is available without friction.

The ability to make these changes within a standard Business Process Mapping (BPM), the IT architecture and its application framework is critical. Digital transformation is a move to a new social transaction – a new corporate culture. It promotes fluid operations that change with available technology and business operational goals, seeking to consistently improve outputs.

Here we need to focus: Management must now insist that any new technology fit within the existing IT architecture. This is a critical requirement if the company wants to avoid recreating the same IT application interface maze that they drag around with them now. This line may be hard to hold when point solution vendors offer targeted packages that don’t fit the envisioned IT environment – except through complex interfacing.

Management should take the time to generate combined business/IT application solutions with a BPM methodology rather than buy applications that don’t’ easily fit. At a basic level, digital transformation is focused on leveraging current and emerging technology to deliver a low cost, seamless work and transaction experience. It is about simplification and rebuilding the company. It includes both customer (internal & external) touch points and the work that happens behind these touch points to help make the gears of production work.

This focus has tremendous operational and cultural implications and represents a deep change for most companies. As part of this definition process, management will need to understand the scope of what it is about to do and the impact it will have on the company and daily operations. This will allow an honest look that provides a realistic assessment and budget. Based on this information, senior management can determine how the company will compete, how it will look at collaborating with the employees, contractors, vendors and customers, and how flexible it will be in reacting to opportunity and change in the future. These and similar decisions should be part of a comprehensive look at Digital Transformation and how they will impact the operation. This is critical because management must understand what they are committing to do.

To move in this direction, expectations will need to be set along with “ground rules”. This includes the need for any company that is truly interested in becoming a digital company to be open to reconsidering the way they look at their business operations and IT/OT. That will be tough – it is at risk of becoming political. This is why any effort of this nature and scope need full and vocal executive support.

IT needs to integrate its thinking and architecture with OT in a much more flexible and continuous improvement setting. The secret here is the simplicity and ease of upgrading and adding apps. As much as any mature company will have an ERP system installed, this will never be the competitive advantage. The ERP system is the backbone that should enable the company to focus on the edge devices and collaboration activities more effectively.  They must also be effective and allow operational efficiency. Different apps are used for operational support or Custom Operation Applications, such as transaction applications and the multiple workflow applications that move work through the company. These applications typically focus on mobility and social. These applications are “generated’ by using BPM tools. The third cluster of application support will be the applications and capabilities that provide a competitive advantage. To deliver these applications quickly and with a flexible architecture, they are also generated by the company’s BPM tools, as special purpose applications that leverage the current digital technology capabilities in interacting with customers, contractors, supply chain, technical services, operations and maintenance. These applications will have both external, customer facing capabilities that work through a seamless interaction with internal operations and internal processing capabilities. Essentially they are the silo destroyers that enable multi-functional collaboration between departments and with the external world.

The only manageable way to synchronize all the moving parts in this transformation is to standardize BPM principles. The BPM platform should be integrated and all business processes designed and captured such that the next step, layering an optimization engine on top, can be deployed without having to re-work all the process maps.

 

The Strategic Imperative

The key to framing the transformation is not the time it takes or even the cost, but the results. The creation of a new company, prepared to thrive in the future business society, leveraging constantly emerging technology is a type of corporate legacy for the managing group. This approach will help engage senior management who must agree that the transformation represents a compelling and strategic need.

The start of this pathway must be the assessment of the business’s current state of affairs. We need to define the type and use of devices by employees to execute their work – including working with contractors, vendors and customers.  We need to be truthful about the degree of BPM deployment.  Do people know what they should do, and how to execute their tasks? Are these work processes standardized, centralized and available in digital format?

The new level of collaboration required to compete is a fundamental corporate culture position that must be resolved. We can no longer rely on the IT opinion of how to deliver operational change based on requirements. We can no longer really afford to let business areas go off on their own and create their own IT support. All stakeholders must be engaged in this digitalization transformation. Thanks to the waves of staff cuts, there is no spare capacity left to assign the transformation activities to. It is a problem that must be formally addressed through a Program Management Office.

To be allowed to succeed, it is important to make certain that all expectations, in every business, manufacturing, service, and IT area are clearly defined and agreed upon. This is why we prefer to develop a digitization roadmap defining the order of magnitude, as well as the risks and ease of adoption. The goal is for everyone to understand; and to not give a project manager wiggle room in case of failure. The roadmap should answer these questions:

  • Why does the company want to become a Digital Enterprise?
  • Do we have a clear vision of what the future business operation will look like and how advanced digital capabilities will add value?
  • Can you describe how the company will operate?
  • How is success been defined and does the business agree on progress measures?
  • Have we created a digital transformation strategy and roadmap?
  • What is the time frame of the necessary commitment?
  • Have you taken steps to modify the corporate culture to break silos and set the foundation for collaborative, integrated business and IT teams?
  • How will this transformation provide a competitive advantage?
  • Has senior management committed to the most important goals?
  • Will the transformation be led by business or IT? How about formal reviews?
  • Do you have up-to-date maps of the business processes, IT infrastructure, data architecture, and application interaction/interfaces/data flow from which to start?

