The first steps towards digitalization
Digitalization, Industry 4.0, Industrial IoT are trending topics in industrial environments. There are lots of new applications, systems, and companies marketing their latest solutions. These terms have in common that they combine various techniques, they impact different processes of the value chain, and that they need to be tailored to each enterprise. No single recipe works for all. Often times, the hardest question is where to start and what are the first steps.
In the present times of uncertainty and complexity, the path towards digitalization has to be a step-by-step approach, tackling solvable problems one at a time, with the global goal to understand thyself and be agile in front of changes in the environment.
The common understanding of digitalization includes not only solving company internal problems (“efficiency”) but also seizing market opportunities (“growth”). Correctly approaching an opportunity can also be understood as a problem to be solved or a challenge to overcome. This viewpoint allows us to use the same methodology for company-internal problem-solving and for developing new possibilities.
Many companies today might fund a project that builds towards industry 4.0. To leverage this investment, here are some basic guidelines to make sure that the organization’s next steps towards digitalization are done by design and not by chance.
- Identify problems or issues. The first step for a properly set-up project is to make sure that it will target the right objective. If a company is well run, there is probably a process in place to support identifying problems, but in general, there are multiple ways of compiling a list of issues or opportunities:
- Intuition. Not final, but a good starting point. If a project or management team “feels” that something is a problem, it probably is. We can use data to confirm or disregard the hunch.
- Other sources to collect from such as customer surveys, employee satisfaction, employee suggestions, KPIs.
- Find leverage in the company’s strategic goals: Ask how the operations can add to achieving the company’s strategic objectives. What is hindering them from contributing in that way already?
- Select the problem or opportunity that you want to tackle first. Starting with one problem is essential. Ideally, the one that stands out and has the most significant impact on the company or its clients. How can we identify it?
- Gather data to quantify the magnitude of the problems or better, the problem’s effect in the company’s profit, safety or image, or customer impact.
- Find criteria for prioritization in the company’s strategic objectives and assess how solving the problems can contribute to achieving the company’s goals. If winning market quota is an important goal for a company, they might want to sort the problems by the impact on this metric.
- Consider additional ranking criteria and determine the first problem to tackle. It can also be a set of related issues that can ideally be solved with the same solution.
“The result should be a well-assessed decision, determining the first problem that’s going to be solved or the opportunity that’s going to be seized.“
- Get a deep understanding of the one problem the company is going to tackle. The visible part of a problem is the effect, usually not the cause. After the previous step, the project team has evaluated the “impact” of that effect. However, there are still some things to do before defining a solution and starting the implementation project. First, it’s necessary to deepen the insight into this problem in the following iterative steps:
- Qualitative exercise to “deduce” the possible causes for the unwanted effect.
- Make hypotheses or assumptions on causes and use data to confirm or reject them. This step sounds natural to anyone who is familiar with KAIZEN. The possibilities that advanced analytics and big data science make available allow a major shift in the scope and depth that a company can reach with this analysis if the right know-how is on board.
In some cases, the required data is not available right away for active use. When this happens there are several options:- Combine data from multiple sources, both company-internal or external that can be accessed openly or purchased.
- If the data “exists” but is not collected yet, design a way to gather it. Options include surveys, experiments, the use of appropriate sensors, or interviews with the people with first-hand experience. If the collection of the data is expected to be done in the long term, the company will have to put in place specific infrastructure for data acquisition and storage.
- Check for completeness. Get spot qualitative data in different points of the process to see if there is knowledge/information not being caught by the collected data.
- Design and calculate metrics to assess the present situation, set a goal and for later use in evaluating the result.
- Set a goal. Now that the problem is identified and metrics are defined to describe the effect and the cause of the problem, it is highly recommendable to set a goal. Ideally, it should be a SMART objective (specific, measurable, achievable, relevant and time-bound) (in comparison and contrast with ideally/initially objective set before starting). This is necessary later to assess the success of the implementation.
- Find the best solution for the problem. Once the objective is identified, its cause established, and the real effect of fixing the problem is understood, the project team can begin to look for the solution. Having defined a SMART goal is useful to select the best-suited solution for the organization.
The previously described process needs to be tailored to each specific situation. Agility and effectiveness are a must if we want to show the best possible results in a reasonable amount of time with justifiable means.
Back to the initial question, our suggestion is: don’t wait to have a set-in-stone 5-year vision for your company’s digitalization. Instead, start making incremental changes, aligned with the global strategic goals of the enterprise. A useful idea to navigate the industry 4.0 hype is not to see it as a goal in itself, but see it as a set of methodologies, solutions, and tools for a stepwise preparation towards agile decision making, higher customer value, and long term benefits for the company.