Chief Digital Officers at the forefront of innovation

By Michael Schuldenfrei September 10, 2019

As the world around us becomes more and more digital, manufacturing companies must learn to ride the wave of digital transformation. Doing so requires a strong in-house team member that is in charge of driving innovation in the company. This is what the role of Chief Digital Officer (CDO) is all about. The CDO is charged with challenging current operations, introducing digital tools, drawing value from data, and constantly being on the look-out for new technologies.
The position appeared in the C-suite landscape just a few years ago, and has since been adopted by many companies. According to a 2017 PWC report, a fifth of the most prominent enterprises worldwide had appointed a CDO. This trend was even stronger in Europe, where 38% of the surveyed companies had a CDO. The position of CDO is new, and still taking shape. The global management consulting firm Egon Zehnder reported earlier this year that 85% of its CDO clients were the first to hold the position in their companies, and that 75% of them had been in the role for less than 3 years.

In this blog post we introduce the role of the CDO, especially as it pertains to Smart Manufacturing. We explain why the position emerged and what positive impact appointing a CDO could have on Smart Manufacturing companies. Finally, we move from strategy to action, diving into concrete steps the CDO should take to turn his or her vision into reality.

Why appoint a Chief Digital Officer? The gap waiting to be filled

When you look at the traditional C-level executive roles in a manufacturing organization,, you can see a gap that is waiting to be filled.

The Chief Operations Officer (COO) and Plant Managers are typically charged with ensuring that products are manufactured as efficiently as possible and delivered on-time and on-spec to customers. The COO wants to use data to ensure equipment is running efficiently, track and control suppliers, discover anomalies on the production floor and ensure that nothing unexpected prevents on-time deliveries.

The Chief Marketing Officer (CMO) may be charged with defining the product portfolio and ensuring it meets market requirements. To do so effectively, the CMO needs data about market trends, competition, sales, customer feedback and more.

The Chief Technology Officer (CTO) is usually looking for the next innovations that will differentiate the company’s products and processes to enable the next generation of products.

The Chief Information Officer (CIO) is responsible for ensuring that all other executives and their teams have the systems and tools they need. Their day-to-day job involves maintaining, supporting and upgrading the ever-changing IT landscape, looking after both new systems and legacy systems built on a wide variety of technologies and dealing with issues such as network management, security, cloud deployments, system development, etc.

Looking at all of the aforementioned executives, it’s evident that they all rely on a strong digital strategy, but none of them are actually devoted to implementing such a strategy within the organization.

who among them is responsible for taking a holistic look at how digital technologies are used in an organization and how the company shifts from traditional processes to digital ones? Who has the time and the authority to evangelize and drive change in the organization to keep up with the rapidly advancing digital age? Who makes sure the company isn’t staggering behind data-driven competitors who are squeezing value out of every piece of data they collect? Who among them creates a strategy that ensures the company is getting the maximum value from the latest innovations in the digital world?

This is where the Chief Digital Officer comes in. Although their purview is much broader, and includes everything involving a company’s digital transformation, we are going to focus this article on the role of a CDO in the manufacturing arena, particularly along the automotive value chain.

The Chief Digital Officer and smart manufacturing

One of the main reasons manufacturing organizations decide to appoint a CDO is to define and implement a coherent and comprehensive strategy for “Smart Manufacturing” (a.k.a. “Industry 4.0” or “The Industrial Internet of Things” – IIoT). The potential value gained here is enormous, where a small improvement in process efficiency for example can add millions to a company’s bottom line.

Smart Manufacturing is heading towards a revolution and it’s the CDO’s mission to carry this vision out. This means guiding the company towards a highly digitalized horizontal and vertical value-chain, where the entire system is connected digitally and is ever-responsive to changing needs. This goal is so significant that a PWC report: Industry 4.0: Building the digital enterprise found that in the near future, implementing an advanced Industry 4.0 strategy will not only be a “qualifier to compete” but also a prerequisite to secure funding from investors.

