When you make something, itās been pointed out, you make something else. Put another way: Every product has its byproductāsomething savvy businesspeople recognize as an opportunity. Decaf coffee producers sell caffeine to energy drink companies; lumber mills sell pulp and sawdust to all sorts of customers.
This was the dynamic that leaders at a global industrial manufacturer had in mind as they pondered a strategic crossroads. Theyād successfully grown the company to billions of dollars in revenue on the strength of traditional hardware and services, but traditional success wouldnāt hold off a fast-changing marketplace.
The manufacturerās industrial product base was becoming commoditized, bringing pressure for brand differentiation. Technological disruptions like artificial intelligence (AI) and the Internet of Things (IoT) were both reshaping customer expectations and uncovering new opportunities. Regulatory shifts toward sustainability suggested a demand for digital solutions to track environmental impacts.
Therein, the leaders knew, lay their opportunity in an untapped byproduct: data. The data from the manufacturerās offerings could be captured and converted into an entirely new line of businessāa digital services business. Digital services like intelligent monitoring and analytics, or preventive and predictive maintenance. Like asset performance management solutions.
Company leaders also knew theyād need to have a strategy to get thereāand to do so from their back foot, so to speak: The companyās traditional market approach had done well on a decentralized operating model with minimal digital investment, but this meant their capabilities were dispersed, and a new digital business would be tough to scale. A talent gapācommon in the industryāfurther complicated the picture. The companyās rural locations were attractive to a traditional, trades-oriented workforce, but could leaders entice the emerging class of tech-savvy professionals theyād need to expand digitally?
Whatever the details to come, one thing was clear: because of the scale of their ambition, the work ahead of them would involve nothing less than redesigning their entire operating model ⦠without cannibalizing existing revenue streams.
To that end, company leaders reached out to Deloitteās business strategy team, specialists in guiding companies in designing executable strategies and transforming and modernizing operating models.
By aligning the executive leadership team and more than 40 company leaders on ambition, strategy, and operating model, the Deloitte team helped build a unified approach to the companyās digital transformation.
First things first: Start where you are. The Deloitte team used a digital capability map and maturity model to conduct a thorough analysis of the companyās current operating state: What was the company already investing in digital products and services? What revenues was that generating? What digital capabilitiesāpeople, process, technologyāwere supporting these offerings? Where were they strong? Where could they stand to improve? And how did all this stack up against industry benchmarks?
In parallel: Understand what youāre aiming for. How big was this new industry market for digital solutions and services anyway? (Pretty big, as it turns outāthe Deloitte teamās market sizing assessment suggested more than $50 billion in digital solutions opportunities of which more than a third could be accessed by the companyās existing business.) How fast was this market growing, and where, and why? Then, to help identify and prioritize strategic opportunities within this market, the Deloitte team convened thought leaders and specialists from across the organization for a Deloitte GreenhouseĀ® workshop with company leaders.
The workshop (ultimately, one of many) helped company leaders bring strategic choices into focus and fueled the next set of conversationsāwinnowing down, then pinpointing emerging opportunities that didnāt just align with the companyās ambitions but, more importantly, its ability to execute.
Next: Set a new course. The combined team defined a strategic āDigital North Starā outlining how business units, applications, and market segments would be prioritized for transformation and supported by a robust business case outlining returns on investment, value tracking, and implementation milestones.
Finally: Start the engines. To bring the companyās new strategies to life, the Deloitte team turned to designing a net new digital operating model, tailored to the companyās needs. They did so by first using a digital operating model framework and set of archetypesāeight common, viable digital operating models to consider as foundational thought-startersāto facilitate discussions with company stakeholders and home in on model elements that would fit their ambitions.
These eight references and frameworks became two, and ultimately oneāthe scaffold on which the companyās new model would be built. This model emphasized governance, accountability, and digital capability building, with a structure that enabled collaboration across business units.
A mobilization plan closed out the strategic chapter of the transformation process and kicked off the tactical. This plan detailed a five-year roadmap for reaching digital maturity in both capabilities and offerings, with guidelines for accelerating existing digital offerings, and bootstrapping new, revenue-producing digital services.
The plan also outlined how this would happen from an organizational perspectiveāhow, under the new North Star, business units would interact with the enterprise in launching and running digital services, as well as how to attract and retain the next generation of talent necessary to grow the business.
By aligning the executive leadership team and more than 40 company leaders on ambition, strategy, and operating model, the Deloitte team helped build a unified approach to the companyās digital transformationāalong with the tools (chief among them a detailed multi-year roadmap, including phased implementation plan with clear progress milestones) to achieve it.
The team validated a significant market for digital products and services, with ample opportunity for growth and innovationāof the multibillion-dollar market opportunity to which the company aspired, growth areas defined by the new operating model are projected to provide significant potential revenues, with a supplemental three-year business case showing additional, incremental revenue possible simply by accelerating existing offerings.
To start the enginesāfollowing a Deloitte incremental investment assessmentāthe company invested in new talent and capital expenditures.
By closing capability gaps and prioritizing high-impact digital offerings, the company is poised to expand within the digital landscape with confidence (confidence being a byproduct the company may elect to keep for itself).
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Deloitte has again received a Strong rating, by Gartner, a company that delivers actionable, objective insight to executive and their teams, in its April 2023 report titled, Gartner: Vendor Rating, Deloitte.Ā
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