In the mad scramble to implement a digital transformation strategy, decision makers often obsess on achieving a desired result, losing sight of the process along the way.
Creating digitally-enabled businesses is more than just using cutting-edge technology. Organization must be fully committed to investing time, resources, people, education, and change management.
The process (not just the results) reflects your business’ digital maturity: an increasingly important metric for decision-makers in the manufacturing industry.
Under increasing pressure to maximize production, increase efficiency and lower capital costs, manufacturers must plot a way to digitalize effectively without putting their supply chain, customers, and production capacity at risk.
"To plan out your company’s digitalization plans, you must first identify your place on the digital maturity scale."
💡 Use the three levels of digital maturity in this article as your starting point!
So, what is digital maturity?
“Digital maturity” refers to the company leadership’s responsiveness and adaptability to disruptive technological trends, determining your business’ ability to create value.
As laid out by an article in the MIT Sloan Management Review, the digital maturity journey for companies involves three key characteristics:
Gradual process: no company attains digital maturity overnight. Attaining digital maturity requires going stepwise through different developmental stages. Each company will go through this process at their own speed.
No predetermined outcome: a digitally mature company may look and operate very differently from how they were in the beginning—but a clearer picture may emerge once the company begins moving towards maturity.
Learning curve: Digital maturity is a learning process for companies, which over time must learn how to respond appropriately to new digitally-grounded challenges.
Three Levels of Digital Maturity
According to Deloitte, a manufacturer’s level of digital maturity influences a wide range of benefits that go beyond company’s profitability.
These benefits include better financial performance (as seen in improved product quality and higher customer satisfaction); improved ESG (environmental, social and governance), as seen in lower environmental footprints and rising workforce diversity; and improved resilience.
A 2020 report by the Manufacturers’ Alliance for Productivity and Innovation (MAPI) found that almost half of digitally mature companies reported higher revenue growth and/or net profit margins when compared to industry averages.
Deloitte’s research found that digital maturity can be gauged according to the tangible business benefits delivered by an organization’s digital transformation efforts.
Businesses measured using this metric can be sorted according to three broad categories:
Just starting out -- lower maturity
Getting things in place -- median maturity
Reaping the benefits -- higher maturity
At the bottom of the scale, organizations with low digital maturity tend to think of digital transformation in a narrower scope.
As a company moves up the digital maturity scale, digital transformation begins to be seen in broader terms, and with more expansive initiatives being undertaken.
Each category also suggests a series of “digital pivots” that help an organization increase its digital maturity quotient. Each pivot represents a set of technology-driven assets and business capabilities that benchmark an organization’s progress, and their increasing embrace of technology as a force-multiplier for their enterprise.
The levels of digital maturity (and the pivots needed to rise to the next level) all come together to form a roadmap that organizations can use to plan their journey toward becoming a digital enterprise.
1. Just starting out -- lower maturity
Manufacturers at the very beginning of their digital transformation journey is considered lower in digital maturity.
The organizations may be traditional, analog-based using legacy systems and processes. Or they may represent manufacturers that are only beginning to adopt digital solutions in their processes, willy-nilly with unclear vision of the way ahead.
At this stage, organizations must achieve three digital pivots that can help them build a solid basis for digital adoption:
Implement flexible, secure infrastructure: The organization must source technology infrastructure that meets high security and privacy standards while retaining the ability to scale capacity according to business demand. Achieving this pivot may call for leveraging cloud-based platform-as-a-service (PaaS), managed service provider (MSP) models, or automating cloud infrastructure operations.
Improve data mastery: Manufacturers have historically tended to underutilise the data their operations generate. This pivot reverses this tendency, by encouraging the aggregating, activating and monetising of data collected through the production line. Data converted into insights, through machine learning and other analytics platforms, can help manufacturers optimize a variety of processes, from raw material sourcing to predicting if customers will stop buying from you.
Create digitally savvy, open talent networks: lay the groundwork for digital transformation throughout the organization, by refocusing employee training programs on digital competencies. Organizations can also adopt flexible, contingent talent models that can more easily scale one’s workforce based on business needs —using not just in-house talents, but also freelancers and gig workers to extend the core employee workforce capabilities.
At this stage, organizations should focus on the back end first, starting with digitalizing back-office such as finance, HR, or R&D. As the organization builds confidence and digital skills, they can more easily scale up at lower risk. The learnings from a successful back-office transformation can be used to transform higher-order functions such as production, quality control and engineering.
💡Take a page from Rockwool's playbook:
“We’ve been going through quite a digitalization journey over the past five years, focusing mainly on our backend services to ensure that they work properly so that we can actually feed them effectively to a commerce platform.”
*Rockwool is a Danish multinational manufacturer of mineral wool products. They been around since 1909 and have kept up-to-date with digitalization.
2. Getting things in place -- median maturity
Manufacturers at the middle of the digital maturity scale may already have certain elements of digital transformation in place (like the Industrial Internet of Things collecting data throughout the production line), but still working through leadership alignment and siloed data.
At this stage, digital pivots will involve engaging all stakeholders, improving processes, and developing a unified digital vision.
The four pivots at this stage include:
Increasing ecosystem engagement: engaging external business partners can help organizations gain access to essential resources (technology, intellectual property, people and the like), increasing the organization’s ability to improve, innovate and grow. For instance, executives can lower risk of down time by working with the digital solutions provider, like Intershop, to integrate the systems.
Building intelligent workflows: refining processes can both produce positive outcomes and free up resources for higher-value actions. This might call for automating business decision-making; or using AI to oversee the production process, identifying areas where quality issues can occur.
Unifying the customer experience: digital tools can help deliver a seamless customer experience, consisting of coordinated digital and human interactions presented in immersive, engaging environments.
Ensuring business model adaptability: organizations should expand their portfolio of business models and revenue streams, optimizing each offering to better adapt to changing market conditions. Digital platforms are perfect for this pivot—options like a digital customer portal, digital marketplace and or digitally connected products - should be considered at this stage.
Organizations can shift from a generalized approach to drilling down to specifics. For example, targeting a single business function for comprehensive digital transformation, and leveraging all four digital pivots to systemically digitalize that function.
This will help develop confidence in the organization’s ability to execute the pivots, and also build organizational momentum to sustain the changes required by ongoing digital transformation.
3. Reaping the benefits -- higher maturity
At this stage, organizations may already be on a transformation roadmap that can account for disruption and maximize the benefits derived from technology.
The organization will see digital technology provides the ability to drive continuous change through every level of the organization, transforming the manufacturing process at every point from materials sourcing to supply chain to production to customer services.
With all the pivots behind them, higher-maturity organizations must focus on developing two complementary “soft” factors: strong leadership and a digital mindset.
The former can guide the continuing digitalization process, buy in across the organization and encourage the organization to take “smart” risks along the way. The latter encourages the organization to look at old problems in new ways, helping to visualize unexpected (but effective) solutions to formerly intractable problems.
Avoid the complexity with a digital transformation partner
With limited internal experiences to guide you, digital maturity can be challenging to develop on an organization-wide level. When you are faced with the need to ensure an optimal outcome for your organization, it is important to get an outside perspective—one with extensive experience in digitalization—to guide you through the process.
Industry-specific digitalization partners—like Intershop in the realm of e-commerce—can help you draw from a deeper pool of experience, and create a broad array of different, yet valuable digital initiatives to bring your company forward to the next stage in digital maturity.