A staggering 79% of knowledge workers report silos in their organizations, adding that communication outside teams is poor, according to a 2022 survey conducted by Forrester Consulting and commissioned by Airtable called The Crisis of Fractured Organizations.

Silos are organizational groups that work independently of each other, with little communication and cooperation and, often, some level of competition and negative behaviour between them.

Many of the people I speak with who are engaged in digital transformation see silos as a significant barrier to change, and they speak about this with passion. They should. Digital transformation relies on cross organizational change to be successful.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn how to undertake digital change—and how to break through the silos that inhibit it.

The good and bad of organizational silos

Most organizations are divided into groups that can be effectively managed. In these silos, expertise can be developed and shared, responsibility and accountability can be clearly defined and group loyalty can create a secure and supportive environment for employees.

But silos can also negatively impact their organization. They limit the willingness of employees and managers to share information with others outside their silo. This lowers morale and encourages employees to advance the interests of their silo above those of other silos and/or the organization as a whole.

Silos exist due to organizational structure, culture, performance management and the behavior of the managerial team. A culture that emphasizes competition between silos is often used to drive performance improvement. Where a competitive approach is used to manage the senior leadership team, it is reflected throughout the organization.

Silos have been recognized as a challenge in organizations for many years. Before our current age of rapid technological change, cross organization collaboration was less critical. Slowly changing products and services, more stable markets and long-established processes can be managed in the presence of silos. The organization can function reasonably well if the silos focus on their own performance, mostly in isolation from everyone else. Where silos interact, standard processes exist that enable the organization to function despite the reluctance to cooperate.

However, as the speed of competition and change has increased, silos work against businesses that want to keep up. Efforts to improve processes, to focus more on customers, to introduce new operating system models (such as agile or lean) and to become more innovative have been hampered by silo structures and cultures.

This is particularly true for digital transformation projects.

Silos and digital transformation

Changes in products and services can have an impact in many places—marketing, sales, operations and finance, to name a few.

These silos must work more closely together to respond to rapidly changing markets and customer demands. Process changes in one part of the organization will often have implications beyond the silo where they were introduced. New business models will often require radical organizational change that won’t succeed if people can’t work together in the interest of the whole organization, not just their own silo.

It is crucial to empower individual employees to realize digital transformation. Employees must actively participate in this change, but if they’re stuck in silos, they’ll support the interests of the silo over that of the organization.

Overcoming the challenges of silos is essential in this era of digital transformation. But how can you do it?

How bad is your silo problem?

The starting point in fixing your silo problem is developing a good understanding of the silos in your organization. At the University of Waterloo, we have developed a tool for our Watspeed Digital Transformation program that helps you analyze your silos. This simple exercise will help you understand if silos are holding back your digital transformation.

Score each of the following statements on a 0 – 5 scale, with 0 indicating that it does not apply to your organization and 5 indicating that it is widespread:

Low scores in this exercise indicate that silos are a problem in your organization. High scores suggest that silos are not holding back your digital transformation.

What can you do to break down silos?

If silos are inhibiting your ability to digitally transform, here are some things you can do to break them down:

Create a common vision: Aligning the whole organization behind the same digital transformation vision is essential for empowered employees to contribute towards it. Establish clear processes for engaging people in creating it, updating it and understanding it.

Use collaborative tools: There are many collaborative platforms that enable people to work more easily across organizations today (such as Microsoft Teams). To be effective, employees need to be trained in their use and standard processes for collaboration must be established.

Shared accountabilities: Performance management systems need to encourage collaboration rather than competition. Where possible, create shared accountabilities that cause people to work together to achieve them.

Bring people together: Establish a program that helps people to work with and get to know others in the organization, establishing relationships that will enable future collaboration. This might include social events and gatherings.

Leadership behavior: If leaders are seen to compete negatively with each other, often reflecting that in their communications with their teams, it will be reflected in the organization. If the most senior leader encourages this, it won’t change until they stop doing it.

Training: Conduct training that crosses boundaries, providing understanding of the organization beyond silos. and include people from multiple silos in each session.

Clear processes for collaboration: Collaboration rarely happens automatically. Consider where your problems with collaboration between silos are greatest and establish formal processes and practices that improve it.

Value stream mapping: Map organizational processes and address the weaknesses in process connections between silos.

Culture of transparency: Insist on openness and sharing of information throughout the organization.

Single source of truth: Technology makes it easier to establish a single source of data truth in the organization, which will create a common basis for decision making and reduce potential for conflict.

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Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

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Unfortunately, most organizations are not equipped to deal with rapid technological change. They focus on refining what they do today, and understandably so—it has been the basis for their competitive success thus far. With the current explosion of AI applications, organizations will need to find a way to adapt.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn how to undertake digital change. In seeking to understand the artificial intelligence challenges, my colleagues and I have developed three simple steps for considering your own AI projects.

Recent history has set a strange stage for the AI revolution. Covid-19 forced many organizations to change more quickly than they would previously have thought possible—but it didn’t usually change the fundamentals of their culture or work organization.

The upheaval of Covid-19 has been followed by a period of reflection, with more corporations understanding that the world has changed. This has prompted greater attention to developing a technology-based digital transformation strategy or, for others, finding their own new balance between the old world and the new.

Artificial intelligence is challenging these new normals. Just as organizations have been starting to feel that they are regaining a measure of post-Covid stability, the AI hype is demanding yet more radical change. Many organizations fear that unless they get on the AI train now, they will be left behind.

The fourth industrial revolution requires that organizations be aware of and ready for rapid technological change, understanding the technological developments that are happening in their industry and adopting and implementing appropriate strategies. A digital learning culture is one of the essential elements.

Living in a world of digital transformation should involve the establishment of digital early warning systems. The apprehension with which AI is now being regarded is an indicator that most organizations don’t have them.

