Digital Transformation with One Hand Tied Behind Your Back and Your Pocket Picked
Achieving Digital Transformation Success in Asset-Intensive Organizations
I’m as mad as hell, and I’m not going to take this anymore. Look, I’m not disappointed in you — I’m disappointed in myself for believing in you. I’d apologize for my negativity if I was sorry. If this piece does its job I will have pissed off almost everyone — welcome to the club. We’re going well below the line but don’t worry — we’ll come back up the other side to positivity, I promise.
Guess which table I’ll be attending today?
I’ve been involved in about 3.5 transformations in the past decade or so. I’d deem about 1.5 of those efforts successful. Why the fractions? Some efforts were only partially successful and I didn’t stick around to see the end of the last one.
These statistics correlate well with a host of published business leadership resources who’ve been stating recently that most transformations, and in particular digital transformations, are not achieving their stated goals.
According to McKinsey, less than 30% of digital transformations meet their objectives, and for traditional industries that number is far worse, between 4–11%. That is an objectively terrible track record. I’m sure the accompanying return on investment scores poorly as well if anyone was brave enough to publish those numbers.
Yet, every organization seems to be boldly forging forward, if you can call it that. It’s more like wandering in the desert for 40 days and nights if you ask me. There is a definite herd mentality going on currently with more than a bit of fear of missing out (FOMO) for good measure.
There is no shortage of advice in the business leadership magazines and websites available to identify pitfalls (what not to do) with reasonable, if generic, suggested solutions (what to do) to execute digital transformations. Still, we choose to run blindly off the cliff.
Follow the money, a former boss would often say to me, and you’ll see where organizations and thus people’s motives and incentives lie.
And what money there is! Asset owners are spending tens or sometimes hundreds of millions of dollars on their digital transformations. Not coincidentally, management consultants, solution providers and systems integrators are making tens if not hundreds of millions of dollars. The entire technology and consulting industries are adding more fuel to the funeral pyre.
With such a terrible transformation success rate you’d think people would start to question what’s being offered, what’s being bought, and why it’s not working, no? Maybe it’s just me. It’s like organizations have entered a fight with one hand tied behind their back. Even worse, the people supposedly in your corner are picking your pocket while you’re engaged. The fight isn’t only unfair — it’s rigged against you.
Something has to be missing, right? What could it be?
Let’s take inventory of my experiences, shall we?
First, there was the enterprise-wide business process re-engineering transformation. Next was the human resources lead organizational restructuring offered as an accountability clarity move but was a headcount reduction drive. Third, was the corporate restructuring and turnaround transformation forced by a prolonged soft market to save the organization by drastically stripping out costs. Finally, there was the technology-first digital transformation lead by an eager IT group that started before the turnaround and is still ongoing.
In reflecting on these transformations, I aimed to observe any situation through the lens of good holistic and strategic asset management. The answer quickly emerged. Every one of my own transformation experiences was a term I call ABAM — anything but asset management. With each position I looked at these transformations the good asset management angle could scarcely be found. The whole perspective was missing.
That doesn’t mean there was no value gained. It’s best not to characterize these transformations as a complete success or failure. A better description perhaps is a mixed bag of great, good, bad and ugly. There were tangible improvements in corporate services: finance, human resources, supply chain management. There were far fewer improvements in operations, my area of the organization — opportunities missed, I suppose. The sum was simply more mediocrity for an already mediocre operations organization. Not bad, but not good either — just meh.
My experience isn’t isolated. I’ve tested what I’ve seen with others. I get to talk to practitioners and leaders in many other organizations in a variety of industrial and infrastructure sectors. Each story is somewhat unique to be sure but not special as there remains a striking degree of similarity.
Why is the asset management perspective missed in these transformations? The short answer is the stakeholders, decision-makers and participants don’t have full asset management awareness so it is not being included in their projects. One by one, this includes:
Senior Corporate Leadership — The C-Suite lacks asset management awareness, not surprisingly. While the golden goose — the assets (and often the reason for the organization in the first place) exists in operations they are only one voice in a board room of many strong and competing voices of the corporate leadership team.
Technology — This highly influential group takes a very technology-first approach, obviously. They are partners to operations but do not have asset management domain expertise. They generally do a great job on the general corporate applications but its the operations specific arena where there are tensions between digital transformations happening for you versus to you. The solution architecture has a good mix of enterprise IT and OT solutions with a mix of smaller localized point solutions.
