5 Reasons why Digital Transformation requires a CDO

3D Printing

Earlier in my blog, I stated that Digital Transformation has to be initiated by the CEO or the board. While that is true, most businesses understand that the CEO cannot be the person who is fully in charge of digital strategy or transformation. Because of this, they added a new member to the board—the chief digital officer (CDO). It is the task of the CDO to fully develop a digital strategy and make sure that it is executed within the business. By the way, moving to Cloud technologies is the way IT actually transforms itself digitally. The rest of the business should barely feel that the technology has changed. Digital Transformation has to come from an elevated view.

Looking at the subject from above, I see 5 reasons that clearly demonstrate that Digital Transformation requires a CDO.

No 1: Digital Customer Experience

Everyone who shops online has personally experienced the Digital Customer Experience (DCX).

  • First, I search for a detailed description of the product I am interested in. If I can’t find what I’m looking for on one site, I simply move on to another until I find the desired information.
  • The next thing I always check is product availability. I want to know when I might expect the product to be delivered. If the online store doesn’t provide this information, I immediately leave the site.
  • After I complete my purchase, the store will provide all pertinent information: when the item was packed, when it left the warehouse, the tracking number, and so on.
  • If I need to return anything from the order, most stores make it an easy process. I just have to go online, fill out the necessary form, and return the item with just a few clicks.

But how does this apply to B2B? What is the experience our customers receive when they order an item or device? Will they get reliable delivery times, or will they need to reach out by phone to check the status of their deliveries? How many people will they need to speak to in order to get the right information?

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Back in the day, we believed the customer should count himself lucky when we delivered the goods he needed…to our terms and conditions, of course. Now, it is much different. We are lucky to even have valued customers, and we serve them with the intention that they get the best possible experience every time they place an order with us.

The goal of Digital Transformation is to highly improve the DCX. This extends far beyond answering engineering questions, providing a high-gloss brochure, or taking the customer out for a drink or two.

Current customers expect specific information and flawless integration with their business processes. They want you to contact them by email when you ship your products. Customers expect an electronic data interchange (EDI), and they prefer not to call you in order to get information if the delivery is late. The automotive industry is already far ahead in this regard. Many other businesses have to catch up.

I consider Digital Customer Experience to be one of the most important issues for businesses to care about today, and it can be greatly enhanced through Digital Transformation. Our competitors will go through this transformation. But if they do not? Even better!

No 2: Digital Products

The term “Internet of things” (IoT) is in every newspaper nowadays. But very few companies really understand the opportunities IoT gives them. I consider IoT a question of imagination. Think about how digital products can serve your customers, especially new products with technologies that were not available a couple of years ago.

Internet of Things IoT

What if your products, which are installed at the customer’s plant or in the field, could inform you of deviations or anomalies in the process? What, if your device is connected to the Internet and transfers status information to your home base? This information can help engineers refine your products with greater insight because they get to know the area of application at your customer.

For example, you could add temperature sensors to understand the environment in which your device is working. You could add sensors that “listen” to the ball bearings in your machine, which will tell you far in advance if it is going to break in the future based on changes in sound patterns. You can send your customer a maintenance notification before broken parts stop his production.

There are many other possible applications. Collecting this information from your machine or device will lead to a huge amount of data, or “big data.” It is a new task to analyze this data. From the data you get from your machine, you will see patterns you never thought of, and which affect the accuracy of your machine. If you did not have access to this information, you would probably never understand why your products behave like this within certain environments.

Adding sensors to your products, along with an IP interface, is usually not that expensive compared to the device itself. But it will give you and your customers a whole new range of experiences.

No 3: Digital Production

When we talk about digital production in terms of Digital Transformation, we are not talking about robots and CNC machines anymore. Robots are usually no more than replacements for boring or dangerous human labor. CNC machines like lathes and mills bring automation to your production and will make more or less the same products that humans did before, but they will be made faster and with more accuracy.

Digital Transformation in production goes way beyond this. It will influence your supply chain, your machining, your productivity, and more.

Here are two examples of a digitally transforming production:

    • Parts are labeled with RFID chips that contain the machining information for the individual part. When the parts arrive at the CNC mill, the machine will get the information of what to do directly from the part.
    • Another example of a revolution introduction is, of course, 3D printing. It will allow you to directly manufacturer complex parts with a much shorter supply chain:

      3D Supply Chain
      Source: Survival Through Digital Leadership, Deloitte Digital

The new ESA Ariane 6 rocket will be produced with a huge amount of 3D printing. Airbus just presented a test plane, THOR (Test of High-tech Objectives in Reality), which was fully 3D printed. 3D printing has matured a lot over the last couple of years. Don’t connect 3D printing the flimsy machines you can now buy on Amazon.