What to understand about the AI hype

It is important to understand two aspects of the AI hype. It is certainly true that AI has huge potential to radically impact many aspects of organizational activity, and that you need to carefully consider what it mans for your organization. However:

1. The term artificial intelligence applies to many different things and is much abused today. The recent discussion has been about generative AI, which “generates” a response to questions. However, organizations frequently use the term to refer to machine learning and other technologies that have been around for some time. This is confused and adds to the hype.
2. Organizations have done very little with generative AI so far. In a 2024 report by ETR, Generative AI Growing in Business, only a minority of organizations surveyed were using it for production tasks, and most of these were relatively simple and unlikely to indicate radical transformation.

So, while it is very important you understand and develop your response to AI, you have time to do this carefully. Our methodology will help you to assess your AI project ideas. Our tools allow you to assess whether artificial intelligence is the appropriate technology to apply to address the need you have identified.

Step 1: Should you be using AI for this project?

If your response is NO to any of the below requirements, you should carefully examine whether artificial intelligence is appropriate for your project.

Step 2: Which project should be my highest priority?

You may have a number of possible artificial intelligence projects in your organization and limited resources to pursue them, so you’ll need to prioritize. The below rating matrix will help. Feel free to add to it if there are additional criteria that are important to you.

The criteria in the artificial intelligence project selection matrix are:

The matrix is provided below, with sample data provided to illustrate its use. The weight column indicates the maximum score for each factor, which allows you to vary the emphasis given to each Factor in your decision-making. In this example, Project 3 is the best choice.

Step 3: Am I able to use artificial intelligence for this project?

Using artificial intelligence requires that the organization has the necessary resources and capabilities. The below tool helps you review this and develop an action plan to address any deficiencies you find.

Review the requirements for successful artificial intelligence adoption using the following tool and develop your own plans to address deficiencies.

These three simple steps provide tools to help you consider your artificial intelligence projects. They will enable your management team to carefully consider the use of artificial intelligence in your organization.

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These changes are driven by how we are using increasingly capable information-based technologies that are designed, implemented, maintained and modified by engineers. More than ever since the original industrial revolution, the decisions engineers make and the advice they give are impacting peoples lives.

I’ve made a career of understanding the digital transformation of industry, and I’ve spoken to many manufacturers about how to level up their technology and unlock the benefits of Industry 4.0. I teach it at the University of Waterloo and I’ve written about it many times here on engineering.com.

But there’s one aspect of digital transformation that’s often neglected, brushed aside in favor of conversations on the exciting technological and business opportunities. The digital changes that engineers and manufacturers are helping to bring about will fundamentally alter our society, and they must plan for these changes in a responsible and holistic way—or we’ll all pay a steep price.

The outsized role of engineers in digital transformation

The changes in society wrought by the first industrial revolution were dramatic. From predominately rural lives, people went to work in factories, moved from the country to the city and would eventually vote in elections. Free trade replaced protectionism, education became compulsory and the roles of women and men in family units were transformed. These changes happened over an 80 year period, in just a few countries.

The changes we are seeing today are much faster, bigger and global.

Engineers have always understood the importance of their ethical behavior, knowing that bad decisions can impact people’s lives or even result in their deaths. I believe that ethical behavior was easier for engineers in the past than it is today. Guidelines and regulations would often be available to help engineers make good decisions, but today’s rapid technological change means these guidelines don’t always exist. Has anyone yet nailed down the ethics of generative AI? (If so, please share.)

More than ever before, engineers need to analyze the impact of their work and make their own ethical judgements.

The efforts of manufacturers to respond to the fourth industrial revolution and digitally transform their operations is not an easy one. Up to 70% of these efforts fail, since they require a wide range of skills from throughout the organization. Digital transformation is not possible without the technical, process and project management skills of engineers. They understand what the technology can do and how it can best be used in existing or new organization processes, and they have the experience of managing technical projects needed for successful implementation. Engineers are a critical element in the impact that technology will have, in the workplace and beyond.

Economic prosperity is tied to digital transformation

The application of technology in digital transformation can take many forms, influencing products and services, processes and business models. The success of these applications will determine the future performance of the organization. Bad decisions may lead to its demise. As the pace and scale of technological change increases, this becomes more critical and frequent. We have already seen many well-known companies fail for their inability to adapt.

While it is normal and economically healthy for some organizations to decline and new companies to take their place, in the globally integrated economy the new companies won’t necessarily appear where the old have failed—some places will be enriched by the fourth industrial revolution while others will decline.

This means local and national economic prosperity depends on effective digital transformation for existing companies, and the creation of a fertile environment for the creation and attraction of new ones. Economic prosperity depends on the extent of national digital transformation effectiveness. The role of engineers in this is critical.

The huge human impact of digital transformation

For organizations that survive, the decisions made about technology will also impact how people work. Their job descriptions, job flexibility, stress levels, physical and mental exertion and overall quality of working life is directly impacted by these technology decisions. The jobs people will have in the future are being created today.

It is therefore critical to understand the human impact of technological transformation. Not only for the sake of the humans whose working lives will be affected, but for the sake of maintaining a cohesive organization. Engineers must consider this factor to an even greater extent than they have in the past.

The decisions made within an organization will be important outside it too, in the local community. Changes in job numbers, pay levels and job security will impact workers and their families, along with the businesses and organizations that rely on the money they spend. 

Business volatility, driven by more rapid technological change, doesn’t just impact the individual organization but extends to the wider community. In the past, slow change in businesses was easier for communities to adapt to. Today, fast change places stresses on the network of institutions and elements that make communities whole, secure, vibrant and economically successful. Engineers are at the front line of organizations’ responses to digital transformation and the resulting community impact. It’s not a responsibility to take lightly.

