Breaking Down Cultural and Organizational Barriers to Digital Transformation

By Paul Miller

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ARC Report Abstract

Overview

As we learned this week at the 24th annual ARC Industry Forum at the Renaissance Hotel at SeaWorld in Orlando, Florida, despite some initial false starts and questionable implementations, digital transformation is now beginning to deliver tangible business benefits in plants, factories, infrastructure, and municipalities around the world.

Once again this year, the Forum kicked off with a low-key Super Bowl Party Sunday evening.  A full day of cybersecurity and other workshops followed on Monday, along with the annual meeting of the Digital Transformation Council (DTC). Several suppliers also made some very interesting press announcements.  The theme of this year’s Forum “Driving Digital Transformation in Industry and Cities,” resonated well with participants.  This included the many end users planning or already working to transform their organizations with data and new digital technologies.

barriers to digital transformation

At the Tuesday morning general session, ARC Advisory Group senior analyst, Harry Forbes, summarized the event by the numbers: more than 850 attendees representing 250 different companies from 20 countries, and 55 sessions and workshops spanning six different topical tracks. Harry also made it a point to identify and thank the Forum’s 75 corporate and media sponsors, who help make this annual event possible.  These included Platinum sponsor, Microsoft; and Global Sponsors, Bentley and Siemens.  The long list of other sponsors included industry-leading technology suppliers spanning the OT, ET, and IT worlds, including several cybersecurity suppliers.

Andy Chatha, ARC’s Founder and CEO, then set the stage for the keynote presenters.  “For many years now, we’ve been trying to bring the separate information technology (IT), operational technology (OT), and engineering technology (OT) groups together.  Now, for the first time, we’re going to start the Forum with a talk by senior IT and OT executives from a leading global company who have been working together closely to break down traditional organizational silos.”  With that, Andy introduced Peter Holicki, Sr. Vice President, Operations, Manufacturing & Engineering, and EHS at Dow; and Melanie Kalmar, Dow’s Corp. VP, Chief Information Officer, and Chief Digital Officer. 

Dow Breaks Down Traditional Organizational Silos

The ensuing, often entertaining, back-and-forth talk provided us with first-hand insights into the traditional disconnects, differing priorities, and cultural divides between  OT/ET and IT organizations, respectively, and how Dow overcame these to enable the company to move forward on its digital transformation journey.  As we learned, when both Mr. Holicki and Ms. Kalmar started out at Dow, Operations had no link to or understanding of the IT group, and Operations was a largely unknown entity to IT.  This helps illustrate the cultural barriers and functional disconnects between different groups that’s still prevalent across much of industry and infrastructure.

      

As we learned, Dow’s digital strategy is to move from simply being a chemical company that “does digital,” to become a digital developer of new materials.  Corporate management’s mandate for Dow to become a digital company sparked Mr. Holicki and Ms. Kalmar’s efforts to break down the silos between their organizations.  This would enable them to tap into the respective domain knowledge resident in both groups so they could work together more effectively to solve business and operational problems.

“It just made sense to break down the barriers between the two groups,” Ms. Kalmar said.  “We always thought Operations needed more discipline, but as we learned more about that group, we gained new understanding of how site-to-site operational differences called for a more custom approach than we were used to in the IT world. ”  To this, Mr. Holicki added, “OT and IT speak different languages.  Also, while Operations are dispersed across sites, IT tends to be more centralized.”

According to Ms. Kalmar, “We needed to find the common ground across the two organizations.  We also had to think about the cultural issues to enable our two groups to work together.”

The company’s Manufacturing 4.0 initiative revolves around the three pillars of customers, employees, and improving the way work gets done.  Mr. Holicki explained that for Manufacturing 4.0 to succeed, he would need help from Melanie’s IT and digital experts.  In particular, he clearly saw that his team needed new digital tools to improve turnarounds.  According to Mr. Holicki, "We had to look at the work processes and break down the silos to be able to work together to solve problems."     

