Our DELMIA experts highlight some of the learnings that affect the ability of companies transforming--in addition to what is the return on investment.
In this podcast, Eric Green, Vice President, DELMIA and Fred Thomas, Strategic Business Development and Marketing Director at DELMIA continue their discussion on the Transformation Journey Research Notes Series. They discuss Key Considerations in Planning and Executing Your Transformation Strategy.
This Transformation Journey Research Note Series™ will help you understand:
• Where transformation fits with the corporate strategy
• How paycheck as well as return on investment is measured
• Agile methodologies that demand a more iterative approach to transformation
Download Notes of the Transformation Journey here.
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00:10 Therese Snow
Welcome to our DELMIA podcast, Global Operations On The Go. Today we continue our series on the Transformation Journey. Our guests, Eric Green, vice-president at DELMIA, and Fred Thomas, strategic business development and marketing director at DELMIA, will pick up with Note 3: Key Considerations in Planning and Executing your Transformation Strategy. Let's listen in.
00:34 Fred Thomas
Thanks, Therese. Hi, Eric. Thanks for joining me again and sharing your ideas in our transformation journey discussion.
00:41 Eric Green
Well Fred, I look forward to these discussions because I think they're relevant in today's business and the industries that our customers are in—and looking forward to covering the topic today.
00:51 Fred Thomas
Great. So we've outlined seven key considerations in our latest research note on planning and executing your transformation strategy. So let's talk about these. Clearly, surveys and the studies cited in this research note indicate the difficulty in transforming manufacturing. Are you surprised at the results?
01:10 Eric Green
Honestly, I'm not. What's interesting is the level of research that we found from analysts and consulting companies that have done a lot of work in looking at how companies are transforming. And the studies that are associated with that have clearly told us that transformation is hard. We've seen that first-hand with our customers and what they're going through. But part of this research note in the series, one of the things we're trying to do is highlight some of those considerations and learnings that as companies transform, you know, what they should be on the lookout for and how to address some of those topics. And hopefully, by doing so, we can help them make the transformation a little bit easier.
01:52 Fred Thomas
So when we reference the word transformation, are we strictly talking about digitalization of manufacturing?
02:01 Eric Green
We're not. We're talking actually about transformation of the business. Digitalization of manufacturing is really just digitizing elements that were traditionally either manual or disparate. And what we're talking about here is transforming the business which includes a much broader set of constructs. And we outline these in research note one—we see that there are basically seven elements. But it goes well beyond just digitalization—we’re talking about the incorporation and doing it in the context of business processes, for example, and many other pieces to this.
02:40 Fred Thomas
So in this research note, the title, as we said, is Key Considerations in Planning and Executing your Transformation Strategy. We talk about considerations in learnings. Can you just explain a little more how we're using those terms in this research note?
02:59 Eric Green
Sure. Any company that works with partners like we do—and we're helping companies implement solutions to solve problems, whether as part of a small initiative or a much larger transformation strategy—there are things that we have gleaned from these exercises that we think are key considerations. And they have an impact on the success or failure of companies as they transform. And this research note dives into the detail on the different considerations that we believe are important, and some new considerations that we're seeing evolve with the changes in business today. Things that maybe two, three, maybe five years ago weren't necessarily relevant or exist, but they do today because of the speed or the dynamic within the business.
03:54 Fred Thomas
That's great. You know, there's there's going to be so much application of this out in industry, I think, for those that are listening. So let's talk about 2020. It was a challenging year for everyone, including manufacturers. We're starting to hear the term “new normal”—but was 2020 really that different for those in in manufacturing?
04:18 Eric Green
That's a great question. Everybody talks about the new normal and obviously the pandemic had an effect on last year and is still having an effect on business this year—and will be in the foreseeable future. But at the end of the day, it's just one of many events through time that have affected manufacturers. Other events we can reference that have affected manufacturing is the financial crisis in 2008, which affected the companies based in the US and the associated industries and markets. There's also events such as the Fukushima earthquake—that affected the automotive supply chain and those suppliers that were companies working in Japan.
So every so often there's some disruptive event—whether it's geopolitical, whether it's macroeconomic, or some in the case of Fukushima, you know, they say it's an act of God—that has an effect on business. And manufacturers have to contend with those disruptions. So is this the new normal? You know, based upon last year's pandemic, potentially. But is it truly a new normal? I would contend that it's the next normal. Because in two years, or in six months, or in five years, there's going to be something else that affects manufacturers that they have to contend with. And those companies that have the ability to work through that disruption most effectively are the ones that are going to have the most success.
05:55 Fred Thomas
So then you've probably picked up some learnings, not only from, I'll say, the pandemic of the past year, but even some of the extraordinary events of the past. Can you share some of those learnings that might affect the ability of companies that are transforming or should be transforming?