This strategic perspective helps everyone to have a common understanding of the transformation and set realistic expectations. This is the foundation that is necessary to move beyond individual improvements and upgrades that provide some benefit, but really increase the complexity of the business operation and its support.

 

VCI’s Method

We prefer to begin the transformation process with a Digital Intensity Assessment. The reason is straight forward. In any company there are already some digitization activities as well as their committed owners. Any internal discussion is challenged with the question as to whether we are doing enough towards digitalization, and are we doing it fast enough. This inevitably leads to two internally opposing views. Those comfortable with the state of affairs, and those that are increasingly uncomfortable with the company’s digital evolution.  A third party assessment eradicates this hurdle, and management can begin their Vision development with a single truth defining exactly where they stand in the digital evolution and how well they are doing relative to peers.

Fig. 3 VCI Digital Transformation Process

Fig. 3 VCI Digital Transformation Process

 

The Digital Intensity Assessment includes an appraisal of the company’s relative overarching position relating to digital use, as well as an evaluation of the relative standings of the operations sub-systems. The assessment uses four classifications: manual, remote, autonomous with human support and fully autonomous. We assess the company’s business processes, digital use by people and visualization, transparency and collaboration.

The Vision shaped by the company’s long term strategic needs helps to define the roadmap. The vision and roadmap will in turn, help to define the company’s structure, work methods and IT needs. The vision provides the foundation for the company strategy and the definition of the strategic business outcome or change model. This is the conceptual design of the business operation. The digital intensity report along with the vision for the future will be used to determine the type of IT support and technology infrastructure architecture that is necessary. This architecture will be a conceptual design of the IT hardware that will be needed and its placement, the technical software (operating systems, middleware, tools, etc.), the storage needs, the way the company’s users will access applications (phones, tablets, radios, screens, printers, etc.) and the communications network that will be needed. This will also describe how the internet may be used, how mobility devices and social media will fit in and much more. Standards for adding new hardware and software will be created to support this architecture. In parallel with this IT infrastructure architecture definition, business managers can begin the actual transformation, with the construction, or update, of a high level current state or “As Is” process centric model of the business. From this model, a new “To Be”, or future state business design, with IT support needs, can be built.

This future state model will be built following the capability requirements in the strategic business outcome design, its process flow, and its approach to supporting the internal and external customers. The result is that the future state of business design will be based on the digital framework and digital characteristics envisioned for the company. The high level business design and the IT infrastructure architecture will be brought together to confirm compatibility and make any necessary adjustments.

The Digitalization Roadmap can be defined as the high level business case for the identified digital initiatives ranked by their order of magnitude, the ease of deployment and the time it will take. In most instances, we find companies are deeply vested in their current operations and IT platforms, that discussions considering abandoning it all are fruitless. We have to clarify this statement: Capital intensive companies in industries like mining and oil & gas do not live in the same world as for example, a services company like an advertising agency. The core commercial decision to develop an asset is based on return of capital invested over very long terms. This financial construct does not allow for a “redo” half way through the asset’s economic life and all effort has to be expended to define to optimum point between leveraging the old and replacing it with the new. The roadmap has to layer on top of this high capital engineered asset, an agile work execution model that appreciates the streamlining and debottlenecking of routine work cycles in a new digital fashion. This must include dynamic simulated optimization and work schedules plucked out of time based maintenance to exception based tasks determined by statistical predictive modelling. The roadmap should also appreciate that the nature of work is evolving and collaborative, data-driven decisions are prized. This transformation of the culture has to be included as an initiative in the roadmap.

PMO and Project Management Support is critical for the successful transformation specifically because we are working with so many moving parts that we are trying to integrate. Pause for a moment, IT has to collaborate with operations, as operations has to collaborate with scheduling, supply and maintenance. This is not easily done and in most instances, the company will not have the internal resources to do this without a formal PMO.

Managing the digital transformation can be approached in a variety of ways – from less formal that are more flexible but increase risk, to more structured that offer much more control and lower risk, but are slow and inflexible. The options are available to fit the culture of your company. We have landed on a Project Management Support to channel the higher level transformation effort and control the transformation with a formal outcome definition and operating design.

This approach will help define the future working environment and the IT support it needs and thus the technology architecture. This will also define the characteristics that any business or IT component of the solution will need to conform to. At a lower level, where the business activity flow and application support are designed and built/generated, this level of control should shift to one that is more flexible. At the application construction level, the transformation methodology should link to a flexible project management like Agile. This design provides transformation project control and flexibility at the individual operating function.