Navigating digital transformation for a better future

While digital transformation is local, it is also national. How organizations respond to the fourth industrial revolution locally will be aggregated nationally and reflected in economic performance and national standards of living.

Most of the wide-ranging changes taking place today have uncertain outcomes—we don’t know what our form of governance, relationships with other countries, working lives, education, financial systems and beyond will be like in the future. Engineers have the skill and knowledge to influence these outcomes for the better. The advice they give and work they do will significantly impact our future world.

Engineers have always carried a heavy responsibility. As technology changes continue to accelerate, and as industry digitally transforms itself in response, that weight will only increase. Engineers must navigate these changes to ensure they result in better lives for people today and in the future, from the workplace to the community to the nation and the world at large.

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Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

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I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what skills are needed to lead digital change. I’ve also developed a simple model you can use to analyze your own digital transformation leadership skills and those of the managers in your organization.

Organizations are usually designed to do what they already do well—this is necessary to survive. Understandably, their priority is achieving performance objectives that allow them to succeed today, providing jobs and returns to owners and shareholders. In the past, change was relatively slow and managers and leaders were appointed based on their skills in maintaining the status quo.

At the same time, organizational structure was based on achieving reliable levels of quality and productivity. Activities were divided into specialist silos and assigned to those with a high level of specific capability. Organization culture supported this orientation. Doing the same things well every day was, rightly, highly valued, while activity which diverted attention away from achieving short term targets was frowned upon.

Against this background, it is not surprising that most senior leaders of organizations struggle with the introduction of large-scale change. They were not appointed to lead it and have little relevant previous experience. The members of their senior management team and the people who report to them have similar challenges. Further, the organization objectives, structure and culture directly conflict with radical change.

Operation and transformation

Much has been written on the characteristics of effective digital transformation leaders. They usually concentrate on elements that are important in managing change, including being innovative, risk taking, a visionary and an effective communicator. These are all important elements for radical change, but insufficient for ensuring an effective transition in an organization that must continue to successfully operate during the transition. In addition, they don’t give enough emphasis to how the technology will impact performance.

These were our concerns at the University of Waterloo when we looked at how we should develop digital transformation leaders. We reviewed the research in this area and what others had written and then developed our own simple model that integrates leadership of change with daily operational good performance. We identified the following areas as encompassing the range of capabilities needed:

Innovative: Digital transformation requires development and implementation of new products or services, processes and business models. Organizational leaders need to be oriented towards doing this themselves and, importantly, with others. After initial implementation, innovation is critical in exploiting the change.

Systems: Systems thinking involves understanding complex systems and the relationships between the elements within them—how the system fits together and functions as a whole. When digital transformation takes place, it is usually within a system. Leaders need to understand this in determining the impact that transformation will have in the organization, both in terms of existing daily operations as the transformation takes place, and after the implementation period is complete. This is critical in successfully introducing technological change in an existing operation.

Visionary: A visionary leader is someone who can imagine the future and excite others to work with them to create it. Visionary leadership is usually thought to be essential for effective digital transformation in creating the vision, focusing the organization’s efforts on it, and motivating the workforce to achieve it. Visionary leadership is necessary to overcome the inertia of a traditional organization.

Performance: Digital transformation should be designed to achieve a high level of performance, either within existing operations or within new operations. Maintaining emphasis on the performance objectives of the change being introduced, as well as the performance objectives of ongoing operations, requires a dual focus, which is difficult and often creates tension.

Collaboration: Innovation usually requires collaboration to achieve the combination of capabilities that can develop, implement and exploit ideas. In digital transformation this means combining business, technical and human knowledge with design, development and implementation. Leaders need to create an environment that encourages innovation throughout the organization.

Compassion: Digital transformation will only be successful if people in the organization are supportive of the changes being made. If employees lack trust that their welfare will be a priority as changes are made, they will not provide that support. Compassionate leadership is essential.

The DX leadership profile

The DX leadership profile allows you to evaluate the leadership capability of your organization as it undertakes digital transformation. Simply rate the performance of the above categories on a five-point scale and plot the leadership profile of your organization leader, the senior management team as a whole, or anyone with managerial responsibilities.

Here are a few common profiles that illustrate how to apply the tool. All organizations are different, and your own profile may not match the examples.

First is an example of a traditional organization focused on day-to-day operations—the traditional DX leadership profile. For this organization, digital transformation will require significant leadership development and change. The current leadership is highly focused on achieving short-term performance goals, does not have a strong vision, and while they are open to collaboration, compassion, and a systems approach, these attributes are not given strong emphasis.

Next is a profile implied by much of the discussion on digital transformation leadership. The popular DX leadership profile emphasizes capabilities that are usually thought to be important in management of change, and minimizes short-term performance. Systems focus is a significant challenge in this profile and there is room to improve collaboration and compassion.

Finally, take a look at the ideal DX leadership profile. This aspirational profile combines capability in ongoing business performance with leadership of radical change. Most leaders or leadership teams will not match the ideal profile, but they can and should make plans to address the areas of weakness, such as leader development, recruitment and accessing short term resources.

Conducting your own analysis

The DX Leadership Profile analysis tool will help you consider your own organization. The chart is based on your own judgement of your strengths and weaknesses. Its best application is as a focus for discussion amongst the members of your leadership team. Consider it at a team meeting and agree on your own profile. Then create a plan of the work you’ll do to improve—I’d love to hear about it in the comments below.

Looking for more digital transformation advice? Learn the easiest way engineers can plan for big technology changes.

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Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

The post Are you a good digital leader? Use this tool to find out appeared first on Engineering.com.

Even though the rapid change in most industry sectors today is broadly understood to require a substantial response, most organizations lack the confidence to proceed. But there’s a way to get this confidence, and it’s easier than you think.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what makes for a successful transformation—and how to avoid problems that lead to a digital dead end.