06:13 Eric Green
Well, there's two that are obvious, and everybody's talking and writing about them. And that's—one is agility and the second is resiliency. So one having the ability to pivot quickly and adjust to market conditions; the other one's having the processes and the fortitude of the business structure, to be able to handle disruptions and changes. So they're very closely related. But within that construct, what we're also seeing is that as companies transform, there are things that have to be deployed and utilized, that are new, with regard to how they're going about transforming their business. For example, new governance models, and how they go about changing their business.
We're attacking new business opportunities, looking at, you know, how to measure payback and ROI—that’s being revisited. Because there are some things that I would call are table stakes that may not necessarily have a direct short-term ROI, but are critical to establishing that foundation for having a change-ready type business. And so these are just a couple of learnings, and we've highlighted, I think, seven considerations in the research note that we describe and talk about throughout the document.
07:26 Fred Thomas
Great. So let's talk about the transformation initiatives, and are they all created equal? Should we assume that everyone or every company is using the same playbook and making transformation a priority at this point?
07:55 Eric Green
I don't think so. What we're seeing is that, depending upon the company in the industry—and they're taking different approaches, and they're all successful in their own right—there’s not one playbook. And that is key. Because, you know, the company's culture may be different than others, the company size, the markets, and the business models may be different. But what's really interesting is that this is happening in a multitude of different ways, and there's some common themes and threads that we see with companies that are transforming. So for example, through our work and pulling together some analysts that we found, is that, you know, those companies that look and modify their business processes, in addition to adopting technology, based upon approaching new markets, or trying to manufacture new products and goods for a new market or market segment, are going to have a higher probability of success, as opposed to if you said, if you will, you know, just automating existing processes today, or automating a bad process.
That sounds pretty obvious, but the reality is, when that propagates across an organization, you get down into the manufacturing operations, and things that take place with manufacturing operations, that can be a challenge. Those companies that embrace those challenges are having a higher probability of success and are seeing their businesses grow. I can think of two companies today, that are our customers that are in one industry that shifted because of the events of 2020 in the pandemic, whereas one of their business channels or business streams has become much more challenging, but another business stream that they have actually opened up and created opportunities for them, and their ability to adjust their business processes to support manufacturing of those products—that new channel has allowed them to take market share and still grow their business without having the negative effects of the challenges associated with their, I’m going to use the word “legacy” channel of providing goods and services.
10:02 Fred Thomas
So then when we think about it, manufacturing transformation as we're talking about it really fits within the corporate strategy, or at least it should. Is that correct?
10:13 Eric Green
Absolutely. I mean, the corporate strategy is obviously outlined by the C suite. And that's focused on how the company and the stakeholders are going to serve their customers, support their ecosystem with sustainability initiatives and to provide a more sustainable environment for their ecosystem, and the corporate responsibilities. And then last but not least, what they're doing for their shareholders to help improve the benefit for their shareholders. So to do that, many of these initiatives align to that corporate strategy, and the success of these initiatives and this transformation that these companies are taking part in are clearly aligned to their ability to put in place new processes and new approaches, to either serving their existing customers, or to capture new markets with new products and services. And by doing so, you know, they're able to fulfill those objectives of that corporate strategy.
11:15 Fred Thomas
Excellent. So let's move on to everybody's favorite subject, payback and ROI. And I say that tongue-in-cheek just because most teams always start out going, “Gosh, we just can't get the number we're looking for.” So when we talk about transformation, it kind of indicates a big, long project. So the ROI numbers really have to be huge, don’t they?
11:43 Eric Green
That's a great question. This is a discussion that is debated around executive tables and financial meetings and C suite in every company today, and we're seeing this first-hand. What we found in what we're seeing with companies that are transforming in ways that they're looking at it—one of the key things that we have identified is that the whole way payback is measured should be re-evaluated. Yes, there is a need for an ROI. Yes, there's a need for payback. But some of the fundamental principles that ROI and payback have been put in place by some of some of the companies that we've been exposed to and are working with, there's some fundamental foundational elements that aren't being addressed properly. So for example, one of the things we highlight in research note one is data and data management. Well, in the world of manufacturing and supply chain, you know, data is key, as we all know it, insights that you capture from data are fundamentally important to the ability to drive that change and transform the business, and help you understand which business processes could be changed; what new approaches can be taken to deliver, make and produce products and services for new markets.
