How do I become a data-driven industrial company?

In times of Industry 4.0, digitization is associated with a growing degree of data drivenness in the perception of many companies. I share that view. Specifically, I see 3 major digitalization steps that companies must prioritize before planning and executing business strategy activities. First, though, I’d like to explain a few more terms in English related to digitization, based on the great Forbes article [1] Digitization, Digitalization, And Digital Transformation: Confuse Them At Your Peril (2018).

The English language differentiates more accurately than the German language between Digitization, Digitalization and Digital Transformation. These three terms indicate the state of your company in terms of digitization.

Digitization is the process of changing from analog to digital form“ (Gartner´s IT Glossary)

In terms of the business environment, this term describes, for example, the digitization of documents and information, the first stage of digitization according to the German term.

Digitalization[…] is the process of employing digital technologies and information to transform business operations“ (Digitalization and the American Workforce)

The next step after pure digitization of documents is that of processes. Often processes are carried out partly analogously today. Often, process information is already digitized in the form of documents (Excel spreadsheets, for example), evaluated or processed analogously in the process. The digitization of processes is often accompanied by a degree of automation. With the advent of PIMS or MES systems, for example, production processes have been digitized and in some cases can even be viewed digitally in their entirety. The goal of the process digitization is a higher efficiency as well as an increased transparency of the process.

The digital transformation of companies and business units, on the other hand, has another focus. So it is about, often on a project basis, to build and offer new business models based on digital technology or the findings of digitalization and digitization. These are called innovation projects, which, unlike the aforementioned activities, require less understanding of technology than customer centricity.

In practice, there is often a mixture of the three terms, which is why it is difficult to formulate a clear entrepreneurial positioning and a subsequent strategic route. Most frequently, these “new business models” are the desire of many industrial companies to increase sales and gain competitive advantage in often fiercely competitive (traditional) markets. In the fewest cases, the resulting requirements are not known to the companies themselves. Innovation projects in new business are accompanied by cultural, strategic and resource-related risks. The strong uncertainty of new business development inevitably. Likewise, it requires expertise in the area of ​​new business development, which is often lacking in traditional companies. Industrial companies are at risk of equating digitization with new business development and, in a sense, “burning” themselves to such comprehensive projects.

Practice shows that digital business development is doing well to build digitization initiatives. Thus, an initial digitization of the existing processes is recommended. On this basis, internal potential for improving efficiency can then be tapped first. In the field of manufacturing, e.g. The use of data to identify quality-relevant process parameters and their influence in the interaction on the final quality result of the finished component. This is accompanied by an increasing amount of data through the inclusion and consolidation of relevant process parameters from different sources (eg production-related systems, sensors or external parameters such as the factory hall temperature). In this way, new innovation initiatives can be developed, which through long-term customer integration in the long term Important here: If I approach externals with ideas of digital business models, should I own a certain degree of digitization of my business processes have. How else can a provider company credibly position itself reputable?

[1] Digitization, Digitalization, And Digital Transformation: Confuse Them At Your Peril (2018), https://www.forbes.com/sites/jasonbloomberg/2018/04/29/digitization-digitalization-and-digital-transformation-confuse-them-at-your-peril/#65e31b0b2f2c

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