Podcast: Practical strategies for achieving success in digital transformation

Jeff Winter has nearly 20 years of experience in the manufacturing industry, with a focus on automation, safety, controls, and OT and IT systems. Jeff became a thought leader in the fields of Industry 4.0 and digital transformation, and has actively participated in industry associations, academic groups, advisory boards, and industry research teams.

Jeff has teamed up with Scott Achelpohl, managing editor of Smart Industry, to create (R)Evolutionizing Manufacturing, a monthly series of chats about how industrials of all sizes and budgets can embrace technology. The two experts plan to cover a range of topics, including digital twins, predictive maintenance, cybersecurity, IT and OT convergence, automation, and much more. This episode examines practical approaches to digital transformation, highlighting strategies that lead to real success.

Below is an excerpt from the podcast:

SI: Jeff and I are picking up where we left off in November from our two-part chat, the art of the possible in digital transformation, and now the art of the practical. Jeff introduced these two companion topics during episode four, so I'm going to turn our chat over to Jeff for introductions.

JW: Sure. So, this started a few months ago. I did a post on LinkedIn on these very topics because I kept seeing the same thing over and over. Companies limiting their visions and not knowing what they should do, especially to start. So the art of the practical, our topic today, it grounds us in reality, where the art of the possible, which was the topic for episode four, allowed us to dream a little bit. And the art of the practical acknowledges that while our aspirations should be universal, what we actually achieve, and the path to getting to achieving it, is highly personalized.

And this approach isn't about limiting our ambitions, but rather understanding and embracing our unique corporate landscape, our company size, our industry, our culture, and any specific objectives that we may have. And that's why today we're diving into the art of the practical and digital transformation. We've dreamed big. We thought about how industry 4.0 can push boundaries. We visualized what excellence looks like, especially when we take advantage of all the disruptive technologies that are out there. But now we're going to talk about the practical terms, how we reach those goals, and how we achieve our targets.

SI: Last time we talked a lot about goals, having the right ones for your business and being satisfied once they're reached. The question is, which goals? Our goal setting is, as Jeff said, determined by our company's needs and objectives. Much of corporate goal setting is about achieving ROI. Of course, we've all heard about ROI. So maybe I should ask this question to you, Jeff, before we dive into questions that have come in since episode four in November. How do we make sure that our dreaming, the art of the possible, meets ROI to conform to the art of the practical?

JW: Great question. The key to making sure that the art of the possible translates into the art of the practical and ultimately drives real business impact is rethinking how we define success. And I'm going to point out one key thing in your question that I want to focus my entire answer on. ROI. Return on investment. Too often, digital transformation initiatives are evaluated through the lens of ROI. But the reality is ROI is better suited for continuous improvement projects, not transformational projects. When you're making incremental gains like optimizing supply chain efficiency or reducing machine downtime, ROI is a great measure because you can compare costs before and then after and determine the percentage improvement and the relative gain associated with that. But transformation is fundamentally different because it's not about improving the existing system. It's about building something entirely new. New revenue streams, new business models, new market opportunities. The very nature of transformation makes it difficult, and sometimes even impossible, to measure with traditional ROI formulas.

A perfect example of this is actually AWS, Amazon Web Services. So, AWS wasn't created because of a clear ROI calculation. In fact, when Amazon first started developing it in the early 2000s, Wall Street analysts and industry insiders were skeptical, even dismissing it as a distraction from the company’s core ecommerce business. After all, why would an online retailer get into cloud computing? The decision didn't make sense if you're judging it purely on short-term ROI. But internally, Amazon didn't see itself as just a retailer. It saw itself as a technology company that happened to sell products online. And it recognized that it needed scalable and on-demand cloud computing to run its own operations and that other companies probably need that too. So AWS officially launched in 2006. And on the first day, it was something like 12,000 developers signed up, a clear signal that there was a massive demand. But still, AWS didn't generate substantial profits right away. It took years of investment, refinement, and customer education before the world truly understood the value of cloud computing. But today, AWS is the largest cloud provider in the world, contributing more to Amazon's profits than all of its retail operations combined. Now, if Amazon had measured AWS solely on its ROI in the first few years, it might never have been launched. Or it would have shut down before it became the giant that it is today.

So if not ROI, how could or should companies measure transformation? So here are a few key alternatives. First I would say is market leadership and competitive positioning. Are you capturing new market share? Are you redefining how your industry operates? AWS didn't measure itself on traditional retail metrics, but on how well it could dominate the cloud computing space. The second is customer impact and adoption. Are customers engaging with and, more importantly, depending on your new offering? Today, companies like Netflix and even the SEC rely on AWS so heavily that they report in financial filings that losing AWS would be a major risk to their business. The third is operational agility and scalability. Can your company move faster, scale easier, and adapt better? That's a big change in what you're looking at and what you can do. I have to say that the fourth is ecosystem growth and new revenue streams. Are new partnerships or business models or revenue opportunities emerging? You have to think AWS created an entirely new business category that high-tech giants like Microsoft and Google had to catch up to. The bottom line here is that if Amazon had only focused on ROI, AWS might not ever have existed. Transformation isn't about proving short-term financial returns. It's about creating the future for the company. And the companies that recognize this and measure success beyond just ROI are the ones that lead industries rather than follow them.

SI: As you can imagine, we've had a lot of great questions from the comments to our LinkedIn recently, particularly when you raise the topics of the art of the possible and the art of the practical. Our first question asks, should transformation arise from possibility or need? Should the approach be technology adoption focused or problem focused?

JW: I like this question because it's kind of like asking, should you cook your dinner because you're hungry or because you saw a recipe that looked really amazing? The truth is, the best meals and the best transformations come from a mix of both. If transformation is purely need-driven, companies often wait until they're backed into a corner, reacting to competitive pressures and regulatory changes or customer demands that they didn't prepare for. And that's like only going grocery shopping when your fridge is empty. Sure, you'll get food, but you'll probably make rush choices, and you're unlikely to end up with this gourmet, wonderful meal. Now in business, waiting until change is necessary often means that you're playing catch up rather than leading the industry.

Now the other way to think about it is if your transformation is purely possibility driven, you risk chasing shiny objects. Adopting new technology because it looks impressive rather than because it actually is solving a problem. That's like seeing this fancy machine out there that you want that's going to help you cook a meal and then deciding you need to cook every meal in this fancy machine that you buy, even if what you really need is just a good frying pan. So, what's the right approach? Problem focused but opportunity aware. So yes, transformation should start by solving real business problems. That's one of the simplest ways to make an impact quickly, but it should be informed on what's possible. Companies need to ask themselves questions like, what are the biggest barriers to growth, the biggest barriers to efficiency or to customer satisfaction? Are there emerging technologies or even business models that could remove those barriers, especially in a game-changing way? Are we solving for today's problems or are we positioning ourselves for the future? The answers to these questions will have profound impacts on which transformational initiatives you pick and which goals you pick with them.

About the Podcast
Great Question: A Manufacturing Podcast offers news and information for the people who make, store and move things and those who manage and maintain the facilities where that work gets done. Manufacturers from chemical producers to automakers to machine shops can listen for critical insights into the technologies, economic conditions and best practices that can influence how to best run facilities to reach operational excellence.