Well, it’s still critically important that that foundational element of data is managed and put in place in a manner that is consistent across the enterprise and the supporting supply base and stakeholders. And what we're finding is that there are still significant gaps in the data, both in the quality of the data—meaning, you know, how you define what a specific manufacturing data element might be and how its measured—as well as gaps in the availability of that data, where information is not being captured. And we're seeing this in the construct of, you know, all the IoT projects that spun up over the last few years, is that they capture a lot of data, but a lot of the data is out of context, or it's not the right data. And it's very solid, you know, they didn't actually capture data related to the business process. So the combination of those factors highlights the fact that there's a foundational element with data management that's required. And that's really hard to measure ROI and value on data management outside of the IT and the administrative burden function that it takes to put those processes in place and put those systems and tools in place to manage the data. Obviously, a platform approach addresses that, and of course, with Dassault Systèmes and our 3DEXPERIENCE platform, that's a big plus.
But, you know, going beyond having the platform, you know, there are things that the organizations and these companies, IT departments, along with the operational technology departments have to put in place to fill in the gaps, or that data doesn't exist. And standardizing that is extremely important. But again, you know, that's the foundational success to drive some of these initiative changes. And if you don't have that foundation in place, it doesn't matter what your ROI is, because you're going to fail before, or you're not going to meet the ROI objectives or payback projected because you're going to spend all your time trying to get the data structure in place and the data elements in place so that you can actually do some of these initiatives and drive some the process changes that are required.
15:14 Fred Thomas
So it sounds like we really should be breaking up what used to be the big huge projects into much smaller, more iterative approaches, which a lot of people refer to as the agile methodologies. Is that correct?
15:31 Eric Green
I think so. What we're seeing today is the speed of change that's taking place in businesses, as well as the sort of things I just talked about with the data. With agile methodology, you have the ability to move quickly and decompose large problems in a manner that you can create small successes and wins. And you can measure the ROI successfulness of those elements of an agile methodology much more easily, then you can a large waterfall type initiative or waterfall type project. Moreover, it gives you the opportunity to pivot when you realize that something was missed at an earlier stage of the project. And I say missed; that's not necessarily a bad thing.
What I'm talking about is maybe the business changes because of a disruption, like we saw last year, or maybe because there's an opportunity to take advantage of some new manufacturing equipment or manufacturing processes that we're seeing more and more with additive manufacturing, that maybe wasn't considered in a previous agile step. Having an agile methodology allows you to go back and make those adjustments while at the same time still making progress moving forward, and you can measure those. And many times, a measure of success comes down to beyond just the financial measure, but also the qualitative measures of the process efficiency, process adoption by the organization and the people, and also other areas. They're as important, or if not more important, but they're more difficult to measure. So for example, the human experience of the worker, and that involves everything from their involvement in managing their activities in the manufacturing shop floor, to their safety and wellness. And those are all different elements that can be accounted for.
17:14 Fred Thomas
Sounds like most teams then should make sure that they've really sat down with their financial organizations; even their executive suite to make sure that everybody's aligned on how we're going to measure the payback. Because it sounds like we could be doing it a little differently going forward versus how we've done in the past.
17:38 Eric Green
I would agree. I think in any transformation initiative, in any company transformed, I think it's important to have the communication—we highlighted this in the other research notes—across all the stakeholders so expectations are set properly, because there's going to be gaps. And there's going to be, you know, areas within the organization, between factories, or between production lines, or between the different supply chains, the products and goods that are produced with these companies that are going to vary, because they're all not equal. And as such, understanding that—understanding what's required to get them to a baseline and improve—having that expectation set so that people understand is extremely important.
And it also ensures that you have a common approach of looking at the business and recognizing that they are different. Using—you know, we've used the car analogy in the past and in our previous discussions—if you're looking at the new CA Corvette, for example, you're going to evaluate differently than you might evaluate a Ford Bronco, for example. Because they have different products, different services, different intentions. It’s the same way for any manufacturer with the goods and services they are providing to their customers. Those manufacturing facilities that support those different products and the supply chains that provide parts and services to support those products may have different levels of maturity—as we highlighted in research note two—or a different level of completeness of the seven elements as we highlighted in research note number one, and as such, the need to be managed through the agile methodology differently.
19:19 Fred Thomas
Okay. But that brings up an interesting question that comes from the research note itself, and I noticed there was a comment that transformation is both top-down and bottom-up. Can you go into that a little bit more?
19:34 Eric Green
I think a trend that we're seeing, especially with the younger generation of workers and people in the workplace is their desire to make an impact. And many innovative ideas come from that group because they grew up in an age of technology. So in addition to having your traditional top-down corporate initiatives—your transformation is just to go address a new market or to change your business—there’s significant evidence that shows that at the lowest level, there's significant opportunities for innovation and change that can lead to transformation coming from today's workers and embracing that human experience for those workers and facilitating that change. And whatever transformation that might result from those ideas that those workers provide, can be very meaningful to not only the individuals and employees that are involved, but also the bigger organization because they can have a, you know, using financial terminology, a material impact on the business that can be very, very positive,
20:38 Fred Thomas
That's great. We both know, based on our experience, governance is so key in this type of initiative. What's the governance model look like for something that's so strategic as this and really so important to the company?
