September 13, 2024 5 Steps to Navigate Digital Transformation for Leaders

Digital transformation is vital for staying competitive, but it’s challenging. Here’s a guide to help leaders navigate the journey smoothly.

by Ryan Kuhlenbeck, CEO and co-founder of Pico MES

1. Start with the Numbers: Baseline Data Collection and ROI Calculation

The first step in any digital transformation journey is understanding where you currently stand. This means doing the math, even if it’s painful. Leaders must commit to collecting baseline data, even if it’s just for a week or two. This data is essential for calculating the Return on Investment (ROI) of any digital technology you’re considering. Without a clear understanding of your current losses, you can’t accurately assess the potential benefits of new technology.

It’s not enough to simply measure losses; you need to validate and understand the data. This step is crucial. Without it, any ROI calculations you make will be off, potentially leading to poor decision-making.

2. Evaluate Key Operational Metrics

Once you’ve got your baseline data, it’s time to dig deeper into specific operational metrics.

• Output efficiency:
  • For repetitive environments, make sure you have accurate output/shift data. Look for variations across shifts and operators, as these are potential areas for improvement.
  • In high-mix environments, compare target times for each order against actual times. How much of your day is spent on setup versus actual production? Identifying inefficiencies here can yield significant gains.
• Quality control:
  • Define what “good” looks like in your operation. If you measure quality at the end of the line, track how many failures occur and investigate their root causes. This will help you identify systemic issues that need to be addressed.
• Uptime:
  • Track equipment downtime and understand why it happened. Knowing the root causes of downtime can help you prevent future occurrences and keep your operations running smoothly.

3. Identify Core Technologies for Strategic Advantage

Not all technologies are created equal. Some will be essential for your business, while others might offer a strategic advantage.

• Traceability:
  • In industries like automotive or aerospace, full traceability is a must. Being able to answer any customer questions about when and how a part was built can significantly reduce risk.
• Digital work instructions:
  • Especially in high-mix environments, digital work instructions are crucial. Ideally, these should be tied to your quoting or ordering systems, or designed to be flexible enough to use across multiple scenarios. If your company lacks standardized work processes, this is a critical area to address before you can scale effectively.
• Industry-specific tools:
  • Invest in tools that align with your business needs. For example, if your operation involves repetitive tasks like fastening, consider integrating advanced fastening technologies. If a particular technology doesn’t immediately seem necessary, it’s okay to skip it for now.

4. Make vs. Buy: Strategic Decision-Making

Next, evaluate your internal capabilities. Are you able to develop software solutions in-house, and if so, are you good at it? If the answer is no, that’s perfectly fine—just know that you’ll need to look for a vendor to support you.

When considering whether to make or buy, it’s essential to do the math. Often, it’s more cost-effective to purchase pre-existing solutions (like digital work instructions) and integrate them into your systems. However, if you have a highly customizable product mix, you might need to invest in a configuration management system tailored to your needs.

5. Implementing Digital Transformation: Two Paths to Success

Once you have a clear understanding of your baseline issues, identify the necessary infrastructure, and assess your internal capabilities, it’s time to get started. There are generally two paths to success, depending on your team’s experience level.

• For experienced teams:
  • If your team has prior experience with system creation and integration, you might be ready to take on a larger project. However, be cautious not to dive into systems integration too quickly. Start by validating individual systems before full integration. This approach reduces costs and complexities in the long run.
• For first-time implementers:
  • If your team is new to digital technologies, a “Crawl/Walk/Run” approach is the most effective.
    • Crawl: Start with a simple solution targeting a specific problem, ensuring it can scale as you grow.
    • Walk: Gradually introduce additional technologies, such as traceability tools and connected machines, to build a robust foundation for continuous improvement.
    • Run: Once you’ve gained experience and validated earlier steps, integrate business systems for a fully connected operation.
  • Remember, digital transformation is a journey, not an event. Focus on incremental improvements, learn from each step, and remain flexible enough to replace point solutions as needed.

Digital transformation is a journey, not a one-time event. By focusing on key metrics, choosing the right technologies, and taking a strategic, incremental approach, leaders can ensure their organizations stay competitive and resilient – making them more agile and efficient in an ever-changing digital environment.

Ryan Kuhlenbeck is the CEO and co-founder of Pico MES. His career spans a wide range of automotive manufacturing including General Motors, Tesla, and Alta Motors. He has experienced firsthand the real-world issues that the digital divide creates and has created a company dedicated to helping all factories be more efficient and profitable.

Subscribe to Industry Today