Digital transformation requires integrated management

The majority of successful organizations achieved their success by repeating the same processes year after year. When tweaks were made, they were within an organization that was specifically designed for reliable repeatability, not for revolutionary change. It is little surprise that most organizations now find digital transformation difficult and, as the research tells us, most fail.

The reasons for stalls are usually within the control of the organization itself. According to McKinsey, the controllable aspects are:

• Ineffective or misinformed transformation strategy
• Ineffective design of transformation
• Insufficient alignment and/or commitment across the organization
• Lack of clarity on transformation strategy
• Resourcing issues

This research indicates that effective leadership planning and coordination of digital transformation is rare. But there are ways to break through the conservatism that holds back many organizations today.

Breaking through conservatism

Most CEOs were hired to manage in a conservative way, since radical strategies with a high degree of risk could be career ending. Organization structures, practices and culture are all designed for slow change. Silos are widespread and management team collaboration is weak.

It is important to emphasize that the focus on safety and reliability that exists today has been valuable in the past and will continue to be in the future. It will still be important that organizations are effective at producing reliable, high quality goods and services at an appropriate cost. Negatively impacting this in the pursuit of transformational change would be a fatal mistake. Instead, organizations need to carefully change, maintaining operational effectiveness while more easily incorporating continuing transformation.

Silos in organizations inhibit integrated cross organizational change. They limit understanding of the impact of change in one area on another, resulting in unintended negative and positive consequences. Collaboration on changes impacting more than one department is restricted, meaning larger projects are less likely to be successful and that the organization will be less likely to undertake them. Data that may have value across the organization is not shared and processes operate in disjointed ways, and this is exacerbated when new technologies are introduced.

Organizations must change to overcome the challenges of their current structure, practices and culture. How? With a simple tool called the Digital Transformation Integration Analysis Matrix.

The Digital Transformation Integration Analysis Matrix

The Digital Transformation Integration Analysis Matrix is intended for use by a group within an organization. It should be completed collaboratively, using a flipchart, whiteboard or some other format that enables everyone to participate in the digital transformation planning. This facilitates integrating digital transformation activity across the organization.

It looks like this:

The left column lists the digital transformation initiatives or projects the organization is engaged in. Each of the other columns represents a separate function or department. Within the matrix, the implications of each initiative for each function or department are recorded, based on the discussion within the group completing the matrix. Initiative implications may include opportunities to exploit new technology or requirements for change in processes or practices.

Take the following hypothetical example in which a canoe manufacturing company is planning to introduce new technologies. The changes planned for each organizational function are described in the left column and their main implications for each of the other functions are given in the other columns. This matrix was prepared by the management team and reflects their combined understanding of the integrated digital transformation work.

Most digital transformation initiatives have substantial implications in many other areas of the organization. Failing to fully consider these will result in missed opportunities and unanticipated negative consequences.

Planning your digital transformation integration

Consider a digital change initiative in your organization. Apply the matrix to this initiative and identify its impact throughout the organization. Talk to others about their thoughts on what should be included in the matrix. Are there now areas worthy of attention that were not addressed effectively before?

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Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

The post 70% of companies get stuck on digital transformation, but this tool can save you appeared first on Engineering.com.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what makes for a successful transformation—and how to avoid problems that lead to a digital dead end.

Every month, I’ll share a new lesson on how to steer your organization through the rough waters of digital transformation. Yes, there will be homework. But if you pay attention and put in the effort, it won’t be long before you start seeing real results.

Digital transformation is different for every organization. It depends on a wide range of factors—some internal, like culture and existing technology, and some external, like competitor behavior and economic conditions. Digital transformation activities can be big or small, from establishing an entirely new business model to automating a single process.

Whatever the nature of your transformation, understanding its whole business impact should be incorporated in your plans. A change in one department may have implications elsewhere that you will need to consider. If you are planning a whole business change, understanding how everything fits together is critical.

This month’s lesson introduces a simple tool that enables you to take an integrated view of your digital transformation activity. It focuses on your business model—the main elements that enable your organization to function effectively—and makes them visible in a holistic, easy to understand way.

The problem with traditional business planning

Organization business planning has traditionally been a lengthy process. Long periods of consultation are followed by the creation of detailed, organization-wide business plans that are often articulated in verbose documents.

This long planning process restricts the pace of change and is inadequate in the age of digital transformation. It also makes modifying the strategy difficult. This process was designed for an era of slow change. Today it is obsolete.

The Business Model Canvas

Last month we learned about the Value Proposition Canvas, a tool that makes it easier to develop and validate ideas for new products and processes. Developed by Alex Osterwalder, this tool was designed for lean tech startups, and it’s part of a larger planning tool called the Business Model Canvas.

The Business Model Canvas integrates the main elements of an organization on a single A3 sheet of paper. The tool has been used with great success by tech startups to design their business models to create and deliver their technology products and services.

This tool can also be used to plan your digital transformation activity. By viewing all of the key business elements together, the Business Model Canvas makes it easier to understand the impact of technological changes and plan for them effectively. It is also much easier to make modifications as you see the actual impact of your implementation.

The Business Model Canvas considers both the internal and external aspects of your business, and is centered on your value proposition—the value that your business provides to customers. Once you have established your value proposition, you can complete the rest of the Business Model Canvas. It includes the following:

• Customer Segments: Who are your customers, and are they in different segments? Will your transformation activity change this?
• Customer Relationships: How do you routinely engage with your customers (email, phone, conferences, etc.)? Will your transformation activity change this?
• Channels: How do you contact your customers to make sales (email lists, social media, advertising, sales reps, etc.)?
• Key Activities: What are your main activities that create the value proposition? This may include your manufacturing, design, maintenance, etc. Does your new technology change this?
• Key Resources: The main practical resources you need to create your value. This may include physical equipment (machine tools, robots, etc.), floorspace, people, the internet, etc.
• Key Partners: The external organizations or people that you need to create value and complete key activities. This may include suppliers and services such as cloud providers. These may change as you digitally transform.
• Cost Structures: What are your main organization costs (human resources, energy, distribution, raw materials, etc.)?
• Revenue Streams: How does the value you create result in revenue for the organization (e.g. subscriptions, sale of products or services, etc.)? What does your transformation mean for your costs and revenues?