21:07 Eric Green
Well, a lot of times, governance has historically been looked at in the context of the success of project. Who are the stakeholders who are involved, who's the customer of the project, what’s been changed, and includes a combination of OT and IT individuals and a matrix group of individuals based upon their role. Well that’s still extremely important because, let's face it, we're talking about changing business processes; you're talking about changing business methods and everything associated with that. But in addition, we're also finding that there has to be an approved or new governance approach for, simply put, data and technology. And you especially look at the data and the growing amount of data that's becoming available, you know, how to put that data to use. As I said earlier, you know, many companies still don't have the data that they need to make some of these informed decisions in their factories, because their factories are still—I’m going to use the word—a “data tomb”, which is a term that's been around for a while.
They're generating data, but they can't pull that data out to make informed decisions, or they're missing the data completely, because they're not capturing it. Well, you look at a manufacturer who has 30 or 75 plants, that becomes a compounding problem. And so when you're capturing that data, and you're looking to measure the data associated with those pieces of equipment, or those manufacturing processes across all those plants, you need to have a governance approach so that you can have a common way of utilizing that data to help drive your transformation, and that's extremely important. So it's both governance around the initiatives themselves, and the business processes and the changes that are required—both in the business process, but also culturally—but also the underlying data that might be used to help drive the decision support and those activities.
23:04 Fred Thomas
Great. Let's talk for a minute about transformation and technology. We hear so much about IoT and kind of playing with it to find value in transformation sounds so much deeper. Can you share your thoughts on this a little bit? Is new technology adoption by itself transforming?
23:24 Eric Green
I think the misnomer is—and what a lot of companies do is—looking at new technology as the silver bullet, and that can help change my business. What we need to recognize is that technology can be an enabler if it's used in the proper context. And we've seen this, and this is highlighted in the research notes—and not only from what we put together in our research notes, but also from other analyst reports like LNS research, for example—highlighted that these IIoT or IoT projects, not in the context of business process, haven't been successful. And that's not surprising, honestly, because you're looking at data without a full understanding of the implications of that data across a business process that might have bearing on something that's, you know, five or six steps removed from that actual data set. And so you don't have that linkage between the cause and effect. And so what we're seeing is that, while technology plays an important role, and having the ability to leverage a platform is extremely important, but some of these other technologies like IoT and machine learning and AI, they need to be put and used in context.
And if they're not done properly, then you're going to have what I call science projects, where you get some great information, some really interesting results, but you can't apply it across the broader business, and manufacturing processes are large. Technology plays a key role, but it needs to be done in the context of the business processes and looking at, you know, what you're really trying to accomplish. So for example, would that be going after a new geographical market? Is that trying to open up a new market and a new set of industry segments that you're targeting with new products or services, or leveraging an innovation that you have to capture market share in your existing channel? Technology plays a role on that, but the bigger broader business objective of how you approach those activities is the most important element, and then applying the technology, and then applying the business process, the culture and the change, come together to make that effective?
25:38 Fred Thomas
Great. This is really interesting, Eric. We've come to the end of our time. Clearly, we've found some very insightful considerations and shared the learnings—why don't you just wrap up for us with your final thoughts on transformation maturity and the considerations that our listening audience should take away from this?
26:00 Eric Green
I'd be happy to. We started the research Note series in response and working with our customers to help provide some insight from our organization working across a wide array of customers across a wide array of industries and geographies. Combining that with what’s publicly available research from different analysts and, in research note one, we covered the different elements; the seven elements associated with that. In research note two, we talked about the four levels of maturity that we've identified and proposed. Here in research Note three is, if you look at what we're seeing, is really focused on as companies transform, what are some of the observations that we're seeing and some key considerations and some findings that might help our customers and companies at large, not make the same mistakes, or to be able to facilitate the transformation faster, by having a little bit more insight to the repercussions associated with these considerations.
And as we move into research note four, given what we've talked about in research notes one through three, in research note four, we're going to be highlighting some areas where we believe that companies can start to capture some of that value using an agile methodology and approach, and based upon their maturity and based upon what they have in place with those seven elements—where and how they can get started in transforming their business if they haven't already started, or consider a new way to capture more value in their existing transformation process. So research note three here highlights the considerations and some of the key learnings, and look forward to research note four when we highlight and speak about where and how to go about capturing value in different areas.
27:46 Fred Thomas
Great. Thanks, Eric. We appreciate your time.
27:49 Eric Green
Thank you, Fred. Always enjoyed the conversation.
27:51 Therese Snow
Thank you, Eric and Fred for continuing the conversation on our transformation journey. I'm Therese Snow, and thank you for listening to Global Operations On The Go.