Getting value out of data is central to a Smart Manufacturing strategy. As such, using data to drive decision making and intelligent systems design is high on the CDO’s list of priorities. It is the CDO’s mission to define and develop a data analytics strategy, which leverages predictive and prescriptive analytics, forecasting and automated feedback to improve company operations. For manufacturers in the automotive supply chain, there are many areas where the value of this can be significant, these include:

Manufacturing efficiency: data from equipment and manufacturing systems (PLM, MES, etc.) provides valuable insights into the manufacturing processes, improves line efficiency, reduces scrap and lowers costs.

Safety, reliability and quality: collecting and connecting data from equipment, systems and consumables across factories and even across the supply chain, can provide unparalleled insights into quality and reliability issues, ultimately impacting the safety of critical components.

Accelerated ramp: as products become more complex, companies frequently struggle to reach desired manufacturing volumes and quality levels. High quality data feeds and analytics can dramatically shorten the ramp time of new products by enabling engineers to quickly comprehend the root cause of issues and implement fixes.

The challenge of being a CDO

The primary tasks of the CDO are to build the strategy for achieving these goals, to evangelize it throughout the organization and to work with other stakeholders, like the CIO, COO and CTO, to make it happen.

This is no easy task however, especially when resistance to change can still be fierce in the workplace. In fact, 50% of PWC surveyees (comprised mostly of CDOs) stated that lack of digital culture and training was their biggest obstacle. At the same time expectations have never been higher.

Nowadays, management expects more from data and analytics. They expect their manufacturing operations to run flawlessly and with maximum efficiency, and for systems to automatically and autonomously identify issues and fix them. Moreover, they expect to be “data-driven” – so that all decisions are based on high quality, trustworthy and accurate data. They expect their organization to make good use of the latest-and-greatest technologies and methodologies, and they expect to do all of this in the most cost-effective manner.

To meet these mounting expectations and be successful agents of change, CDOs must adopt a firm strategy that puts their digital vision into action.

From Strategy to Action

The digital age is driven by data, but data on its own is not enough. The growing number of sensors, embedded systems and connected devices results in a flood of continuous information streaming in. So The first step in translating the strategy into a practical work plan involves identifying gaps in data collection and analysis capabilities, prioritizing data that will bring the most value to the business,and addressing these issues holistically. This means moving away from ad-hoc data analytics, where data is analyzed haphazardly, to a focused data strategy, where data is structured correctly throughout the value chain, and analyzed efficiently to inform business decisions and enhance overall performance.

As we wrote in an earlier blog , there are five fundamental steps to maximizing value from data, each with their own unique challenges:
1. Get the data you need
2. Organize the data
3. Analyze and present the data
4. Automate analytics
5. Innovate

The CDO’s strategy requires a plan with a practical approach to completing these steps and to solving the challenges they pose.

Think big, start small

Since it can be a long journey, the CDO must learn to balance between the big picture and taking gradual steps towards the end goal. It’s important to start with small projects with limited scope and clearly defined and measurable KPIs. This will demonstrate value and help bring other stakeholders on board. For example, we helped a customer measurably reduce scrap by implementing a solution which correlates data from several sources on an assembly line and identifies optimal combinations of machine parameters to keep the entire process centered and consistent.

Nevertheless, focusing on a single problem and solving it with a point solution is a problematic approach. There are key strategy and technology questions that must be answered up front to ensure that solutions will eventually be able to scale to the entire organization. We have heard many stories of Smart Manufacturing projects which started out promisingly but eventually failed because they couldn’t scale. Questions might include:

  • Which hardware and software platforms and technologies will be used?
  • Where will they be deployed (cloud, on-premise)?
  • How will they handle myriad data sources, fast-growing volumes of data and large numbers of users?
  • How do they cope with legacy equipment and systems?
  • Who has responsibility for each piece of the puzzle?
  • How will the various players work as a team to make it happen?

The CDO has a pivotal role in orchestrating the activity to answer these questions and deliver working solutions.

Conclusion

The appointment of a CDO can be a good way to initiate or accelerate a Smart Manufacturing strategy. By creating quick wins, showing the inherent value of digitalization and data and creating a holistic infrastructure on which new solutions can be built, the CDO becomes an enabler of innovation for the entire organization.

About the author
Corporate Technology Fellow,  joined OptimalPlus in 2006, and brings over 30 years of software and information technology experience. Since joining the company he has served in several leadership roles including Chief Software Architect and CTO.