The Business Model Canvas can be organized as in the below template from Strategyzer.

Template for the Business Model Canvas. (Image: Strategyzer.)

The Business Model Canvas in action

The following example of the Business Model Canvas considers the introduction of technology in a whisky distillery. The current position of the business is represented in the Business Model Canvas below:

The distillery wants to move into more direct-to-customer distribution while expanding its product range to appeal to more people in a younger market. This will require automation in the production process to enable faster changes from one product type to another (for example, from Cask Strength whisky to Sherry Oak Finish).

A warehouse management system will be needed to handle the complexity in the new warehouse, which will include sensors to enable closer monitoring and control of warehouse conditions (an important element in whisky aging), and to support the substantial increase in direct shipping that is expected in the future.

A CRM system with data analytics capabilities will facilitate direct relationships with customers and support the direct sales activity, including the use of artificial intelligence to enable individualized customer communications. Given the distillery’s level of technical capability, cloud hosting will be used where possible.

The management team create a new version of their Business Model Canvas for the completed technology project (the changes are in italics):

Using the Business Model Canvas for Digital Transformation

The Business Model Canvas has been used by organizations globally to assist with their strategic change. You can modify the Business Model Canvas if you feel that there is another category needed. Remember, though, that the simplicity of the Business Model Canvas is its strength. It can be quickly understood and form the basis for a group discussion on changes being made.

Digital transformation requires engagement from everyone in the organization. Wide, patient consultation on changes is needed and should create support for the changes you are making. The Business Model Canvas allows that to happen.

Old business model planning models required extensive documentation and were hard to change. The Business Model Canvas can be created quickly and often, providing a historical record of your discussions and the changes made.

Your digital transformation homework

It won’t take you long to try out the Business Model Canvas. Try it and you’ll see how easy it is to use and gain confidence in arguing for its adoption in your organization.

First, create a Business Model Canvas for your organization today. Next, imagine a technology-based change that you think would be valuable, and create a Business Model Canvas based on that change. Finally, use your completed charts to demonstrate its value to others.

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Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

The post The easiest way engineers can plan for big technology changes appeared first on Engineering.com.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what makes for a successful transformation—and how to avoid problems that lead to a digital dead end. 

Every month, I’ll share a new lesson on how to steer your organization through the rough waters of digital transformation. Yes, there will be homework. But if you pay attention and put in the effort, it won’t be long before you start seeing real results.

Active participation in continuous improvement and innovation is critical for successful digital transformation. Employees across all levels in an organization must be involved in, and committed to, technological change. This will make it easier to solve problems when they arise, identify new opportunities and foster organizational agility and innovation.

To that end, it’s important to effectively communicate and analyze ideas for change—and one of the best methods to do so is a tool called the Value Proposition Canvas. Originally developed to guide tech startups, the Value Proposition Canvas has proven to be an important tool to overcome the challenges of change that plague most organizations.

Why innovation is so hard—and why it requires teamwork

Many organizations have sought to encourage continuous improvement and innovation, but most are unsatisfied with the results. According to McKinsey & Co, 86% of CEOs believe innovation is critical to growth but only 6% are satisfied with their innovation performance. 

Continuous improvement is a collective process. Anyone who has an idea should be able to easily share it with others, gain their input and have it considered for implementation. Decision makers should be able to easily understand which ideas have value and are worthy of further consideration. The Value Proposition Canvas in a collaboration tool that enables this to happen.

The Value Proposition Canvas

The Value Proposition Canvas was originally conceived by Alex Osterwalder as part of the Lean startup methodology, a widely used framework to guide the development of tech startups. That methodology was pioneered by Steve Blank to develop business and product ideas, identifying those that have a reasonable possibility of success and implementing them. 

Many companies now recognize that the Lean startup methodology is not just for tech startups, but can also be used to support innovation and continuous improvement in established organizations large and small. We do this in our Digital Transformation program at the University of Waterloo.

The Value Proposition Canvas allows an idea for a new product, service or process to be expressed and communicated on a single page. It summarizes an idea and its value with a simple format that can be understood by all it. The Value Proposition Canvas has two main elements: the Customer Segment and the Value Proposition.

How to use the Value Proposition Canvas for digital transformation

The Customer Segment describes the problem or opportunity that an idea is intended to address. When applied to digital transformation, it can be used to describe the focus of the improvement being proposed. For example, the introduction of augmented reality headsets to support maintenance activity in a manufacturing facility.

Each of the main elements has three parts. In the Customer Segment these are:

• Jobs: The objectives of the customer or users of the technology being suggested. In the example these would include monitoring, maintaining and repairing factory equipment.
• Pains: The challenges that are faced in getting the Jobs done. In the example these might include keeping equipment knowledge up to date for all maintenance employees, retirement of boomer employees and consistency of the quality of maintenance work.
• Gains: The benefits that are desired or achieved by doing the Jobs well. Perhaps: reliable equipment, good production quality and lower equipment downtime.

The Value Proposition side of the canvas describes what the innovation or improvement is and how it will benefit the Customer Segment. It has the following elements:

• Products and Services: The main elements of the idea. For example: A comfortable headset which is suitable for an industrial environment, providing hands-free access to digital equipment maintenance data and the ability to capture images and video of equipment to share with colleagues.
• Pain Relievers: How the idea addresses the Pains in the Customer Segment. Perhaps: Providing access to online, up to date equipment knowledge in real time at the work site and accelerating new employee training.
• Gain Creators: How the idea contributes to the Gains. For example: Improvement in the quality and productivity of maintenance work resulting in reduced downtime.