To help bridge the cultural divide between the two groups, “Melanie started sitting in on my meetings and I did the same with her group,” Mr. Holicki said.  They both also sit on Dow’s corporate strategy board.  "We got to know each other a lot better and started to build common ground and trust," he added.  This led to the creation of a joint innovations team.

The Dow Digital Operations Center

Ms. Kalmar explained how the Dow Digital Operations Center (DOC) brings together the deep domain expertise resident across the company.  She admitted that while creating the DOC was a risk, it was one that both she and Mr. Holicki felt comfortable with. 

A few examples of the new digitally enabled capabilities developed at the Dow Digital Operations Center include using drones, robots, and crawlers to help make Dow a safer place to work and enhance the quality of inspection work.  “Robots are also starting to do real work, not just perform inspections,” said Mr. Holicki.  Virtual reality solutions developed at the DOC help engineers solve problems. “We’re also rolling out innovations that allow us to track both people and equipment better.”  Many of these innovations have been implemented across the company’s manufacturing sites globally.  “The Digital Innovations Center was a big investment, but well worth it,” according to Mr. Holicki.

Lessons On Breaking Barriers to Digital Transformation Learned at Dow

“Without cooperation, we would have missed opportunities and be more exposed to cyber risk,” Ms. Kalmar explained.  Trust is key.  We challenged the normal way of doing things.  The biggest surprise to me is that it didn’t take a lot to get the other leaders on board.” 

“We both work for speed and value,” Mr. Holicki added.  He explained that solutions must be able to be rolled out across multiple sites to achieve business value.  This requires collaboration.  Collaboration also helped the cross-functional team screen and identify many of the solutions already available out there that could help it do many of the things it wanted to do.  “Value creation is key – if it doesn’t create value for your company, why bother?”  

“If I had to do something different, it would have been to get my people out into Operations sooner,” Ms. Kalmar said.  “Also at first, rather than seeing what Manufacturing really needed, we allowed our budget to be a crutch.  Eventually, we began to focus on the things that could really ‘move the needle.’  But we know that our journey will never be over and we have to keep working together.  We also know that we will continue to evolve with an influx of new skills.   IT and OT roles will continue to cross over and we have to become more agile.”

"We each have our respective strengths;  it's about our willingness to work together whenever needed," Mr. Holicki added.  “I learned a lot about cyber, and IT learned a lot about manufacturing’s reliability requirements.  We have over 100 sites around the world and we’re working together to optimize them one at a time.  We also have to address digital threats and make even better use of our data.  This includes working together to sanitize data so we can trust it.”  Summarizing his key takeaways, Mr. Holicki mentioned the importance of trust, cooperation, benchmarking, and free and ongoing collaboration. “You also need a strategy and a value proposition.”

“Success will never happen without alignment at the top and you have to keep communicating across the company,” Ms. Kalmar added.  This often involves ‘wearing down the leather’ on your shoes by physically visiting with other groups.  She then threw out a challenge to those gathered for the general session:  “We’d like each of you to think about areas where teams at your own company could work together better.  Go start the conversation to break down those silos.”

Shaping the Future of Production at Audi

Dr. Henning Löser, Head of the Audi Production Lab, began his keynote address with: “A lot of you know Audi for its beautiful cars; I’m from the ‘dark side’ of production.”  While much of that production is centered in Germany, Audi also has quite a few production sites across the world.  With a global workforce of approximately 91,500 people, the company produced almost two million Audi-branded automobiles in 2018.

barriers to digital transformation

Dr. Löser went on to explain that while the company is set up for high-volume production, it strives for stability.  This led to a dilemma.  “We want to shape the future of production by being innovative, but production is very structural by its nature and production groups tend to be very conservative.”  To resolve this dilemma, the company founded the Audi Production Lab (P-Lab) in 2012.

