Digital transformation has long been touted as the growth engine of the manufacturing world — but the proof is in the data. According to McKinsey & Company, B2B digital leaders experience five times the revenue growth of their peers, on average. A natural first thought is “great, where do I sign up?” A natural second thought is “that sounds expensive, how could I possibly fund this?”
Digital transformation isn’t just one initiative — it’s the vehicle for a completely different way of doing business. Therefore, it requires tremendous investment. This thought is scary, and rightfully so. You want to be certain this investment is the right move for your business.
Can you afford not to?
Digital transformation sounds great, but it is it necessary? Time is money, and companies utilizing digital transformation understand that. According to Mckinsey & Company, “Boeing developed its two most recent airframes, for the 777 and 787, using all-virtual design, reducing time to market by more than 50 percent.” Digital transformation is not a luxury investment but a need for your business to stay relevant.
With a traditional business model, it’s difficult to innovate as quickly as customers are ready to move onto the next thing — thus costing you your competitive edge. All the processes and parts that make up the final product just move slower. In an age where someone else with a bigger and better idea is just around the corner, you need a way to maintain your advantage by constantly innovating, and fast.
So, how can you make the transition?
Adjust your Mindset:
It’s easy to think in terms of finding low-cost alternatives to systems currently in place. Instead, there must be a shift in mindset from finding a low-cost solution to finding a solution that brings in more revenue.
Yes, digital transformation is a huge investment — emphasis on the word “investment.” Rest assured your company will see that money again. A report from the World Economic Forum found that every $1 invested in Cognitive Technologies (Products of Artificial Intelligence) has yielded $1.9 increase in revenue per employee.
The question still remains: where does the funding come from?
- Internal Reserves: There are many options for allocating company profits, but if digital transformation is at the top of your to-do list investing back in your company is critical.
- Utilize Investors: As mentioned before, digital transformation is an investment. Handle it like a new business venture — which requires investors. You will see your money again and so will those who helped along the way.
- Rework your Budget: This is a “tough pill to swallow” solution because it requires reducing expenditures elsewhere. Don’t concentrate on the nitty-gritty of each department. Instead, understand the big picture and exactly what is needed to achieve it. Everything else is excess.
Of course, this list is not exhaustive, but it gives insight into where you should start looking.
Identifying funding sources is the easy part. Now you need to show that digital transformation is a worthwhile investment. Start with smaller projects that move your company towards full digital transformation. Think of it like this: a person is more likely to spring for new kitchen cabinets than build a new house.
Utilize projects that address specific problems and have a quick ROI. The success will fuel the eagerness of investors to move forward on other digital transformation projects.
Once you’ve secured funds, it’s essential to use them effectively to maximize your success. To accomplish this, it’s wise to implement systems that aren’t excessively customized. The systems you implement now are not digital transformation fully realized, but the first step of your digital transformation journey. You will adjust these systems as the need arises. The less customized they are, the more cost-effective updating them will be.
The Bottom Line:
You know what digital transformation is and how to fund it, but where do you begin? A project of this magnitude needs an expert approach. Contact us directly to learn more, or download our report, “PLM & the Digital Enterprise,” to explore how Product Lifecycle Management can enable your digital transformation strategy.