CHANGE MANAGEMENT

The Dirty Little Secret About

Digitally Transforming Operations
by Markus Hammer, Malte Hippe, Christoph Schmitz, Richard Sellschop, and Ken Somers
MAY 31, 2016

Earlier this year, we walked the halls of the Hannover Messe, one of Europes largest events for
industrial manufacturers. The newest robots, 3-D printing systems, and data-mining hardware and
services were all there along with a host of people hyping Industry 4.0, the Internet of Things (IoT),
Digital Manufacturing, and big data and advanced analytics. It seemed as though everybody from
the best-known software giants to basic industrial parts providers was marketing a latest
technological breakthrough even if it amounted to little more than a new sensor attached to an
old piece of equipment.

Amazing dreams were being sold: A black box that could be installed in your plant and would
improve your competitiveness all by itself; big data servers and algorithms that would tell you
how to improve your process with no additional engineering investment; virtual-reality glasses
that would make your workforce more productive just by putting them on.
It was all reminiscent of 19th century advertisements for cure-all patent medicines.

There is a common misconception that technology alone can produce magical results. But the
reality is the results depend on how people use it, particularly if they can use it to amplify
longstanding skills and expertise.And thats often when organizations run into problems. Thomas
Froese, leader of data-analytics-and-modeling company atlan-tec Systems, has 25 years of
experience in helping companies apply advanced analytics. He summarized the issue very simply:
We can automate mathematics, we can automate design decisions, but we cannot automate
changes in human behavior.

INSIGHT CENTER

Operations in a Connected World

SPONSORED BY ACCENTURE

The technologies and processes that are transforming

companies.

Its a familiar story. Back in the 1980s and 1990s,

lean manufacturing was the Big New Idea and it
seemed like everyone was learning new tools with
Japanese names. But too many companies eorts
to become lean stopped at the tools, when it
was the ideas underlying the tools that gave lean
its power by helping people become more

eective. The exceptional organizations that succeeded understood that lean requires a massive
eort involving many changes at once, mostly centering on people: the role-modeling of new
behavior, the transparency of communication, the fostering of new capabilities.

Even today, our own research conrms that only 26% of major organizational transformations
succeed. Technology-based transformations involve a similar commitment: Froese conrms that
helping people learn to use analytics eectively can take up to 75% of a projects time with the
remainder going to the technical tasks of data cleaning and model design.

So what have we seen in companies that are successfully transforming themselves with new
technologies?

In addition to the traditional transformation success factors noted above, we see four major
dierences between the success stories and the also-rans.

A focused perspective. Determining where to start among thousands of potential use cases is not
easy, but a balance of expected impact, technological readiness, likelihood of success, and
acceptance by the organization usually provides an eective initial screen. For industrial players,
this set of criteria often turns attention to areas such as predictive maintenance, advanced planning,
and sales optimization all functions that cover large parts of the cost or margin base, are well
measured, and show improvement potential beyond what can be reached with traditional
improvement techniques.

A two-speed trajectory. Setting up an entire IT architecture or automation infrastructure is akin to

installing a new ERP system: a multi-year journey that often costs hundreds of millions of dollars.
To avoid this roadblock, successful companies use a more agile strategy that relies on local solutions
to capture value quickly, while gradually building the long-term IT and automation architecture.
Rapid impact generates excitement and buzz while providing lessons that can be codied and
shared, ensuring a better outcome for the enterprise as a whole.

A translator for a bigger, broader team. Capturing the digital opportunity is becoming even more of
a team sport. In addition to the IT and topic experts that major IT projects required in the past,
todays eorts in complex elds such as resource-productive manufacturing or predictive
maintenance need deep expertise in production processes, data science, and change management.

A few companies are therefore creating a new role designed to communicate with all of the parties
involved: the translator. This pivotal person forms a bridge between the process and IT experts and
the data scientists as new IT infrastructure is set up to enable new analytic applications. Once the
process engineer is acquainted with the new software and the future business cases are selected, the
translator can move on to the next process or site to be transformed.

A commitment to helping people change. Because these innovations can have a major impact on
how people work, its essential to anticipate peoples concerns and build a persuasive case for the
new approach. A major train operator, for example, designed an advanced analytics solution in
order to better understand the failure behavior of a major battery pack in one of its train models.

The technical solution was the easy part: Sensor data accurately predicted battery failure just weeks
before it actually occurred. As a result, the company could abandon its rigid (and wasteful) cycle of
changing batteries every two years.

The real challenge concerned the implications for employees. Instead of large crews disassembling
the packs at centralized workshops, small teams would replace the batteries in the eld as needed.
That would free capacity for other types of maintenance tasks but would unwind longstanding work
arrangements. Thinking through how to deploy employees under the new solution and dening
the benets that employees would feel therefore took substantially more eort than designing the
technical solution did. But by emphasizing the greater exibility, new learning opportunities, and
advancement prospects that the new model generated, the company was able to increase employee
satisfaction even as it achieved signicant cost savings.And it was the combination of the analytics
with peoples expertise that ultimately mattered by allowing people to spend more time on tasks
that were a better use of their skills.

So when leaders are thinking about their organizations digital priorities its digital strategy they
should obviously identify the technologies and ways to apply them that would have the greatest
potential impact. But they should also make sure that they dont give the possible barriers to
adoption short shrift. They should have a plan for helping people use the new technologies and the
related new methodologies more eectively. Remember that technology alone is not a cure-all. Its
the people applying the technology in their daily jobs who will create the additional value.

Markus Hammer is a senior knowledge expert in McKinseys ofce in Vienna, Austria.

Malte Hippe is a senior expert in McKinseys ofce in Hamburg, Germany.

Christoph Schmitz is a senior partner in McKinseys ofce in Frankfurt, Germany.

Richard Sellschop is a partner in McKinseys ofce in Stamford, Connecticut.

Ken Somers is a master expert in McKinseys ofce in Antwerp, Belgium.

This article is about CHANGE MANAGEMENT

FOLLOW THIS TOPIC

Related Topics: PROJECT MANAGEMENT |

ANALYTICS |

IT