DIGITRANS - Digital Transformation for SMEs

11-12-2017

Through the eyes of a company in the advanced manufacturing industry

Industry 4.0, Blockchain, IoT, AI,.. these are modern digital advancements that are sure to reshape the world. In some way, they are already doing so. We see new innovative startups coming up every day with products in these fields who are motivated by and dream of disrupting the sleeping industries.

So, it is no surprise that a lot of existing SMEs think about these digital technology advancements, with some even trying to adopt them as part of their "Digital Transformation" strategy. In theory this is great news, however, a lot of companies have an underlying misunderstanding of the meaning of Digital Transformation and the importance of the right approach to Digital Transformation.

First, let's clear up what Digital Transformation is. It is a profound change in a business. This means changes in business and organizational processes, competencies, and models to fully leverage the changes and opportunities of a mix of digital technologies. (1)

In other words, digital transformation is not merely something one of the departments in a company is doing. Instead, it's a company-wide effort. Neither is it the use of a single digital product or service. Instead, it’s the continuous and strategic use of digital technology to improve workflow and operations within a company, find new innovative business models, and creating new added value for the customers through engaging experiences. (2)

There are a lot of SMEs in the less developed Danube regions that want to also start their own Digital Transformation. So, the DIGITRANS project was born. Its aim is to develop an innovation method that will enable SMEs to create competitive digital business models within a specially set up incubator space. (3)

DIGITRANS focuses on three fields: Creative industries, Health, and Advanced Manufacturing. As part of the project, interviews with companies that have successfully undergone Digital Transformation in these fields were done. Today we will share the insights of a company in the advanced manufacturing field. (3)

This company was founded in 1966, it currently has 80 employees and 10 million € of yearly revenue.  Their initial business model was based on a truck going from village to village selling stock metal items that the company produced, directly from the truck to farmers, entrepreneurs, and families.

A lot has changed since. The company doesn't produce stock items anymore, instead, it manufactures custom metal items for each of its clients. They have developed an IT system for clients to create and order their own metal items. This system is integrated into every aspect of the company and automatically takes care of work optimization, production line organization, production line programming, accounting, and billing. Thus, custom products are created for clients on a just in time business model, usually in less than 10 hours.

The idea for digitalization came from the top and started around 6 years ago. However, it was not merely the leadership that was included in the process, but also the workers. A lot of SMEs don't do this because they believe digital transformation to be something only for the top. However, it is important to include the workers in the process to ensure that the digitalization process made sense to them. Furthermore, the company leaders got vital feedback for key decisions about the user experience of digital products.

The company has thus far invested more than 600.000 € on this digital transformation. With this transformation, the company saves money, because of the reduced need for employees, while at the same time maintaining the output level. In addition, the company reduced response times for orders and now has much fewer product rejections by customers. 

For anyone starting the digitalization process, they have some recommendations. The first is that one should establish clear company goals because this gives the foundation for the whole project. Furthermore, they recommend creating a well-developed project draft for all the involved parties. In addition, you should realize that software is always late so you should plan ahead. Finally, they very highly recommend choosing an experienced project team with good references.  

Finally, an important aspect of digital transformation is the realization that this is not something that can be done overnight. It's a long process where the whole company has to come together. It took the before mentioned company three years to develop software that ties into every aspect of their business model and another two years for the whole company to adopt the new digital tools.

In conclusion, the DIGITRANS project plans to help SMEs in the less developed lower Danube on their way to more competitive digital business models through an innovation method and within an incubator. Furthermore, there are many great case studies of companies that have successfully undergone Digital transformation. The company presented in this article transformed their business model and value proposition through the development of a special software that ties into every aspect of their business.

Author: Nataš Rus  - www.tovarnapodjemov.org

 

Sources:

1. https://www.i-scoop.eu/digital-transformation/

2. http://www.channelfutures.com/industry-perspectives/what-digital-transformation-and-not

3. http://www.interreg-danube.eu/approved-projects/digitrans

Programme co-funded by European Union funds (ERDF, IPA, ENI)