What Is Digital Transformation?

Digital Transformation enables the integration of digital technology into all areas of a business, resulting in fundamental changes to how the business operates and delivers value to customers. It is a strategic process that empowers organizations to leverage technology to improve their processes, products and services. The key to understanding digital transformation is that it is a strategy driven primarily by technology in service of enabling people to become self-sufficient.

More specifically, digital transformation empowers people to solve complex enterprise problems rapidly on their own by automating menial tasks so they can focus on value-add work. It is important to note that digital technologies are any electronic tools, systems, devices, and resources that generate, capture, store, or process data from humans and machines.

Digital transformation is not a project or series of projects. Furthermore, it is not drastically reducing your workforce for a false pipedream that their jobs will entirely be replaced by automation. In fact, digitally transformed organizations work in conjunction with their workforce to realign responsibilities to encourage decentralized, self-managed teams.

Strategy is ongoing and requires continuing education at all levels of an organization in a scientific manner free from vendor bias about how digital technology is transforming members of an organization on an individual and collective level. Strategy requires that an organization continuously learn how digital technology is transforming it as a whole relative to other organizations and the market.

By its nature, for digital transformation to work, it requires transformative and disruptive leadership who have deep technical competency and are free from financial sponsorships that would otherwise steer them towards a solution-stack driven approach. It necessitates adopting an Agile philosophy at every layer of the business due to the inherently high levels of complexity and rapid change. The Agile philosophy uses rolling wave planning, iterative and incremental delivery, rapid and flexible response to change, coupled with open communication between all teams, stakeholders, and customers at all times.

In an Agile business, progress is measured in terms of working software to the degree that end-users feel their business case needs are solved and the project is integrated into existing systems. Traditional progress is measured on completed tasks or deliverables set against a fixed pre-planned schedule. The primary goal of the Agile philosophy is to deliver value to the customer as quickly as possible in an iterative manner.

This is achieved by recognizing that the value you deliver is a function of newfound knowledge gained from customer feedback. This means the value of any undertaking and its return on investment is unknown until such a time that a minimum viable product is delivered to customers and feedback is acquired from customers.

Traditional businesses use earned value, which measures cost as a function of time spent based on the assumption that you know exactly what your deliverable looks like, operates, the numerical value it will provide, and how operations will sustain this value over time. This does not work for the Industrial Internet of Things (IIoT) landscape because actual cost and value are a function of newfound knowledge acquired after building a technology and iteratively acquiring feedback from customers.

Minimum technical requirements may help illustrate what an IIoT project needs to accomplish but it is not exactly clear on what the tangible mechanisms to achieve this feat will look like, let alone explicit details as to how operations will sustain its value over time.

The key to mastering digital transformation is first understanding the 4 key principles on which it is built.

1. O̶p̶e̶n̶ a̶r̶c̶h̶i̶t̶e̶c̶t̶u̶r̶e̶ Open source
2. Data is streamed on a report-by-exception basis instead of poll-response
3. Use a lightweight protocol
4. Edge-driven

Regardless of an organization’s size and vertical, a tapestry of tools are necessary to function. There has never been one tool that can do it all. This tooling diversity allows you to decouple the solution from the technology underneath the hood. O̶p̶e̶n̶ a̶r̶c̶h̶i̶t̶e̶c̶t̶u̶r̶e̶ Open source means that your organization is free from a monolithic technology ecosystem that utilizes one vendor’s mainly proprietary, tightly-coupled, closed-loop solutions incapable of natively communicating with tooling from different vendors. Most data does not change value in a significant amount and frequency. This means it is not necessary to store and report this data until it changes.

A lightweight protocol that standardizes and compresses the payload delivered over the wire while simultaneously decreasing the compute power of the edge device is equally as important. IIoT means more and more interconnected devices, which means heavier network usage. Streaming data through report-by-exception instead of poll-response will significantly reduce unnecessary network traffic and allow you to accommodate more interconnected devices. Last but not least, edge-driven means that the smart devices are informing the business what to do. Digital transformation uses real-time data to improve efficiency, reduce downtime, and increase revenue by connecting, collecting, storing, analyzing, and acting on this data.

This real-time access to data is essential for making informed decisions about how to allocate resources and manage costs. It helps supplement human decisions using verifiable evidence. This is possible through the application of machine learning and artificial intelligence to capture efficiencies that are otherwise invisible to the human eye. Traditionally, business decisions are largely made on anecdotal evidence and no contextual information to your specific situation.

