ARC Advisory Group, where I work, recently announced the publication of their analysis of the 25 manufacturers with the most mature digital transformations. The report identified the leaders and highlighted best practices. This is the inaugural edition of the report. The ARC Industrial Digital Transformation Top 25 report highlights the leading manufacturers that excel at integrating digital technology into all areas of their business, fundamentally changing the way they operate and deliver value to customers.
“Digital transformation leaders across many different industries share common traits and visions,” Marianne D’Aquila explained, “helping them overcome complex challenges to innovate and stay agile. Industrial innovation continues to accelerate, and leading companies have their transformation initiatives well underway. For those who succeed, the result is a competitive advantage, even during the most difficult economic times.” Ms. D’Aquila is a director of research at ARC.
Tesla scored the top spot, followed by Intel, BMW, Johnson & Johnson, 3M, and Eli Lilly. The report said of Tesla, “when Tesla sets out to automate its internal processes, they try to build it better from the start rather than start a clunky project and hope to get better on revision 4 or 5. This orientation is fundamental in determining what KPIs the company values, as many of them are far different from metrics managed by manufacturers relying on traditional views of success.”
The report takes a holistic approach to what a digital transformation means. “Leading companies take a strategic approach, integrating digital technology throughout their value chains. Design and engineering, production operations, maintenance, logistics, supply chain, business systems, customers, products, and organizational structure are subject to innovative change as companies examine and update processes and deploy new tools and technologies.”
There are a few key approaches to a digital transformation. One common thread is clarity around a starting point. Effective digital transformation doesn’t occur unless the organization connects the change to some external market or customer signals. But transformation also requires culture change enabled by machines and data. The topic of how leaders can accelerate cultural change is a large part of the report.
Almost all the companies ARC interviewed noted that when they began their journey, they quickly recognized they didn’t have all the answers. In fact, their digital champions began by aggressively expanding their sources of wisdom beyond their historic and current resources. Digital leaders learn from others.
To create the Digital Transformation Top 25, ARC developed a rigorous process based on financial performance, a community intelligence based ranking system, and software and sustainability data. Publicly available financial information, ARC primary and secondary research, data from ARC’s market database, and the opinions of members of ARC’s community of end users were all factored into the rankings.
One dose of reality is that despite considerable progress, apart from businesses that began with transformation as part of the mission statement, no comprehensively transformed company exists. Further, there are two major issues that are keeping industrial executives up at night. The first is maintaining a competitive workforce. The second is sustainability. In short, even for laggards, there is room to accelerate a transformation and become a leader in the future.
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