The completed VPC might look like this:

Collaborate for continuous improvement

Creating the Value Proposition Canvas should be a collaborative process. A group can create it and all stakeholders can be asked to contribute their ideas. This enables ideas to be refined and the fit between the idea and the Customer, User or Process to be improved. It can be the basis of discussions with decision makers to obtain approval and resources for implementing the idea.

Establishing innovation and continuous improvement is essential for successful digital transformation activity. You need everyone to actively participate in effective technology-based change. If someone is not participating in change, it is much more likely they will be resisting it. 
The Value Proposition Canvas tool is used to enable participation, but it isn’t enough on its own. It should be accompanied by efforts to develop an appropriate digital culture and mindset and clear processes and practices that empower employees to suggest and implement ideas.

Digital transformation homework

Your homework this month is intended to give you some confidence in using the Value Proposition Canvas. First, consider an improvement that you know about in your workplace. Create a Value Proposition Canvas for that idea. Take some time to consider your work—how good was the fit between your Customer Segment and Value Proposition?

Next, select an idea you have for a technology-based innovation in your workplace. Assemble a small group of your colleagues and complete a VPC on your idea. Pro Tip: You can use post it notes to complete the canvas elements, enabling everyone to add their own ideas.

Ready for the next lesson? Read Six Characteristics of a Successful Digital Mindset.

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Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

The post Accelerate Your Digital Transformation with this Tech Startup Tool appeared first on Engineering.com.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what makes for a successful transformation—and how to avoid problems that lead to a digital dead end.

Every month, I’ll share a new lesson on how to steer your organization through the rough waters of digital transformation. Yes, there will be homework. But if you pay attention and put in the effort, it won’t be long before you start seeing real results.

Mindsets are how we see ourselves (our self perceptions) and the world (our beliefs). All of our behavior is based on our mindsets—how we act and respond to situations at work and in our broader lives. Mindsets can support digital transformation or impede it.

In recent years there has been growing interest in mindsets as part of the explanation for digital transformation failure. It is argued that mindsets which may have been a very positive factor in slowly changing organizations are a negative factor in the digital age. For example, a mindset that is very effective and disciplined at managing repetitive processes may not be comfortable with, or appropriate for, continuous improvement or radical change.

Tsedal Neeley and Paul Leonardi have worked to understand digital mindsets. Their 2022 book, The Digital Mindset: What It Really Takes to Thrive in the Age of Data, Algorithms and AI, describes the areas they think are important in digital mindsets. This article is intended to build on their work, expanding understanding of digital mindsets and providing a practical model for action.

Understanding your own digital mindset as an individual will help you add value that will benefit your career. Understanding it for your workforce will enable you to understand a major constraint of digital transformation and allow you to plan how to address it.

Assessing your digital mindset

At the University of Waterloo I have developed a model for the assessment of digital mindsets in organizations. The model is based on a review of publications discussing both digital mindsets and digital culture that would support successful digital transformation. The review identified characteristics that were frequently referred to, and these were consolidated into six categories for the assessment:

1. Working with others
2. Working with data
3. Working with change
4. Working better
5. Working with society
6. Working with technology

Individuals can use the assessment model to understand their own digital mindset, and organizations can aggregate individual responses to understand collective mindsets in units, functions and whole organizations.

The assessment can also be used to consider how the existing culture and practices in your organization are supporting the development and exploitation of digital mindsets, and enable the development of your own culture that supports and develops digital mindsets.

The digital mindset categories

Working with others

Successful digital transformation activity requires comfort in working with people and machines. Employees need to collaborate well with people online, working between and across organizational silos. They must work well with others outside the organization, establishing and operating within new digital eco-systems.

In organizations that were changing slowly, departments or units could focus mostly on their own work, with little need for interaction with others. More rapid change requires close collaboration to understand and manage its impact across the organization.

Working with data

Most organizations have had data available to decision makers for a long time, and this has been applied effectively by many. Today, information technology can greatly increase the volume of data available at all levels in the organization. The potential for improved, data-based decision making is great, but requires mindsets and processes.

In the past, when data was less available, experience and “judgement” were valued in decision making. Establishing the discipline that adherence to data-based decision making requires is a substantial mindset change.

Working with change

Change is often thought to be difficult in organizations and it often fails. Part of the reason for this is that the mindset needed for managing a slowly changing organization is very different from that needed for radical digital transformation. Manager appointments and employee recruitment have been based on the expected contribution to stability and reliability.

This is compounded by organization processes, practices and culture that support slow change. Silo structures, risk intolerance and long approval processes are not helpful here, for example.

Working better

Technology-based change requires engaged participation in improvement from all employees. New processes and work activities will need to be developed and refined when new technologies are introduced in the workplace. Innovation and continuous improvement activity will support this with appropriate creativity and motivation.

New technologies also require new skills. A learning mindset, with a willingness to learn and take responsibility for personal skills development is needed, along with organization management of skills development.

Working with society

The ethical implications of digital transformation are important for society—we should all act ethically in our use of technology. For organizations, ethical issues are also important commercially. Unethical behavior has negative financial consequences, either through lost sales or legal penalties. While ethical mindsets have always been desired, digital transformation creates frequent new ethical dilemmas that require earnest attention to the societal impact of technology and its application.

Working with technology

Competence and confidence with information technologies throughout the organization usually needs to be improved for digital transformation. This requires a good understanding of the technologies the organization is using now and a good level of appropriate technical skills. Discretion and caution as far as cybersecurity and data privacy are concerned is essential. Awareness of and curiosity about the technology the organization might use in the future will promote acceptance of technological change.

Organizations must actively enable these elements, providing training and education.

