What is Digital Transformation?
All About the Tech That's Reimagining Business in the Digital Age12 minute read
Digital Transformation. Everybody is talking about it. We all want it.
But with so many business leaders and tech conference speakers telling us what the phrase means, it might be easier to explain what it is not. It isn’t one magic product or service that you can buy, nor is it one specific practice.
So, then what exactly is it? A major part of Industry 4.0, or the Fourth Industrial Revolution, Digital Transformation is what happens to a business or organization when it adopts and applies computer-based technology to create or improve a practice or process.
“Think of Digital Transformation as an ‘umbrella term’ that captures everything we see happening in modern business today,” says Remus Pop of Riveron. “This includes all the intangible Industry 4.0 ideas that make up a mindset, and then all the tangible things like the IIoT, hardware, and software.”
When it comes to business, Digital Transformation is not a one-size-fits-all solution. It does not have a standardized beginning or a common end because it’s different for each company. And leaders who treat it as if it’s a destination, well, they’re missing the point.
This transformation is actually a journey: a modular and scalable process that can go as far or be as simple as each company wants and needs. Simply converting a single plant floor’s legacy “sneaker net” reporting practices from handwritten papers to electronic files might be all that is needed for some, while others want full smart manufacturing practices that completely automate processes and connect interoperable systems at multiple locations.
“When you think about it, we are just at the very beginning of this,” says Pop, who continues, “It grows with you. It’s not just smoke and mirrors, there are real gains happening from this.”
When done right, Digital Transformation is more than the sum of its parts. It might not mean full-on machine learning with robots doing all the manual labor, but it’s surely more than just moving your stuff to the cloud and calling it a day.
- Don’t think of Digital Transformation as a product or the hardware and software that provides a service. Instead, think of it as an enablement – using innovation and technology to solve traditional challenges and improve an operation or process.
- Benefits: Digital Transformation will improve efficiency, streamline operations, and increase productivity. This in turn will boost customer value and company profit!
- Example of Digital Transformation success and failure:
– Netflix embraced digital data and used analytics to transform the way people watch content. It started the streaming trend and is still atop the growing industry.
– Blockbuster Video ignored changing technology and customer preferences, and as a result it quickly became an out-of-business relic as people migrated to formats like Netflix.
Digital Transformation vs Digitization vs Digitalization
Google “Digital Transformation” and it’s mass confusion. This is primarily because there are two terms – digitization and digitalization – that are used interchangeably but mean slightly different things and produce different results. They're different branches of the Digital Transformation tree.
Digitization is the process of moving from analog to digital. That’s it. It could be as simple as scanning physical photos and saving them as computer files.
Digitalization is the use of digital data to change (and, in most cases, improve) a work process. This could be a doctor’s office using an online network to gain immediate access to your medical records from other health care providers.
Consider these in tandem and you start to understand how Digital Transformation leverages both of these practices to collect, view, and use digital data to streamline a business operation or process – thus, transforming that business with the use of technology.
As another example, imagine an automobile mechanic using a tablet to measure and record sensor data that is then displayed on a single dashboard with all gauge readings. Neither the vehicle’s data nor any corrective action it suggests has changed, but how it is accessed and used has been improved. So moving from clipboards to dashboards saves time and improves accuracy.
History of Digital Transformation
It’s easy to think of Digital Transformation as a relatively new thing, but the concept has been around for a while and seems to run parallel with the history of modern computing.
Arguably, Digital Transformation dates back to 1947 to the first functional transistor, a semiconductor device with powerful signal and calculation capabilities that facilitated the transition from analog computing to digital computing. Transistors are a key component of computer microchips, the first of which was successfully developed in 1959 and introduced major improvements to memory, storage, and precision of data. Digital computing transformed the world by multiplying computers’ processing power and capacity.
Modern Information Technology (IT) structure took shape in the 1960s when IBM launched a mainframe for large-scale data processing and computing power. Mainframes led to servers that host all that data produced by mainframes. This, of course, leads to today's hybrid environments of networking and cloud hosting, which transformed how we store and share data.
The Digital Revolution (the Third Industrial Revolution) took a giant leap forward in 1969 when the first message between two computers was transmitted over ARPANET — a network of connected networks, a concept that led to the Internet. Then in 1971 the first email was sent over ARPANET using the now-familiar '@' syntax to identify system addresses, which transformed the way we communicate.
The World Wide Web debuted in 1989 and standardized the format of electronically shared files to become a digital library. It’s interesting to note that the late 1980s is when automation was fully introduced and ingrained into business workplaces, which makes this period a logical origin point for Digital Transformation in the context of industrial and commercial practices.
A major shift happened in 1991 when a 2 GB server began hosting the Web and the Internet became truly public and readily available in most countries and homes (computers became more affordable and portable in the 1980s). As the Internet grew throughout the 1990s into the beast it is today, businesses had to change the way they communicate and interact with customers and how operations are managed.
Today, the key to using Digital Transformation to your advantage, states Hugh Roddy of Chobani, is to have a plan and create standards. “It’s about networking and data management,” he says. “It could be completely hosted in the cloud, but some might not want to do that for security reasons. It could be simply modernizing antiquated systems like eliminating the bird’s nests of cables. But, build dashboards.” Dashboards, Roddy says, allow everyone to see the same data, creating standards across multiple divisions.
Benefits of Digital Transformation
Because it is so subjective, Digital Transformation can be a diverse tool that, like a Swiss Army knife, can unfold many capabilities.