The Audi Production Lab

According to Dr. Löser, the Audi P-Lab is intended to be the “zipper” that brings together the tightly organized and stable world of production, with the creative and fast-moving innovation world.  The P-Lab combines the best of both: the speed and creative spirit needed for innovation, plus the structure and stability needed for production.  Dr. Löser stressed that it does so by networking the company’s expertise, rather than networking organizations.  According to Dr. Löser, “Trying out something new often involved breaking the rules.  The P-Lab provides a safe space to do that.” 

barriers to digital transformation

Dr. Löser described a P-Lab proof-of-concept project conducted in conjunction with Intel that connects production data, quality measurements, and process knowledge to help the company get more value from its data.  The POC involved using managed predictive analytics to improve the company’s spot-welding operations in its body assembly shops (which make about 5,000 spot welds per car).

To make this work, they had to add names to the time-stamped production and quality data to provide context.  They also needed some bad values to train the model.  Finally, “We needed to think of new ways to deploy the AI algorithms,” Dr. Löser said. To avoid unacceptable latency, the algorithms had to run right on the shop floor, rather than in the Cloud.  Working with Intel, Dr. Löser's team deployed the analytics in an edge device in the P-Lab.  It was also necessary to develop and deploy appropriate visualization for shop floor workers and others.  The success of the POC has encouraged the company to start rolling out predictive analytics for spot welding to its production sites.

But the challenge didn’t end there.  Once Audi began deploying and integrating the algorithms into standardized production environments, it had to determine how to best train its maintenance people to be able to take advantage of them; not a trivial challenge.

Executive Panel Discussion Provides Further Insights

Following a short break to allow Forum participants to stretch their legs and grab some refreshments, the Tuesday Morning general session reconvened with a panel discussion on the above topics with executives from both the technology supplier and technology end user communities.  Representing the former were Christine Boles from Intel and John Kovac from Microsoft.  Panel participants from the user side were Billy Bardin from Dow, Henning Löser from Audi, and Don Bartusiak from ExxonMobil Research & Engineering.  Andy Chatha moderated the discussion.

While readers will have to wait until the video comes out on ARC’s YouTube channel to hear the full discussions, we can say here the panelists delved further into relevant topics such as the cultural/workforce challenges of industrial digital transformation and approaches for justifying and rolling out new digitally enabled technologies.

Cybersecurity also came up multiple times, with several panelists expressing confidence that their respective organizations have been paying adequate attention to cybersecurity in recent years, but that was not necessarily the case for smaller companies with lesser resources.

In response to a question from the audience about the role of digital twins, both Mr. Bartusiak and Mr. Bardin commented that you can’t address any question about digital twins without first defining what you mean by the term.  In the process industries, for example, most processes are already rigorously modeled and simulated for engineering purposes.  Dr. Löser also stressed that domain knowledge is critical when building digital twins.

In their closing comments, Mr. Bardin mentioned that it’s important to focus on what you want to accomplish, rather than the technology itself; Dr. Löser added that you should look at the technology from both directions to help solve both new and existing problems; and Mr. Bartusiak commented that, “The stars are aligned right now when it comes to creating a state change in how we use technology.” 

Recommendations

Clearly, as we learned during this Forum general session and numerous other Forum sessions and workshops, digital transformation involves far more than just implementing new technologies.  Cultural, workforce, and organizational issues also come into play and must be addressed effectively.  To gain real value from digital transformation, it’s also important to have a plan for moving beyond the proof of concept and pilot stages to be able to scale up and roll out successful pilots across the business.

If you couldn’t join us at the ARC Industry Forum in Orlando this year, we recommend that you plan to do so next year.  You can also keep an eye out for the 2020 Forum session videos that will soon be posted to ARC’s YouTube Channel.   

 

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Keywords: ARC Industry Forum, Digital Transformation, Dow, Audi, Information Technology, IT, Operational Technology, OT, Engineering Technology, ET, ARC Advisory Group.

 

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