Recently, I was speaking with the CEO of one of India’s largest corporations, when the topic of Digital came up. The corporation in question was not just another Indian company – it was one that has consistently been one of India’s most profitable companies, paying high dividends to investors and performing consistently better than leading stock indexes. ‘What exactly do you mean by ‘Digital’ when you speak of a Digital strategy?’ he asked. ‘Well, it involves some form of connectivity. It’s about connecting devices and equipment – in other words, your assets – to the Internet of Things, in order to collect performance data. We’d then need to analyze the data, deliver it to a machine, or to an operator who can improve the performance of the machine,’ I said. ‘That is all fine,’ he responded, ‘but what exactly is Digital about that?’ 'Well,' I tried explaining. ‘In your normal technological setup, you don’t have machines – other than computers - connected to the internet. What Digital does is that it goes beyond computers. It integrates the physical and the digital worlds, enabled by embedded computer intelligence.’
‘I still don’t quite see why you’d call this Digital,’ he said. When I asked for clarification, he replied, ‘This is what technology is supposed to do. This is what my IT person should do anyway!’ This brings me to my central topic: some senior business leaders still don’t understand Digital. To be more precise, they don’t understand the difference between IT, Digital and the IoT (or even the Industrial IoT).
Here is the difference. IT primarily drives automation, as in, the automation of information sharing and forwarding during shop floor execution in a manufacturing or service shop, for example. What used to be written on a piece of paper and passed on to the next machine operator for processing, now gets entered into a software system, which reduces manual errors and provides uniform visibility to the data.
The next phase in IT’s evolution would appear to be integration between the systems of information shared between finance, engineering, manufacturing, service, supply chain and other functions within a corporation. Isn’t all this digital? Well, it is, to the extent that almost all of the electronic systems that form the backbone of today’s information systems are digital. There are hardly any 'analog' electronic devices in use in the information technology sector.
However, that’s now what we mean when we talk about Digital Strategy. Digital refers to the connectivity of machines and the use of analytics to drive productivity, reduce equipment downtime and enhance profitability. For example, right now, if something fails with a piece of equipment, we send a person and a part to fix the problem. It means we’re eliminating unexpected failures, which is of direct, obvious value. But Digital takes it a step further, the idea being that it’ll also allow us to obtain new insights into making the machines work substantially better in the first place.
Digital is also inextricably linked to AI or artificial intelligence. When we use insights derived from machine data and analytics in order to influence or enhance the behavior of the machine, we have just injected machine intelligence, or AI, into our technology. Think driver less cars or service-oriented robots.
If you want to consider the biggest ‘big picture’ of Digital, look no further than the Industrial Internet of Things, or IIoT. This term refers to the combination of asset performance management, operations optimization, and business process optimization.
Here’s the pictorial representation of how the IIOT looks like, reprinted with permission from GE. (PLCs refer to programmable logic controllers, which are hardware components which interface with machines and control them. SCADA refers to supervisory control and data acquisition systems, which help automate manufacturing assembly lines.)
Digital is a combination of hardware layers at the bottom, and software on top. You need both components in your Digital strategy – just one won’t do it. The software layers collect, process and analyze data, and use algorithms to figure out what to do with the data. The hardware layers generate data based on sensor readings (e.g. temperature, engine thrust, and others) and pass the data to the software layer using interfaces.
In summary, technology leaders and business leaders need to develop common understanding of terminology such as Digital, IT, automation, AI and IIoT. They need to speak each other’s ‘lingo’ – for technology leaders to clearly outline the benefits to business, and for business leaders to explain clearly to the technology folks what business really needs. Only when business and technology leaders are aligned on the meaning of Digital, will they be able to derive a meaningful Digital strategy.