Senior Operational Leaders — Don’t recognize formal asset management as the way they manage their business in a manage-by-objectives culture. They plan for the long-term but short term results rule the day which means they are constantly asked to lock-in moderate short term value while giving up superior long-term value.
Middle Operational Management — Think they do asset management, but in reality mainly manage assets — there’s a difference. They get pulled in different directions, struggling to deliver the outcomes their leaders expect while just keeping their heads above water.
Practitioners — Have some tactical asset management skills but lack strategic skills. They have limited influence and tend to want to boil the ocean and gold plate their processes resulting in high cost for high-reliability performance. Any way you slice it this group is failing to influence the decision-makers in their digital transformations.
Management Consultants — Have surprisingly few formal asset management skills but it does not matter — their business models are tried and true. Convincing the C-Suite to move the goalposts on the organization’s constraints and use its resources to do things differently while collecting exorbitant fees is nothing short a stroke of genius. I’m just jealous.
Solution Providers — Offer solutions in all different shapes and sizes. There are platforms, suites and point applications. Big market incumbents are competing against an array of small new market entrants with lowered barriers to software development. So much to choose from! From my vantage, many solution providers have missed the mark in terms of what solutions they are offering to solve the client’s problems. Generally, the client hasn’t thought through its problems well enough to define its broad system architecture needs. Solutions are being purchased with uncertain needs and without accompanying investment in the people who will feed and manage them. Again, I’m jealous.
Systems Integrators — Are paid to bring it all together into one cohesive system allow the client to get the most from the least, but tend to act more like solutions brokers and implementation project managers.
Is there anyone I’ve missed taking a swipe at? We are all complicit. Despite our good intentions, we’re not all working together pulling in the same positive direction. It will take a different kind of thinking to get a different result.
At this point, you may be convinced I’m anti-asset-owner, anti-technology, anti-consulting and anti-digital transformation. Let me assure you none of these are true — quite the opposite. I’m just very disappointed with the way digital transformations have been executed of late, and so should you.
Why? Because there are many general pitfalls that we fall into which prevent better results in digital transformations.
No Clear Strategy — a digital transformation is a golden opportunity to set new or reinforce the organization’s strategic vision, mission, goals and eventually plans in an aligned manner throughout the organization; instead, we offer a hodgepodge of disconnected technologies creating even more silos and organizational disconnects
People Don’t Leverage New Technology — you can lead a horse to water but you can not make him drink; poor people change management won’t change behaviours when new attitudes and skills are required to make the most out of the new digital landscape
Not Enough Resources Applied — the new digital organization fail to allocate its vast and scarce people and financial resources into the highest value areas
Fail to Develop New Ways to Work — lots of technology simply tries to digitize existing inefficient and ineffective practices; believing that good is good enough means failing to capitalize on opportunities to leapfrog straight into best practice
Governance — the old ways of managing are not necessarily suited to managing new digital ways of managing; the governance structure and operational management system must adapt and change
To illustrate these points, let’s talk about some stories as examples of hits and misses in recent digital transformations.
One strategy I’m in favour of is simplifying and consolidating applications. It was incredibly surprising to me when our IT folks said the organization was currently trying to manage over 400 applications, many of which were obsolete, duplicitous, or not well utilized. Many applications were cast out which can lower the resource burden on IT application management.
Here’s a DIY that was easy and useful: using Microsoft’s Power Platform one utility was able to build an automated agent to quickly gather the raw data required to perform a root cause failure analysis investigation. What used to take hours now took minutes. They were able to complete more RCFA investigations with the same quality.
Another digital move I can get behind is to get all your data into the cloud. Once, all your data is more accessible then anything is possible, right? Maybe, maybe not. It is a double-edge sword to have all your data at the ready. Couple that with the ultra-interconnected industrial internet of things (IIoT) and get ready for your organization to be overwhelmed as the data volume grows exponentially. How do you prevent being snowed under by an avalanche of data? How do you tell which data is important and which data is not? Not all data is of equal value. The important data is tied to important decisions. Unfortunately, we may not have enough people with the knowledge to differentiate the wheat from the chaff.