First and foremost is data. Data is the new oil in modern industry, and digital data can be viewed, recorded, and/or shared in real-time with web-based cloud applications. Getting the right people access to the right data accommodates true preventative maintenance and predictive analytics. Production dips and downtime can be a thing of the past.
“Digital Transformation brings forth data standardization,” says Kurt Hochanadel of Cirrus Link. “It bridges the gap,” he continues and explains that Cirrus Link uses it to connect and unite the people and processes in different places that were previously siloed off from one another.
With digital computing, data and electronic files are now created, stored, accessed, and shared in a fraction of the time, cost, and size compared to analog.
“It’s not rocket science,” says Peter Photos of Streamline Innovations. “The reason it can be scary for some is because they don’t fully understand it, and therefore they assume it will cost a fortune. But knowledge is cheap, and today it’s available at our fingertips. Use the data!”
Aside from data itself, perhaps the biggest advantage is cloud computing and web-based applications that allow you to monitor and control equipment and processes at any time and from anywhere there is an Internet connection. Time and distance are no longer obstacles. A manufacturing plant manager can now use a cell phone to start, stop, or control a conveyor belt from a thousand miles away.
Even seemingly small things can have big impacts. Things like KPIs and sharing of data between multiple locations all work to seamlessly connect the three P's: Processes, People, and Programs.
Processes become so much more efficient and effective when clipboards become dashboards. Information is available in real-time, and people can make decisions and put it in place today rather than having to wait for the next spreadsheet or quarterly report.
Heck, new software and technology can even be leveraged to train employees to use the new software and tech.
These all save time, and time is money in the business world.
Who Needs Digital Transformation?
Everyone from international Fortune 500 enterprises to local mom-and-pop shops should be using Digital Transformation to remain competitive and relevant in today’s world. Anywhere there is a process in which people and machines coexist, Digital Transformation can be useful. And with today’s tech, you don’t have to be a software engineer or write code to get onboard the train.
Cirrus Link’s Kurt Hochanadel reminds us that technology is simply a tool and it doesn’t have to be complicated. Today’s technology makes things so simple that there is no detailed coding involved from the user end. “We have all this data being collected and shared across networks, so we just need a way to talk to that knowledge base and transfer that intelligence into usable data,” Hochanadel says. “Digital Transformation is the enabling tool that makes this happen.”
Real-World Examples of Digital Transformation
Airbnb and Uber
Smart companies are changing how the hospitality and travel industries do business as they leverage the IoT (the Internet of Things) to deliver services faster and easier than ever using web-based apps on our smartphones. Now we can compare dozens of hotel rates, rent someone’s guest room, or even summon nearby drivers in a few seconds with a swipe of a finger.
Managing multiple sites can be a logistical nightmare and a communications catastrophe. But NGL is using SCADA (supervisory control and data acquisition) technology to turn this problem on its head with the creation of a “smart field” for its saltwater disposal facilities that provide transportation, storage, blending, and marketing of crude oil. NGL’s new SCADA system seamlessly collects data and connects multiple assets in multiple states – turning 114 water treatment and disposal facilities with more than 175 pipeline tie-ins into an efficient network of first-class data and resource management from one centralized digital solution. Each component and site knows the data and capacity of other components and sites, which allows the company to move assets around like pieces on a chess board. Trucks no longer need to be turned away, they can instead be redirected to facilities with capacity. Revenues are up, and salty attitudes are down.
Watch the NGL video
Multiple branches of the U.S. Armed Forces use digital twin technology and 3D modeling to build a virtual environment of a vessel and all of its components and controls. Then, e-learning and augmented reality programs use predictive analytics to train soldiers standard operation and preventive maintenance without real-life consequences of equipment damage or personal injuries. Think of the landmines – figurative and literal – avoided by taking advantage of this. Maybe tech is not yet creating the super soldiers of comic books, but it's definitely inspiring smart soldiers.
Digital Transformation probably isn’t the first thing that comes to mind when eating yogurt, but Chobani uses the industrial application platform Ignition as a bridge between IT and OT (operational technology) to leverage its data and streamline its operations. Rather than call multiple people on a radio to walk each of them through different steps of the plant floor process, Chobani uses the tech to create a special HMI (human machine interface) as a single control point for the entire process. Data and processes are available on tablets and phones, which free up plant managers to make fast, informed decisions from anywhere and keep the top Greek yogurt brand in America running as smooth as a spoonful of its yogurt!
Watch the Chobani video
A major provider of packaged foods for retail and food-service channels, SugarCreek is another company proving that tech-savvy is the way to go. It uses Ignition to build a customized solution of MES (manufacturing execution systems), SCADA, IIoT (the Industrial Internet of Things), and HMIs working in tandem to provide a solution that improves reporting, alarms and notifications, and sharing of important data. Where the company used to struggle with day-old reports and stale data to make business decisions, SugarCreek now has real-time data that provides immediate visibility into everything from production and inventory counts, to the speed of a conveyor belt in a plant, or the temperature of a storage unit. This leads to fewer downtime occurrences and increased control over production processes – which means a bottom line of increased efficiency and revenue.
Watch the SugarCreek video
As these examples show, Digital Transformation is not just a buzzword or a passing fad businesses can afford to ignore. It’s the evolution of business. The COVID-19 pandemic has revealed the benefits and accelerated the incorporation of Digital Transformation. The question is now not if a company should embark on the journey of Digital Transformation (they should), or even when they should (now), but rather how they can do this most effectively in order to stay competitive.