This topic is almost an obsession in our PackIOT leadership conversations and in our team meetings. Every day we interact with customers and leads from around the globe, read reports, listen to podcasts, take courses on the future of the industry, and everything is heading in the same direction: CEOs, Owners or Board Members play a key role in the digital transformation journey of a factory.
For many, many years, the top layer of the SME industry has been in love with modern machines. A dear person always said: this folks like to go to trade shows and come back with new machines. Not being a guy who comes from an industrial background, I thought this was a joke. Until I started seeing LinkedIn posts of CEOs doing photos and videos, even to this day.
And from there came one of the main personal and corporate missions of recent times for us: to help CEOs pull innovation and digital transformation in their factories. We’ve been trying to do this in various ways, with free educational content, case studies, and raising awareness in the manufacturing community, especially in the packaging, cosmetics, food and beverage and Pharma sectors.
This article is another one of those sources of inspiration to bring the CEO to the center of the table in looking to the future.
What McKinsey says about the role of CEOs on digital transformation?
Recently, two digital transformation experts from McKinsey joined a podcast about that topic and they shared a bunch of real cases with the audience. (You can check the full episode here)
Sean Brown: Why do CEOs need to become more involved in setting the technology agenda?
Gayatri Shenai: In the past few years, CEOs and boards have been talking more about how cybersecurity challenges keep them up at night or how a single production update could wipe out a large part of the IT budget. One CEO told me that most employee complaints he receives are about the lengthy help-desk wait times or poor internet connectivity that cause productivity challenges. Customer service complains about e-commerce latency issues or how unintuitive their product purchase interfaces are. These are just a few examples of how boards and CEOs are increasingly realizing how technology can change the company’s performance trajectory.
Sean Brown: The pandemic has put some of these disconnects at center stage because technology has not only been vital to keeping companies operating but the current crisis has accelerated the move toward digital business models. Has that focused CEO attention on tech issues?
Krish Krishnakanthan: I think COVID-19 has revealed the real caliber of organizations’ technology. I mean, the technology revolution is here. Customer preferences have changed and people are more accustomed to technology. It is not just one particular technology driving the change but many of them coming together. You have internet speed accelerating with 5G at the same time as digital design is helping create superior customer experiences. At the same time, changes happening throughout the value chain are creating major business-model disruptions.
With all this, risk grows. For CEOs, it becomes imperative to drive the tech agenda as much as they would drive finance or corporate strategy. One CEO recently told me, “We wouldn’t let anybody run the company if they did not understand finance.” Technology will be as important in the future, so CEOs need to be as well versed in it as they are in finance or sales.
The big mistake: also looking only at the operation
The industrial, operations, and production managers are focused on making sure that the plant operates in the best possible way. In many cases, they need and seek to solve the short-term problem, the resolution of challenges that impact today to today. And they are not wrong. Without this look, the present can be compromised, and no one wants that to happen.
Even before the pandemic, 92 percent of companies surveyed by McKinsey believed their business models would have to change given rates of digitalization at the time. Covid-19 has only accelerated that timeline, with estimates indicating we’ve moved three to four years forward in digital adoption in a matter of months. Digital transformation has become a matter of corporate survival and a top priority for boards. (HBR, jul 2021)
The big mistake happens when the CEO or the board members are also concerned only with the operation. This can be a huge challenge for the company’s long-term survival. As you could see in the MCkinsey podcast, the top echelon of the company needs to look to the future and not just dive head first into the day-to-day operation.
We are not naive and we know that it is not always easy to look ahead, the day to day sucks the energies. But, I repeat, we are talking about the survival of your company in a few years. Any cost reduction that your competitor performs, any innovation achieved, can mean an absurd loss of competitiveness for your plant. So looking to the future is not a matter of luxury, but of necessity.
The real (good) examples
Much of the most successful projects we have seen involving digital transformation in recent years have come directly from the CEO or have had him as one of the key stakeholders engaging with the projects.
I’m not writing this sentence based on books and posts read on the internet, I’m talking specifically about cases that we participated directly in the last 4 years, with clients from different parts of the world (11 countries and 4 continents). These success cases occurred because the CEO was aware of the potential gain from the beginning and was involved in the negotiation. It is not necessarily he/she who leads, but he/she is aware of all the potential that a digitization project can bring to the company.
Usually, the implementations and operations with more impact are those who run like this (3 possible ways):
1- CEO leads the vision on digital transformation and pushes the directors to come up with relevant solutions;
2- Director/manager finds out a bottleneck, pick a solution and pitch the most significant gains to the CEO;
3 – Board member triggers CEO and CEO takes path #1 (above)
This article is not written just for CEOs and business owners, but for anyone who needs support to see digital transformation happening. If you don’t have the final word, a few simple tips can help you win the support of the highest echelon of your factory: start small, validate those small results as soon as possible, take data to the CEO, show him what return you expect from the project you want to execute.
If you are a board member or a Private Equity Professional in charge of a manufacturing portfolio, the same way would fit. You are in a tremendous interesting position to put some pressure on the C-Level in order to make them looking some years ahead.
Questions to ask a CEO on digital transformation
Well, if you are a CEO yourself, you must ask those questions in front of a mirror (really). This guideline was built by John Dillon,
1. Without help from the rest of the management team, can you explain your vision for digital transformation?
2. Do you have a chief digital officer, and what are the challenges, responsibilities and success standards for that position?
3. How much of your budget is going toward transforming the organization?
4. Why isn’t it more?
5. What are your plans for extracting value from the data you’re collecting? Are you using it in real time?
6. Which competitor in your field has done the best job of digital deployment, and what do you admire about them?
7. What’s the risk to your organization if you don’t close the gap?
8. How do you prioritize client intimacy, and what have you done to improve it?
9. What developments are around the corner?
10. Ten years from now, how will your company be different?
How many of those your CEO was able to respond in a “productive manner”?
How many of those you were able to respond in a “productive manner”?
Please, do let me know.