The world is changing fast, and so are markets and customer expectations. In this dynamic and uncertain environment, emerging and emergent technologies^[1] have tremendous transformative potential by creating new opportunities and threats for organizations in various industries. Organizations must be proactive and keep abreast of developments in these areas, understand the potential impact, and act on it, or risk becoming obsolete, irrelevant, or even extinct.

Digital Transformation (DX) is a journey of innovation and transformation. It is like the metamorphosis of a Caterpillar into Butterfly. It involves using digital technologies and strategies to create new value for internal and external stakeholders, disrupt the market, and avoid disruption. DX is not just about using digital technologies and strategies. It is also about changing how you think, work, and innovate.

During the Digital Transformation journey, the organization will face many challenges and opportunities along the way:

• How do you transform the value you deliver to your customers?
• How do you disrupt the market (and avoid being disrupted)?
• How do you achieve all this without compromising your values and vision?

In this blog we will discuss these DX-related issues and considerations at a high level, especially as they relate to environments that operate major IT and OT (Operational Technology) based solutions. IT and OT are two different domains that need to work together harmoniously and securely to achieve the DX goals:

• How do you bridge the gap between them?
• How do you overcome the technical, organizational, and cultural barriers?

Digital transformation also requires major cultural and organizational changes. We will discuss  these topics in future blogs. Stay tuned.

A tale of two very different Digital Transformation Stories

In this blog , we will explore two contrasting cases of digital transformation in two very different industries. The first case is a cautionary tale of how an established organization failed to adapt to the fast-changing digital landscape and lost its business to a disruptive startup. The second case is an inspiring example of how an organization reinvented itself by leveraging digital technologies, transformed its core offering and thrived in the market.

Blockbuster vs Netflix: This is a classic case of a market leader who failed to embrace digital transformation, leading to its demise. In the 90s, Blockbuster led the video media rental space. It could not act on the threat of new streaming services in terms of offering consumers more convenience and affordability. In 2000, a startup (Netflix) created a new model for on-demand media, first with flat-fee DVD rentals[2] and then with cloud-based downloadable digital content. Netflix also used analytics to understand customer preferences and provide them with personalized media recommendations. These customer-centric innovations disrupted Blockbuster’s business and led them to file for bankruptcy in 2010.

Old Rolls Royce vs new Rolls Royce: This is an example of a company that leveraged new technologies and shifted its model from selling products to selling outcomes to its customers. Rolls Royce developed a jet propulsion-as-a-service offering (TotalCare®). This power-by-the-hour offering allows customers to pay for engine performance and availability rather than the engine itself. Rolls Royce is responsible for the engine’s reliability, availability, and efficiency and provides proactive maintenance and repair services. Rolls Royce uses sensors and analytics to monitor the engine performance in real-time. This innovation has changed the competitive landscape in the jet engine industry and created value for Rolls Royce and its customers.

Digitization, Digitalization and Digital Transformation

The diagram below depicts the Caterpillar to Butterfly journey of Digital Transformation. This journey consists of multiple stages: digitization, digitalization, and digital transformation. The activities in these stages are different.

Digitization is about converting operational data[3] from analog form to digital form and facilitating their consumption within operational processes. Digitalization is about ingesting and consuming this digitized data into operational processes, optimizing them, integrating them, and possibly re-engineering them. Finally, Digital Transformation builds on the digitization and digitalization stages. It involves leveraging disruptive technologies to create new and innovative business, operational, and service models, uncover new revenue opportunities, and compete in new markets.

Some enterprises use the “digital transformation” label in a generic way to refer to any activity related to digitization, digitalization, or digital transformation. Others use this label to mean “digital” and “transformation in the literal sense of the words.”

IT and OT: The Odd Couple

DX is hardly a new concept. But what is new is that transformation is increasingly happening in environments where Internet of Things (IoT) systems play a major role in creating and delivering new value to the market. These systems span the physical and digital divide, leading to significant challenges and complexities related to IT/OT convergence.

IT and OT are an odd couple with very different goals, requirements, governance, and standards. They also have very different priorities:

• IT and OT environments vary in architecture, standards, performance requirements, implementation and testing, skillsets, etc. IT must adapt its methodologies and best practices to the unique needs of OT.
• Data security is a foremost concern for IT. It is so for OT as well, but mainly because it can impact physical systems’ safety, reliability, and resilience. Safety, reliability, and resilience of physical systems and people are the top priorities for OT; they are hardly a concern for IT.

Failing to manage and mitigate the IT/OT differences and convergence challenges can seriously hamper the organization’s digital transformation journey.

Look before you jump

Before you embark on a Digital Transformation Journey, you should reflect on a number of very important questions, for example:

• Why is Digital Transformation the answer?
• What are the desired outcomes?
• What should we transform and where do we start?
• Who are the stakeholders?
• What does success look like and how do we measure it?
• Does the transformation impact the organization’s sustainability goals? Hint: yes
• How do individual DX projects impact the overall DX strategy?
• What is the value of all this data produced and consumed by the digitalized environment?

Conclusion

Digital transformation is a vast and complex topic that cannot be fully covered in a single blog. To learn more about digital transformation, its challenges and opportunities, we recommend that you read these publications by the Industry IoT Consortium[4]^,[5],[6].

Suffice it to say here that the continuous barrage of new technologies (for example, Generative AI) will continue to transform markets and expectations and put pressure on organizations (opportunities and threats) to change with do-or-die implications.

Organizations should waste no time in dealing with these threats and opportunities.

Transform! @InfoComm Conference and Exhibition.

We will address the various issues and considerations discussed in this blog in detail at the Transform! Conference and exhibition (June 12-14, 2024, Las Vegas, NV). The Object Management Group’s family of technology consortia (including the Industry IoT Consortium) has teamed up with InfoComm to present this conference and exhibition targeting innovation that enables your digital transformation journey.

About the author

Bassam Zarkout has 30+ years of experience in multiple technology sectors across Canada, the US, and Europe, including eight years as CTO at RSD Geneva, focusing on information governance, ergonomics, ECM, regtech, privacy, and electronic discovery. Through his activities at the Industry IoT Consortium (5 years), Bassam has focused on advancing the domain of enterprise digital transformation through the application of cutting-edge technologies (IoT, AI, digital twins) and has co-authored multiple influential and peer-reviewed papers and frameworks on digital transformation, AI, digital twins, security, and trustworthiness. He is currently working on a framework for sustainability in discrete manufacturing.

[1]      IoT, AI, distributed ledger, digital twins, extended reality, autonomous robotic systems, and many others

[2]      The last Netflix red envelope was mailed to customers at the end of September 2023.

[3]      To keep things simple in this blog, I will interchangeably use the terms data and information (data with context).

[4]      Digital Transformation in Industry – https://www.iiconsortium.org/pdf/Digital_Transformation_in_Industry_Whitepaper_2020-07-23.pdf

[5]      A Short Introduction to Digital Transformation – https://www.iiconsortium.org/pdf/2021-November-JOI-Letter-from-the-Chairs.pdf

[6]      Industrial IoT Trustworthiness – https://www.iiconsortium.org/pdf/Trustworthiness_Framework_Foundations.pdf