The Necessity of Digital Transformation

Successfully running a business has much to do with effectively managing risk, while also not missing out on important opportunities. No company wants to go all-in on the latest trend only to watch it be short-lived or unsustainable. A good example of this fear might be the latest dip in cryptocurrency values. While blockchain technology does seem to have real potential – it is still entirely too new and untested for the majority of organizations to commit significant resources to it. At the same time, being too slow to adapt can spell disaster for even the well-established organizations. Empty Blockbuster, Radio Shack and, soon, Toys R Us stores stand as daily reminders that standing in the way of change means only that you’re waiting to get run over by it.

In the past couple of years, one of the topics that created buzz in boardrooms around the world has been digital transformation. What was initially seen as an IT expense has over time grown to be accepted as one of the main strategic initiatives every CEO needs to consider. Even the companies lagging behind the most are being forced to realize the importance of placing an emphasis on transformation initiatives.

So what exactly is the force driving this sweeping change in perspective?

The short answer is disruption. Companies that were able to truly transform their business to be more agile, cut cost, deliver a better customer experience and innovative products to the market in a shorter period of time have managed to dethrone industry leaders and quickly seize market share. Perhaps the most well-known example of this might be the meeting between Reed Hastings, the founder of Netflix and Blockbuster’s CEO John Antioco in 2000. Hastings came to the meeting to propose a partnership between the two companies and practically got laughed out of the room. Netflix went on to change the ground rules of the market, set entirely new customer expectations and disrupt the business model that Blockbuster built its success on, forcing the movie rental giant to file for bankruptcy just 10 years after the infamous meeting.

Naturally, there are also companies that properly read the writing on the wall and made proper adjustments to remain relevant in the digital era. The biggest such company is certainly the tech giant IBM. A company that has long been the epitome of success was by the mid-90s labeled as a dinosaur and posted record losses. Thankfully, its leadership understood the need to transform their organization from the core just in time. The company acted decisively and divested from low-growth, low-margin product lines, standardized reporting procedures and centralized services teams to drastically cut costs.

Now, according to a Forbes article by Bridget van Kralingen, IBM’s Sr. Vice President, 9 out of 10 employees “focus on developing, producing and delivering high-value solutions for [their] clients”, as the company has reestablished itself as an industry leader once again.

It is clear that digital transformation does not mean the same thing for each company. Some organizations have certainly used new technologies to automate internal processes and cut costs, others have focused on accessing new markets or market segments while a number of companies saw the opportunity to increase operational visibility and gather new insights into their production process. No matter the organizational goal, what all these initiatives have in common is that they take advantage of the organization’s ability to gather an extraordinary amount of data.

The wide acceptance of ERP systems, coupled with the rise of IoT devices that connect to this centralized data repository, has created a new frontier for improvement. According to Gartner, there are currently 8.4 billion “things” on the internet today (up 30% compared to last year). We are gathering an unprecedented amount of data and now, the real challenge is coming up with the best way to analyze this data and act upon it. So far, organizations that have effectively transformed their business with new technologies in mind have seen higher revenues, lower costs and more opportunities for innovation.

This sets the stage for even more competition as companies enter new markets and reach new customers. The companies that look to stay competitive in this new landscape need to have their top leadership take intentional steps to construct and follow through on their transformational initiatives. Merit Solutions can provide your organization just the type of support you need to achieve the goals you’ve identified as important for your continued success.

Curious to learn more about how you can apply IoT to your manufacturing processes and operations? Visit our website for more information on Microsoft Azure IoT solutions.