The answer must lie in the fancy analytics tools available to us, no? Analytics for everyone! These solutions are just begging for problems. Analytics as a solution or a service is great but who’s asking the right questions to create the queries these tools will run? I knew a data scientist who said she could do pretty much anything with the data that we wanted. What the organization lacked were subject matter experts with the required domain expertise to know what questions should be asked. What are the capabilities and competencies of our SMEs that we not only trust them to select certain analysis but have the confidence to act on their recommendations? Analytics tools are only as good as the people using them and those willing to act on the insights generated.
Can we take people out of the equation and rely on artificial intelligence and machine learning? We wish. Certainly, machines are excellent correlation machines capable of much more than the human mind. Sure, machines can find an anomaly, but does the machine tell you if it real? Does it tell you if it is significant? Does it tell you what is the cause? Does it tell you what to do about it? Many predictive and even prescriptive analytics tools claim to do this but fall far short. I saw firsthand how an expensive state of the art monitoring and diagnostics centre with pattern recognition machine learning technology was sold on the idea it could do it all. Oh, you had to suffer a failure to train the model? That’s expensive. There was a slow realization that the tools left it to people to do real diagnostic and prognostic problem-solving after the anomaly was discovered. I’ve got time for mind and machine together. In this instance, the people didn’t have enough of those skills to prevent asset failures promised by predictive analytics, much to my dismay.
What about the Enterprise Asset Management(EAM) system? Isn’t that supposed to be the platform for asset management? Well, yes and no. They handle many of the required transactions just fine. But they largely miss out on the other activity, decisions (despite their claims) which have much more value at stake than transactions, in my opinion. Further, the death of large monolithic ERP/EAM systems death has been greatly exaggerated. I had the opportunity to test out a brand new state of the art system implementation recently. I was disappointed to discover it was the same tired old software wrapped in a new technology platform. I couldn’t believe how much this utility paid for this system. I thought those days were numbered but somehow the solution provider can cling to its old expensive business model because the customers are still willing to buy. There are more options and competition today so organizations shouldn’t have to be locked into these big EAM systems.
And Digital Twins? Don’t get me started on digital twins. There’s no clear definition of what a digital twin even is. I have a colleague who worked at one of those big software companies. He couldn’t believe what his company was marketing as a digital twin. Everything is a digital twin. What I don’t get, particularly for process industries, is that we don’t know what’s going on within our processes, so we build this external digital replica of our processes to guess what’s going on with something we don’t fully understand. Look, I love the idea, but I question the utility — if the model isn’t dialled in it isn’t useful; if you can dial in your model then you understand your process and why need a replica? I’m not alone, Gartner has plotted digital twins on their hype cycle on the downward slope into the trough of disillusionment.
It makes me wonder, what is driving the solution architecture in asset owning organizations? There appears to be a “build it and they will come” attitude. While that can provide plenty of digital opportunities it doesn’t carry the ball over the goal line. No wonder the results and returns are a mixed bag.
It’s not all bad news — I’ve developed a tonic for what ails you. Let me offer a different perspective and new mindset with principles crafted to vastly improve your confidence in getting full value from your digital transformation. I won’t be prescriptive here and I won’t apologize for it. If you want specifics, come talk to me.
A successful digital transformation must not only avoid the generic pitfalls but also integrate the asset management perspective.
Formal holistic and strategic asset management is still in its infancy as an emerging new discipline. There is a difference between asset management and managing assets that many organizations are still learning. The AM discipline seems to be competing against incumbent systems of operational management when in fact it should be seamlessly integrated.
Part of the definition of asset management is the ‘coordinated activities of the organization to realize value from its assets to reach the organizational strategic goals.’ The keyword here is activities — there are only two types: transactions and decisions. Most of our people’s time is taken up by and solutions are designed for transactions. Yet I believe that much more value is at stake to be won or lost with decisions.
The most important decision you make is how you will make your decisions.
I’m making it my business to codify the important decisions within the 39 subjects of asset management. Moreover, I’m creating a framework for first-principles decision-making to help organizations make the best possible decision at every opportunity.
Years ago, I learned of an adaption from data quality called D>I>K>D>A>R which is an acronym for Data > Information > Knowledge > Decision > Action > Result.
