Digital transformation aka “digitalization” has been among the top global issues in the shipping industry for the past two years, as measured by the Global Maritime Forum (see their reports for 2018, 2019, and 2020). Here at OrbitMI, digital transformation is what we do – or, rather, what we help our clients do. But it is not always easy to explain what it is.
Every company uses data and uses it in ways that, most likely, they did not just five or 10 years ago. But does that count as digital transformation?
No, taking data directly from a sensor rather than entering meter readings into a spreadsheet certainly saves time and improves how it can be used and analyzed, but it does not transform the company itself.
These improvements matter because they are certainly vital for improving existing services and internal protocols, but for ‘transformation’, we must look beyond technical advances and incremental process improvements.
A recent comment that illustrated to me the complex nature of digital transformation came from Tim Koller, a partner at McKinsey & Co, in answer to the question: What role does digital transformation have on a company’s value?
His example was the evolution of the banking sector. Since the 1970s, it has introduced ATMs, online banking and mobile apps. As a result, the banks of the present look quite different from the banks of the past. Even though this was a massive change, these new inventions may not have increased bank revenues, he said, although any bank that did not introduce them would have certainly lost revenue.
That, then, is the starting point for this blog: any company that does not follow this strategy will lose out to those who do because of the cost and efficiency benefits that digital transformation brings. What that says to me is that digital transformation is not something a company decides to do; it is something it must do to satisfy its customers and stay in business. In other words, customers—as well as future employees—will simply demand you embrace digital transformation. That eventuality is illustrated by this quote from Mr. Koller's writing:
It seems obvious that banks needed to introduce all these innovations. But these innovations probably didn’t generate new revenues, because customers expected them.
Digital transformation can be applied even to the most basic decision about data: how you store it. Since data was first seen as a valuable commodity, it has often been held in discreet silos of similar information. Yet by moving to a structure that allows data of different types to be accessed across siloes– as Orbit’s architecture can – opens up enormous opportunities to transform how data is used more effectively. As we’ve written recently, a company’s ability to transform data will further drive innovation.
What worries me is that these messages – which seem so obvious – are not being widely received. The consultancy NewVantage Partners publishes an annual survey of senior executives in several industries to track how business leaders get value from their data and its latest, 2020, survey is not a bright spot. Over the eight years the survey has been produced, its results “have been quite consistent,” its foreword says. “They portray a field that is struggling to succeed despite massive investments in technology and applications.”
What the researchers found was that “companies continue to focus on the supply side for data and technology, instead of increasing demand for them. … It’s a technology push rather than a pull” from those who want to make more data-based decisions or embed data and analytics into more products and services, the foreword goes on.
This approach goes to the heart of a company’s culture. Rather than focus on how to merely handle data, it needs to focus on how to use data to drive business outcomes. True digital transformation requires not only a technological shift, but a cultural one.
The NewVantage survey focuses on financial services, healthcare and life sciences, industries that we reported are already deeply invested in digital transformation. This likely means that the maritime industry has a long journey ahead.
There is a lot of literature available about digital transformation but it seems a large amount of it focuses on pitfalls to avoid rather than establishing clear routes to success. In reality, those routes are far from just the creation of servers and proliferation of graphs. Only once those outcomes are clearly defined should work begin on identifying what data is needed, from what sources, how it will be processed and the form in which its insights will be delivered.
Those deliveries will vary hugely from company to company – a consultancy’s output will be very different from that of a service operation, as with a shipping company, or of a manufacturing company, such as an engine builder – so the shape and scale of the data transformation needed will also differ greatly.
But all these organizations have one thing in common: changes are needed if they are to survive and thrive through the decades to come, which will need planning and investment that must be scheduled and budgeted.
So digital transformation is not an optional, nice-to-have side project. It is not a marketing slogan or a headline for the board of directors annual report. Instead, it is an essential metamorphosis of a company’s culture and aspirations, and it demands attention from the highest levels in an organization if it wants to be truly successful for the long term.