No 4: Digital Business Processes

Changing business processes through software and new technology will be the means in which we transform businesses from analog to digital.

Here is a simplified example of an analog business process:

  • Your company receives an invoice.
  • The accounting department prepares a copy and places the original in the pigeonhole of the department that is supposed to be in charge of this invoice.
  • The person who is responsible for the cost center forwards the paper invoice to the person who is able to identify whether it is correct.
  • This person will clear the invoice and give it back to the cost center responsible.
  • He or she will clear the invoice again and it will be transported back to the accounting department.
  • Luckily, nobody is on vacation and the invoice will return back to the finance office before the time for the cash discount has expired.

This is how the same process looks after being digitally transformed:

  • The invoice is scanned on arrival. Even better: the invoice will arrive electronically and does not need any handling.
  • The accounting department will receive information via an electronic workflow and start booking the invoice automatically.
  • At the same time, the person who ordered the item will receive information via electronic workflow and sign the invoice electronically. His or her boss will be notified.
  • If all is good, the final booking will be done automatically, without a helping hand in the finance department.

This is just a simple example that has been taken from real life. Working in this manner obviously gives you a competitive advantage. The digital process is much faster, more reliable, and consumes fewer resources than an analog one.

No 5: Global Digital Transformation

Some businesses have subsidiaries, and some of them in different countries. Depending on their development, they probably don’t have fully integrated systems. I know quite a few SMBs where the subsidiaries still run their own IT. In these cases, their headquarters do not have access to the data of their subsidiaries. Excel files with the necessary information are sent by email from the subsidiary to the main office.

ToCloud 400 x 267

In intercompany business, company headquarters will send invoices out to the subsidiary, transfer pricing has to be done manually, there is no way to view the entire stock of the group, etc. Digitizing the intercompany business requires an integrated system. This is actually not new, but many businesses still fight with the complexity.

With a fully-integrated system, sending goods to the subsidiary will be done automatically with a mouse click. A stock transfer will seamlessly generate invoices, delivery notes, and other necessary documents. These documents, of course, will not be printed or sent through the mail. Instead, they will be used internally, and the financial accounting of both partners will automatically receive the correct information.

If you produce products that require parts with an extremely long delivery time (for instance, castings), a global stock overview would allow you to decide quickly and easily which subsidiary could produce the part with the lowest possible delivery time. There are countless examples of how to improve your intercompany business through Digital Transformation.

Conclusion—Digital Transformation Is About Imagination

“Imagination rules the world”—Napoleon Bonaparte

When we think of the products we have, the production we run, and all of the parameters we work within, do we raise our heads and look around as frequently as we should? Do we know the new technologies that can benefit our business? We ought to!

We need to take the time and see what’s going on around us. When we consider 3-D printers and IoT devices, as well as look at the way Amazon runs its business, we need to sharpen our imagination, and ask ourselves how we can adapt those technologies—along with their creative mindset—to our business, products, and production.

Imagining new opportunities and possibilities requires time to think. When I worked on our Digital Transformation strategy with my team, we locked ourselves up outside of the company for an entire day to brainstorm. No telephones or email were allowed! We just wanted to concentrate on the task at hand. It was amazing to see what we could achieve in only one day. We would never have been able to do this in our office.

Many SMBs understand that they need to embrace Digital Transformation. This is why they hired a Chief Digital Officer. It is the task of the CDO to look at the entire company, as well as the market and evolving technologies to see the opportunities of Digital Transformation in every field. It is his task to point at the opportunities and engage with different departments to prepare a strategy and drive the Digital Transformation. They are, essentially, a “super project manager.”

“74% of 1,254 global business executives stating that they have a Digital Strategy, but only 15% believed to have the necessary capabilities and skills to execute on that strategy”
Forrester 2014

Digital Transformation is a complex project. It will take a lot of time and many resources. It will not be cheap, either. But I am absolutely convinced that it is the companies that embrace Digital Transformation who will be able to survive in the long run.

Can you agree with my thoughts? I would love to see your comments on this article or reach out to me directly, using the contact form.

About Alexander

Alexander Buschek is passionate about Digital Transformation and the opportunities it gives businesses—especially MSEs. He is convinced that every business has to embrace Digital Transformation in one way or another in order to survive. The sooner a business begins its Digital Transformation, the better. Alexander was the CIO / CDO of Braunschweiger Flammenfilter and CIO of Cherry GmbH. Prior to that he was an entrepreneur, consulting MSEs about IT strategies, providing external project management, and overseeing various IT projects (e.g. ERP and CAD implementation and migration). Working with many MSEs gave him a deep understanding of this market. Alexander is now Senior Director, Analyst (MSE) at Gartner.