Let’s begin with the end in mind and look at the back end first. We all agree we want a good Result, it’s how we get there that we don’t agree. We understand that we’re going to have to take Action to earn the desired Result and there are lots of action-oriented people in our organization. The R and the A aren’t the problem so let’s set them aside for a moment and move back to the front.
We’ve heard that data is the new currency. Data informs decisions (jazz hands)! It’s simply not true. Data, by itself, is meaningless. It is simply a means to an end. Don’t believe me? Follow along.
If you add context to Data, say in the form of process or technical context you get Information, which is better than data but still not useful. It’s not until you add more context, business context, that you get to Knowledge which is finally actionable.
Which brings us to D (the second and more important D) — the Decision. How well that Decision is made is a crucial success factor. Who makes the Decision in the organization? Who else should be involved? When is the best time to make the Decision? What Knowledge do they need? What happens if the outcome is bad? These are all factors to be considered.
Too many people and tools focus on Data and Information today. That is the space where much of the data management and analysis takes place and forms the bulk of digital transformations. That’s okay but those people are facing the wrong way, in my opinion. A better place to spend our valuable resources is in the Knowledge to Decision space.
I centre myself on the important Decision to be made. Then I ask myself what Knowledge and Information I’ll need and ultimately which Data is important and which is not. Then I can be very deliberate and focused on developing the required Data > Information > Knowledge.
Fortunately, we can make a decision model using this framework for every important decision in asset management. While there are many decisions to be made, there is only a finite set of decision-types. We can develop an influence model for each decision class.
People are hardwired to want to be completely sure about something. The world doesn’t work that way. Our toughest decisions are always choices made under conditions of uncertainty and complexity. People, leaders and practitioners alike, need to be trained and calibrated to get comfortable with uncertainty. Therefore, we should build our models to be probabilistic rather than deterministic.
Leaders and practitioners should get comfortable with uncertainty.
Our models should not use only single-point estimates, but distributions for each input variable. Research has shown that better decision-making requires not just our position on each input but our uncertainty around those positions. The beauty of this approach is it gives us the ability to evaluate alternatives while optimizing multiple objectives simultaneously. Of course, some math is required but the models can be surprisingly simple. We can track our decisions, whether we’re executing on the required actions and if we’re earning the desired results.
To what end, you might ask — what’s the utility? Oh, there’s plenty to be gained and not much to be lost. The value chasm between mediocrity and excellence in most sectors is vast. For example, the difference between good and best practices in asset investment planning can be value leakage in the order of 8–20% of your project portfolio. Poof, it is gone.
Still, we don’t need or expect to be perfect. Because uncertainty is involved some good decisions can have bad outcomes and visa versa. Our decisions just need to be measurably better than they used to be in our organization and better results than our peers and worthy competitors.
Make all your important decisions with deliberation and intention.
Our industrial and infrastructure sectors are already very complex, there’s no getting around it. Our operational management system framework should be constructed not just for traditional operational management but with good/great asset management practices and the important decisions that must be made. This gives us the ability to simplify the complexities of our complex operations.
Why not include asset management and first-principles decision-making into our digital transformations?
We need a new mindset with critical thinking at the forefront if we want to truly leverage our investments into digital transformations as a multiplier of value to achieve business success.
Our new digital transformation perspective must include our generic digital transformation success factors (avoid the common pitfalls) and integrate the new complementary asset management enabled digital transformation success factors.
The main takeaway here is your system architecture should be designed to answer the questions stemming fro the most important asset management decisions. Anything else is like a box of chocolates, you never know what you’re going to get. ABAM — no more.
When it comes to digital transformations, you — the asset owner, must be the master of your domain. What domain exactly? The domain of asset management, exactly. It’s time to get our act together. Our stakeholders are counting on us.
If I could wave a magic wand I’d freeze all current digital transformations in their tracks. I would force a reset of all initiatives to incorporate a sound asset management perspective and first-principles decision-making. Alas, it’s not to be. The horse has left the barn. We’ve missed the boat on Industry 4.0. There’s too much inertia generated by the incumbent corporate, technology, consultants, solution providers and integrators. There’s not enough awareness of asset management in operational leadership and our practitioners can’t get a better message through to digital decision-makers. It would take a very courageous operational leader to bend the will of the organization. That’s okay — some leaders in progressive organizations will learn their lessons and incorporate good asset management into Industry 4.1. I’m here for that.