Industrial Digital Transformation: CEO Best Practices for Making the Leap
It’s no secret that traditional sectors such as Industrial often struggle with digital transformation. Despite knowing it’s the best path forward and having a strong desire to make the leap, going through the process is anything but easy. Merging two very different worlds (traditional and digital) without proper planning and communication can become a time-consuming and tricky process, and simply increasing digitization budgets won't result in long-term, meaningful change.
One of the most efficient digitization strategies for traditional Industrial corporations is to cooperate with startups. But finding the right startups to partner with requires a lot of know-how and understanding of the ecosystem.
As part of our corporate partnership program, the Speedinvest Industrial Tech team introduces our investors to the most innovative technologies and the startups behind them. Because of our hands-on partnerships with both players in the ecosystem we understand the pain points of large corporations and know the latest trends in industry. This has allowed us to initiate dozens of corporate-startup collaborations, from proof-of-concepts to full commercial customer relationships, as well as direct investments.
Beyond these introductions, we also organize regular events to provide further information and advice to support digital transformation journeys. In September, we held a best practice sharing panel with established industrial companies to discuss how they collaborate with startups from an organisational perspective, and what they’ve learned in the process.
Gisbert Rühl, the former CEO of steel trader Klöckner & Co, was our keynote speaker. Gisbert helped Klöckner become a leading industrial company in the DACH region. Under his direction, collaboration and incubation of startups was introduced to great success. As a result, Klöckner now generates 45% of their annual revenues from their digital trading platform!
How did Klöckner do it, and what advice does Gisbert give other companies in their journey to digital transformation?
Here are five key takeaways from our recent workshop to help you trigger digital innovation in your business.
Success requires CEO commitment
If there is true interest in successful implementation of a digitization project, the CEO must be fully involved and actively promote an “all-in mindset” across the organization. Their buy-in and commitment will have a significant impact on the project's success. Gisbert says he prioritizes activities that support digital transformation (e.g. meetings with a startup or participating in a related event) over day-to-day tasks. Daily operations, he says, can be delegated. But driving digital transformation forward needs to be managed.
Innovation projects should be independent
Digital transformation will cause some level of disruption, according to Gisbert. But it’s always better to lead organizational change rather than become a helpless bystander.
To allow for organized disruption to happen, responsible teams must be given the freedom to make necessary changes. This can involve operations, legal, personnel and even geographical independence from the corporate mother-ship. Building a successful intrapreneurial hub, for example, can require setting up camp in a digital hot-spot like Berlin or Vienna to help attract the talent and network within the entrepreneurial ecosystem.
A challenge with full separation of digital units is finding the right level of “distance'' but corporations are encouraged to approach this transformation boldly. If patient, a certain balance of information exchange will ultimately be achieved and the company will benefit from the digital hub’s learnings and the culture. Each company is different and there is no “one size fits all” blueprint or timeline, so finding your ideal balance can only be achieved through trial and error.
Outside knowledge is essential
Innovation will thrive if you discontinue an inside-out view (innovating only on the basis of existing and known resources and insights) and instead opt for an outside-in perspective (what are potential needs of my customers).
Firms often have a hard time adopting this change of perspective because they are used to relying on existing internal assets and expertise. The goal is to encourage a new mindset in both the digital hub and in the corporation, as a whole. Developing an “it’s okay to make mistakes” culture, agile working methods, and a customer-centric approach are keys to success. As these operational ideals were spearheaded by startups, it goes without saying that the success rate can only be increased by bringing in people with a startup background and mentality.
How does this exchange happen? Gisbert encourages frequent staff rotation between the digital hub and the corporate office.
Hierarchy-free communication tools are needed
One of the hardest challenges that comes with digitization can be convincing employees across all levels and functions of the benefits. What has proven to work for our partners is constant communication on the topic.
Communication creates transparency and inclusion and allows a firm to emphasize the importance of large-scale changes. Moving away from the typical corporate communication tools and adopting a hierarchy free tool such as Slack is key but requires full buy-in from everyone.
Once a tool for hierarchy free communication is established, upper management should be encouraged to proactively participate in discussions happening on all levels and throughout various functions.
Digital training of employees fosters transformation
One way to address the importance of digital transformation is to ask your team to envision your company 10 years from now. Employees across all levels and functions will quickly realize that digitization is essential and digital training is a must for every employee.
Encourage and enable your employees to develop these skills now. Assign clear ownership over a learning program and provide your team with the freedom needed to study and experiment with their own projects.
When in doubt, just do it!
While we encourage firms considering or in the process of digital transformation to think about (and test) the recommendations above, we also want to share the most important tip discussed at our recent event on digital transformation: just go for it!
Taking the leap can often lead to faster success than a well-thought out digitalization roadmap and strategy. Afterall, when it comes to innovation and digital transformation, agility is key!