Equally important to note is that these principles alone are not enough to digitally transform an organization. A paradigm shift in the fundamental way a business exists needs to occur. Organizations are no longer commodities providers. Instead, they need to recognize that they are in fact data companies, whereby their products and services are merely the medium in which data is aggregated and contextualized to optimize their business.

All of this to say that digital transformation is a strategy built on the 4 aforementioned principles, which enables an organization to undergo an educational journey rooted in a technology-first, vendor-neutral, solution-stack agnostic manner.

Digitally transformed organizations focus primarily on technology and its integration into existing systems. This is to say that they value mutual trust and collaboration, integrity, humility, interoperability, scalability, extensibility, and flexibility above all else. Traditional businesses view technology as an afterthought, and costs are only allocated to it after the scope and budget have been defined. In IIoT projects, technology is a central focus, and costs must be allocated to it from the very beginning.

This means that a significant portion of the budget will be allocated to research and development, as well as testing and deployment of new technologies. In most cases, this means eradicating proprietary technology at every layer of the business because it creates data silos. Digitally transformed organizations favor open technologies (MQTT, Sparkplug B, Ignition, etc.) and meaningfully engage with open-source communities.

Organizations that wish to remain in business must meaningfully engage with open-source communities, they cannot afford not to. An example of what meaningful engagement does NOT look like is the “embrace, extend, extinguish” framework, also known as the three E’s. Widely adopted by larger organizations, this approach has been repeatedly used to suppress innovation by artificially reducing competition through acquisitions. Fundamentally, the three E’s framework cannot work to aid digital transformation because it promotes a monolithic cookie-cutter solution.

Manufacturers in particular share the same automation technology stack but their use-cases uniquely drive customization that do not meet the needs of other organizations. Therefore what works for one business will not make any sense for another. Value is not held constant with complex environments that involve digital software technology. What you build today may only be valuable for 24 hours and keeping it operational for any longer will bury your organization into significant technical debt.

This pressure to rapidly change and adapt is equally felt by open-source communities. Their successful existence is dependent upon delivering working software quickly, to the degree that users feel it solves real business needs.

Digital transformation inevitably fundamentally redefines existing job responsibilities and organizational hierarchies. Divisions that have previously held unilateral decision making power will find themselves turned upside down. Information Technology departments in particular have historically been granted ever increasing responsibilities without seeing a proportional increase in resources, namely due to the exponential rise in technological complexity.

In the same swipe, front-line business staff have found their voices no longer being heard, ultimately leading to an organization disconnected with what their customers need and how to empower its workforce to meet those demands. A digitally transformed organization recognizes that its technology teams are primarily service staff and their sole mission is educating the rest of the business about technology. This paradigm shift is in service to achieving a more accurate digital representation of the entire business, whereby all events are captured electronically.

In Conclusion

Digital transformation is a strategy, not a series of projects. A key reason why digital transformation journeys fail, often before they ever begin, is due to technical debt. Simply put, technical debt is the implicit and explicit cost of rework to improve the quality of an asset in service to make it easier to maintain, extend, and decommission. Digital enterprise architecture has largely been driven by linear, deterministic, tightly-coupled proprietary solutions thanks to the false promise of “integrating the business” shilled by enterprise resource planning providers and their network of consultant systems integrators.

Financial partnerships in service to maintaining market dominance created the system integrator philosophy of “go long and deep”, whereby mismatched cookie-cutter solution-stacks were pitched over continuing digital transformation education.

Although technical debt is unavoidable, accepting it must be consciously deliberated by the entire organization with emphasis on interoperability, ease of use, extensibility, resiliency, and decommissioning. Technical debt leads to unplanned work, which detracts from value-added work. With the exponential growth in technological complexity, manufacturing leadership have universally historically chosen short-term gain via point-to-point solutions over long-term continuing education.

The 4 principles that drive digital transformation are not enough to succeed on this journey. Disruptive and transformational leaders with deep technical knowledge are required at the helm to successfully steer the organization towards vendor-neutral, solution-stack agnostic, technology-driven scientific consensus on what digital transformation uniquely looks like for them.

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DISCLAIMER: I am not sponsored or influenced in any way, shape, or form by the companies and products mentioned. This is my own original content, with image credits given as appropriate and necessary.