The digital mindsets radar chart

Consider your strength in each of the digital mindset categories and rate it out of 20. You can easily visualize and share your assessment with a digital mindsets radar chart like the one shown below. The chart allows you to plot your own individual digital mindset and your organization’s digital mindset.

If you need extra help scoring yourself, I’ve developed an assessment questionnaire that is available for organizations to use. For details and to access it, contact me or leave a comment below.

Digital transformation homework

Your digital mindsets homework has three important parts: First, assess your own digital mindset. Then, develop your own plan to address the areas where there is more room for improvement.  Finally, implement your plan—it will better prepare you for your own career future, making you more valuable to your organization.

For additional credit, apply the framework to your organization, considering whether your culture and practices support or constrain digital mindsets amongst employees. Removing your organizational mindset barriers will strongly contribute to digital transformation success.

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Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

The post Six Characteristics of a Successful Digital Mindset appeared first on Engineering.com.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what makes for a successful transformation—and how to avoid problems that lead to a digital dead end.

Every month, I’ll share a new lesson on how to steer your organization through the rough waters of digital transformation. Yes, there will be homework. But if you pay attention and put in the effort, it won’t be long before you start seeing real results.

Understanding your organizational capabilities today is essential for developing your digital transformation strategy. You need to know what you are good at and where you need to improve. To do so, you need a realistic strategy that combines all of the elements that are important in transformation: human, technical and organizational. Finally, completing it well requires effective stakeholder engagement.

Today, we’ll look at how to conduct an internal analysis simply, collaboratively and—most importantly—honestly.

Why honesty is important (but difficult to achieve)

Honesty is essential. Your digital transformation strategy must be based on an accurate understanding of your internal situation and there must be a willingness to face that reality—warts and all! If you can’t do that, the strategy that results will be flawed and unlikely to be successfully implemented.

Achieving the levels of trust and openness necessary for honesty to be expressed in internal analysis is very hard. In most organizations, identification of weaknesses elicits a defensive response. People throughout the organization, including at the most senior levels, are afraid to reveal problems because their own position may be made weaker.

The following example illustrates how important honesty is. During the Vietnam war, reports from the battlefield were sent to military leaders in Washington by U.S. forces. A reluctance to admit to failed or not fully successful missions meant that decisions by the leaders in Washington were often badly flawed—a major cause of the U.S. defeat.

Creating a culture of honesty is difficult and takes time. If you don’t have it now, your strategy development will be more difficult. You can’t wait until your culture is perfect before embarking on your digital transformation journey, but you will need to place a high emphasis on basing your decisions on accurate information. Even when you do this, your probability of success will be less than if you have an honest culture.

A range of tools for internal analysis

Internal analysis is used in many ways by organizations, so there are a variety of tools used. For example, Gap Analysis looks at where you are versus where you want to be. A Strategic Evaluation helps you understand progress on your grand plan. VRIO (Valuable, Rare, Inimitable and Organized) looks at your organization resources.

These and other analysis tools structure your gathering of information, ensuring that you are focused on the aspects of company activity that are most important for the decisions you are making. They also structure the discussion that people in your organization are having.

Whatever the tool, the process must be simple. The tools I advocate in the Digital Transformation Certificate program are intended to be used by groups of people. Collaboration across organizational silos is essential in effective organizational change. Simple tools that are easily understood and applied are much more effective for this.

For digital transformation strategy, we’ll use an internal analysis tool based on one created by Deloitte: the Digital Maturity Model.

Internal analysis with the digital maturity model

This internal analysis tool is intended to focus on five key areas of importance to digital transformation: customer focus, strategy strength, technology capability, operations engagement, and Organizational and cultural commitment. Each category is rated on a scale of 1 (weak) to 5 (strong).

Customer focus

More rapidly changing products, services and markets mean that your organization needs to be more focused on your customers than may have been the case in the past. How aware is everyone in your organization of their needs, and how effectively do you incorporate customer feedback in current activity and future product development? How engaged are you with the customer? This is often reflected in their level of loyalty to you. Remember, this is about your internal capabilities in focusing on the customer.

Strategy strength

Digital transformation is continuous (you don’t just do it once). Your internal strategy processes need to be strong and able to update as needed in response to technological, market and other developments. Stakeholders should be widely engaged through close relationships. They also need to be transferred into action using effective management processes. Your strength here will influence your ability to make your digital transformation vision a reality.

Technology capability

While it is important to remember that technology is only one part of digital transformation, you need to be able to implement, maintain and improve it effectively. Is your network suitable for the changes you want to make? Do you have the capability to manage and exploit the data? Is your security strong enough?

This means having effective IT resources and effective technology skills and knowledge throughout the organization. All employees need understanding that will enable them to contribute to and be comfortable with technological change.

Operations engagement

The success of your digital transformation will depend on how effectively it’s applied throughout the organization. The relationship between your IT resources and your operational resources needs to be strong. They need to work together more than they have in the past, so tension here is a serious problem. Are operational areas ready to use the new technologies in ways that will improve performance (for example, through automation and data analytics)?

Organizational and cultural commitment

Digital transformation always requires a substantial cultural change in organizations. Levels of confidence and trust in leadership need to be strong if change is going to be supported. Innovation and continuous improvement must exist widely if new technologies are going to be effectively introduced and exploited. Are leaders capable of creating this new culture? How effective is your training activity now? It will probably need to be better.

Example: Furniture manufacturer

Let’s apply this internal analysis tool to the hypothetical example of a furniture manufacturer. The manufacturer has (honestly!) rated itself on each of the five categories and given an explanation for the rating.

As with all of the tools we have introduced in this series, the value of this internal analysis is only realized with extensive stakeholder engagement. This enables multiple perspectives and sources of knowledge to be combined in effective decision making. In most cases of digital transformation strategy development, I’ve found that stakeholder engagement should be stronger.

