A Contrarian View on Digital Transformation

Not a day goes by that I don’t get a message extolling the virtues and promise of Digital Transformation. Most of the numbers related to Digital Transformation are in the Trillions.

  • WEF, with a little help from Accenture, thinks that Digital Transformation can create 100 Trillion dollars in value
  • Cisco posits that Internet of Everything, a core element of Digital Transformation, is a 19 Trillion dollar opportunity
  • GE in a very elaborate report outlines that Industrial Internet of Things could add between 10 to 15 Trillion dollars to world GDP

Large numbers are thrown by very respectable firms with abandon. There is nothing wrong in being optimistic about technology’s potential to improve and add value. But optimism that borders on wishful thinking can lead to disappointment.

But, firstly, let’s look at Bill Gates’s quote below

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.

When it comes to Digital Transformation the second sentence is what should worry people the most.

The world is awash with examples of unwarranted waste and misdirected investment. Many organizations approach technology as a panacea that can overcome poor strategy, processes and practices.

No amount of Digital Transformation is going to help K-mart if it does not have a coherent strategy on how it wants to the play the Retail game.

Similarly, much can be learnt from the contrast between approaches taken by GM and Toyota with respect to automation. Toyota Production System (TPS) strongly embraces simplicity and autonomation (automation with a human touch). From A3 report to Visual Management, simple approaches, tools and processes have always been central to TPS. GM/Cadillac on the other hand opened a costly and heavily automated plant in the 80s. It was bedeviled by glitches. The plant won many awards after unnecessary automation was taken out.

The cautionary tale here is that organizations should first look at core strategy and how well the processes are designed and implemented to support the core strategy. The next step is to fully adopt and practice consistently a management system or operating philosophy such as Toyota Production System if they haven’t already done so. The final step is to integrate technologies related to Digital Transformation as a means to sharpen the saw and continuously improve.

Kris Gorrepati

My 2 cents on Supply Chain Management, Manufacturing, Design, New Product Development, Software Engineering, and related topics.

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