Digital Transformation In The Industrial Sector Made Easy
February 6, 2018, by dpuron
Let us face it, the Industrial and Digital sectors do not like each other. It is not that one side lacks the need of the other or the interest but mainly a clear absence of understanding. Corporate culture, business operations, technology standards, tools, talent background, sales processes, capital needs, scalability, average age… Probably any KPI that […]
Let us face it, the Industrial and Digital sectors do not like each other. It is not that one side lacks the need of the other or the interest but mainly a clear absence of understanding. Corporate culture, business operations, technology standards, tools, talent background, sales processes, capital needs, scalability, average age… Probably any KPI that we could mention in this list would only reflect how different these two worlds are.
But….Disruption is coming (like winter beyond the wall), and that changes everything
After going through some of these disruptions in my career (Nokia being “THEONE”) I have come to be a great fan of Clayton M. Christensen’s theories in his book “Innovator’s dilemma”. I firmly recommend this book to anybody interested in the innovation space.
The main takeaways of the dilemma for our case are (sorry for the simplification Mr. Christensen! and thanks for an amazing summary B.B. McBreen):
- Market evolution and technology progress are separate things. Customers do not always know what they need.
- The pace of progress often precedes the market’s awareness of the need. Technology supply may NOT equal market demand
- Disruptive technology is a marketing problem, not a technological one. Markets that do not exist cannot be analyzed.
- Small markets do not solve the growth needs of large companies. Large companies are not interested in small emerging markets
- Big companies migrate easily to high-end markets. But moving downmarket is difficult because the need to improve financial performance prevents downmarket development.
- An organization that accumulates skills and knowledge needed for an established product, stumbles when those skills and knowledge are irrelevant in a new disruptive product.
- Small entrant firms enjoy protection because they are doing things that do not make sense to the industry leaders. Match the Size of the Organization to the Size of the Market.
- Small companies (innovators) have products that are not ready for the big markets where the big players serve.
- In the meantime, they can test their disruptive products on customers currently underserved by big companies (underserved customers)
- New (big) companies emerge. As new markets are created for new products.
- Established firms are good at improving existing products.
- New entrants move upmarket.
- Established firms jump on the bandwagon late. “The most formidable barrier is that they did not want to do this.”
Do not panic, this is not an academic essay. I really believe there is a parallelism of this dilemma with the digitalization of the Industrial sector.
The world has gone through several revolutions. If you are reading this it is because you are somehow familiarised with the terms Industry 4.0 or 4th industrial revolution… the next disruption (using Innovator’s dilemma jargon) is just the 4th one, just that.
To prove my view let us map the above statements to the current state of the Industrial sector Digitalisation::
- The industrial sector does not know what they need. There is technology ready in the market to provide a lot of value to the Industry but customers do not know what they need.
We have IoT technologies, unprecedented connectivity capabilities, computing power at the price of peanuts, cloud solutions, Artificial Intelligence, Big data…. However, the industrial customer does not know what to do with it. They still do not see the big gains promised behind the so-called revolution besides some initial attempts from early adopters (predictive maintenance seems to be the hype)
- It is a marketing problem. There is a need but the market is still not big enough to actually scale resources. What does this mean? Small firms with an organization adapted to the new market will be able to cover the needs (non-existing yet) of these players.
- The new market will not be big. Large companies with old organizational skills will feel safe with the so-called disruptors. New firms are protected.
- But disruption is coming. What seems to be a side business on top of an established one now, will eventually become the key competitive advantage in a whole new sector, producing a multiplicative value to the current one.
- Disruptors will move upmarket and their products will catch up on functionalities that were provided by established players before but with the new paradigm embedded.
- When old companies eventually try to catch up, it will be too late, neither of their organization nor the market will be in the new normal wavelength.
Though this may seem a pessimistic view for established organizations, I do not believe in threats but in opportunities. There are plenty of actions to be taken and quite a few examples of companies that did not suffer from a disruption but emerged stronger than ever. They reacted well to the innovation dilemma. In future articles, I will go through those “academical actions” and how to translate them into practical actions to help your organization avoid becoming the next Nokia.
Stay tuned with BarbaraIoT on https://news.barbaraiot.com.
Does your organization already have a sense of the disruption? Are you taking the correct actions? Are you an incumbent moving upmarket? Tell us your view.
Article written by Isidro Nistal, Founder and Chief Product Officer at Barbara IoT.
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