Digital transformation homework

Your internal analysis homework is to consider the question of honesty. Is this a challenge in your organization? If it is, what should be done to overcome it? If it’s not an issue, consider your plan for engaging stakeholders. Document your thoughts and apply them when you do your own internal analysis.

Ready for more digital transformation knowledge? Check out another lesson: No More Navel-Gazing: PESTLE Analysis is How Companies Plan to Adapt.

Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

The post How to (Honestly) Perform an Internal Analysis appeared first on Engineering.com.

I’m here to help. As the author and instructor of the Watspeed Digital Transformation Certificate Program at the University of Waterloo, I’ve studied organizations big and small to learn what makes for a successful transformation—and how to avoid problems that lead to a digital dead end.

Every month, I’ll share a new lesson on how to steer your organization through the rough waters of digital transformation. Yes, there will be homework. But if you pay attention and put in the effort, it won’t be long before you start seeing real results.

Why are well established companies failing so often today and, more importantly, what could they have done to ensure their survival? In every sector, inadequate response to technological change is regularly causing corporate demise. Many household brand names that been brought down in this way: Blackberry, Sears, Nortel, Kodak, Toys R’ Us and many more.

These failures have resulted in lost livelihoods for the people they employed and impacted their communities. While their activities may be replaced by those of other companies, these may be in other cities, states or continents. In terms of economic development, helping existing companies adapt is very important, especially as technological change, and hence failure, is accelerating.

There are, of course, many reasons that companies fail to adapt, including technical capability, employee skills, culture and leadership incompetency. One of the major reasons, though, is that changes in their external environment were not recognized and given sufficient attention in corporate decision making, including in strategy development and tactical application.

The Boston Consulting Group undertook a study in 2016 which showed that organizations get more introverted as they get bigger. They become focused more on internal metrics like cost, inventory and quality, and not enough on external developments that threaten their existence.

This tendency is more important today. Digital transformation has increased competition with rapid development of new products and services. It has transformed processes, often dramatically impacting performance, while customer relationships are often now fundamentally different than in the past (especially after the pandemic). While introversion was a problem before, it is a much bigger one today. The tool that will help you address it is known as PESTLE.

What is PESTLE analysis?

PESTLE analysis (originally known as PEST, before the L and E were added) categorizes your analysis and understanding of the external factors that are important to your organization: Political, Economic, Social, Technological, Legal and Environmental.

Political: The tech sector and organizations’ use of technology are facing increasing scrutiny by local, regional and national political bodies, which may constrain the use of information technology. The U.S. government’s concerns about Huawei, for example, have influenced many organizations’ choice of technology suppliers. Political concerns about competition in the tech sector and the impact of automation on jobs are further areas of government focus today. Technological decisions require consideration of possible political decisions today.

Economic: Higher levels of employment make it more difficult for organizations to recruit the new skills they need. Low interest rates may make investment easier. Trade barriers may restrict markets and limit international supply chain activity.

Social: Public attitudes toward technology have been changing quickly in recent years. Privacy concerns have grown and influence the adoption of technology-based products. COVID-19 has led to more people using information technology and opened up more technology-based opportunities for many organizations. Increases in working at home change the way organizations use technology.

Technological: Innovation in the technologies available to organizations continues to take place rapidly. Advances in artificial intelligence (AI), automation and the internet of things (IoT) are appearing regularly. Every advance opens up new possibilities for organizational application.

Legal: New legislation will influence organizational use of technology. Legislation on privacy, employment practices, cybercrime, data governance, and in many other areas is emerging today and likely to continue to rapidly develop.

Environmental: Concerns about climate change and other aspects of the environment are now impacting many areas. Technology impacts the environment negatively and positively. For example, it helps organizations manage their energy use and at the same time raises concerns about the impact of the disposal of redundant equipment.

Example of a PESTLE analysis for digital transformation

The following chart provides an example of the application of PESTLE for digital transformation in a forestry industry company. Note that I have utilized a three-year time horizon and included a “Possible Action” column to focus attention on the outcomes of the discussion:

PESTLE is valuable because it provides a framework for understanding the external environment, but that’s not all or enough. Its greater purpose is as a group tool that is used to help pool knowledge and develop collective understanding. In applying it, you should think very carefully about how you do this, to maximize the impact it has on reducing your organization’s introversion. Here are some tips:

• Use PESTLE for management team discussions at other levels beyond the most senior team to reduce introversion everywhere.
• Ensure discussion participants prepare for the PESTLE session and bring knowledge that is appropriate to their role.
• Record and share outcomes in briefings for others.
• Think about how you can bring the outside into the organization—many successful organizations do this by inviting guest speakers, encouraging external visits, etc.
• Encourage education—broadening knowledge and understanding opens minds supports the needed innovation.
• Make PESTLE a regular activity—as the pace of change increases it will be more important that PESTLE discussions occur.

Your digital transformation homework

Your objective with this lesson is to better understand how to develop the external focus of your organization. First, think about the focus your organization has today. What are the factors that encourage an internal concentration and what encourages an external one (such as your performance metrics and the areas of discussion in management meetings)?

Next, do your own PESTLE analysis. It is better if you can find a few other people to do this with you (maybe your own management team) but if you can’t do that, then do it by yourself. Finally, consider the actions you could take to improve your organization’s external orientation.

I’m always keen to hear about how you did. Add your questions or comments below!

Ready for more digital transformation knowledge? Check out another lesson: SWOT and Strategy Development.

Peter Carr is the author and instructor of the University of Waterloo Watspeed Digital Transformation Certificate Program, available globally online, and focused on overcoming the challenges of successful technological change. The program is jointly offered with the Ontario Society of Professional Engineers.

The post No More Navel-Gazing: PESTLE Analysis is How Companies Plan to Adapt appeared first on Engineering.com.