The Project Management Support helps to map out the high level future state. It breaks the roadmap into its functional components based on anticipated impact on revenue growth, or the elimination of major bottlenecks and then revenue growth. The way applications are handled (licensed, developed or generated) should be related to the three application groups– core, internal operation, and competitive advantage. This will help assure that the new operating design, at all levels of detail, will be properly supported and the applications will fit into the IT Infrastructure architecture.

The next major design project is how to build the new integrated business/IT operations. It is not really possible to rebuild everything at once. Management can now choose how to evolve the company’s business and IT operations – for example, by line of business, process, most troubled business area, most pressing area of customer interaction, or organization. Here again, there is no one single right approach and the assessment will  help to determine which of the options will be most advantageous. At a high level, the entire business should have been redesigned to function as a single unit. This creates an integrated business operation design. Applications in this design will follow the standards in the digital design characteristics creating an integrated business/IT solution.

This new design should start with the redevelopment of the daily operation experiencing the biggest problems, or those that are most important in production. This will increase savings and operational streamlining by addressing the most important areas or those with the biggest operational issue first. The transformation should be guided by a formal Business Transformation methodology. This methodology should follow an BPM approach and stress collaboration, compliance with standards, and the use of BPM techniques – with simulation, performance management, and advanced analytics imbedded into the new business design. Taking this approach will require the collaboration of all levels of management, their openness to have their areas measured, and their willingness to try new approaches.

We like the results companies are getting by adopting the Agile approach. There are constraints as the engineering specifications are not as open to change as are applications development. But this approach combined with a baked in Lean BPM standard makes for a modern fast moving transformation.

The magnitude of the change is high as we face the rapid release of new digital solutions and applications, and a data environment that is subject to constant upgrading, the probability of unforeseen issues that affect current support, project timing, resource needs, and budget. To help manage expectations in this area, preventative steps should be built into the methodology, and senior management will need to feel comfortable that although problems will come up, all possible steps will be taken to control any disruption.

 

Managing The Transformation

Few companies have the right foundation to be successful with this transformation as it covers cross-functionality and new working practices. This move is strategic, not tactical. It will change the business operating model and it will have a serious impact on everything – including how work is done internally, and how the company interacts with the customer and with partners/suppliers. This change will be pervasive and invasive. It also requires a close collaboration on the part of the CTO, CIO and senior business managers. It presupposes a long term perspective and commitment to a vision that will require a constant monitoring of emerging technology, and a continuing investment in modernizing business operations and customer interaction. It will require a commitment from business managers to work much more closely with IT and to be fully engaged in all aspects of the IT aspect of the business transformation. This collaboration will help meld the business operation and its IT support into a single operational approach.

Obtaining this commitment is not easy. Transformation also carries considerable risk. Many managers understandably shy away from anything that fits this profile. That is why it must be considered as a long term strategy and a commitment to a new operating model – one that is designed for the reality of the digital society of the future. This is also a chance to change the legacy of inherited past IT infrastructure and application portfolio systems. Most CIOs and IT staff members have struggled with this inherited environment as change and maintenance costs have risen. This is a chance for IT professionals to build a new technical platform that will take the company into a new technology reality and a global digital society.

However, nothing will happen unless this transformation is approached properly and management takes the time to build a solid foundation of vision, definition, and skills.

Once you have consensus on these types of questions you will be in a positon to determine your readiness to make this move to a Digital Enterprise and to take the necessary steps to reduce risk and cost, and build the needed foundation for the digital transformation.

 

Digital Intensity Changes the Company

Digital Transformation starts with the assessment and a roadmap for a new business operating model. The roadmap allows senior management to consider the strategy that will be needed to create this new business model and develop deployment plans. The Digital Intensity Assessment defines the technology capabilities and constraints that will need to be considered in any new business operating model and provides the foundation for the creation of a new IT infrastructure architecture. With this technology definition, the company will be ready to move to Business Transformation. BPM along with the technology that is in the Digital Operating model, will provide the environmental foundation to redesign and rebuild the company – integrating Digital model concepts, standards, and goals into the new process and workflow designs. This will also allow IT to design an optimal application support model that will leverage BPM generated low code applications for applications that provide a competitive advantage – including those that will replace legacy applications over time and generate social apps for mobility devices.

Intrinsic in the new design of the operating model is continuous improvement (CI) to keep the changed company working well and innovatively looking for new device apps that will help improve operational excellence and improve margins for the company. This evolutionary move is a choice that each company must make. Built into the risk/reward model for first movers are brand recognition, investor sentiment, increased revenue, increased market share and employment attraction.