Companies hear big buzz words such as innovation and digitalisation. They are important and perhaps even essential for survival. But how do one start with these processes? How much will it cost and how sure are we about the returns?
These are several pointers that help companies break down what could be a large undertaking.
Start with improving core business
Some people view the epitome of transformation to be the creation of new business models or industry disruption. Contrary to this view, digital transformation often starts with the core business.
Indeed, at no less an innovator like Google, employees are asked to spend 70 per cent of their time on core business, 20 per cent of their time on related projects, and the remaining 10 per cent on new projects.
While transforming business models makes the news, improving core operations is less costly and shows results more quickly.
For most companies, there is a physical operation
Most companies are not Facebook, Netflix or Google—platform companies with minimal operations involving physical components. Many types of companies, such as those in manufacturing, retail, trading, logistics and commodities, have to deal with physical operations, including equipment, inventory and assembly lines.
For these companies, innovation requires the integration of digital and physical capabilities. It is not just about creating platforms. These companies need to integrate the physical with the digital and use the data to improve core operations.
Take as an example Federal Packaging, a company which makes carton boxes. In the last few years, the company automated a large part of its manufacturing process using enterprise resource planning (ERP), Internet of Things (IoT), customer relationship management (CRM) and artificial intelligence (AI).
The process was not without the involvement of the shop floor workers. The company assured them of more purposeful roles in other areas. Federal Packaging also worked with Japanese palletiser maker Fuji Robotics to enhance its robots for use over a smaller footprint and space. In doing so, the company optimised shop floor utilisation and labour allocation.
It also used device sensors to capture data for performance analysis and preventive maintenance for most machines and equipment. Federal Packaging is further looking into green measures to improve its sustainability.
Build up capabilities incrementally
Planning massive initiatives seems daunting. But companies can break up the overall project into a series of small projects based on a short-term, medium and long-term horizon. This is also the concept of “agile transformation”, which is basically about trying new projects to see what works.
An incremental approach towards innovation allows companies to experience and try. For example, they can gain confidence from successful pilot projects before expanding to larger, more costly projects. Failed pilot projects are also a chance for companies to learn and adjust.
Watson EP, which provides engineering design and manufacturing services, begins its digital transformation with small steps. An early adopter of the manufacturing resource planning system in the late 1990s, Watson EP subsequently moved to enterprise resource planning by integrating new modules in human resource, payroll and attendance.
Over time, it gradually added new IT modules and capabilities, such as computer-aided design (CAD) systems, to its operations. Watson EP is further looking into automating some of its manufacturing processes and gaining insights from dashboards.
Digitalisation and connectivity are the first steps towards intelligence
While data analytics and AI are buzzwords and dominate the strategy conversation, the reality for many SMEs is that they may not be ready. The starting point is to have digitalisation, systems connectivity and information sharing. With this information platform, companies can analyse the collected data for performance measures and identify potential opportunities for improvement.
One example is digital manufacturing solutions provider Arcstone, which works with ASEAN-based manufacturers to provide an IT platform for monitoring their manufacturing. The starting point is purely a web-based system with information feed from the manufacturing equipment.
But there is a bigger picture to be seen. To extend the visibility of the supply chain ecosystem, Arcstone works with manufacturers headquartered in the United States, who coordinate Asian and global supply chains, to provide the full picture.
The integration and information sharing means that local businesses benefit from greater visibility of their operations. At the same time, the US-based manufacturers gain greater supply chain resiliency and traceability.
Conclusion
In short, technology innovation can be broken down into steps and prioritised, so companies can organise their resources without overstretching. Contrary to what we consider as big projects and buzzwords, seeking relatively low-hanging fruits to digitalise operations can be a starting point in digital transformation.
The article is a translated version of the one first published in Lianhe Zaobao.
