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Dmitry Shapovalov: the main condition for digital transformation

Dmitry Shapovalov: the main condition for digital transformation

Dmitry Shapovalov,
IT-Enterprise Industrial Business Solutions Team Leader

Digital transformation (what the English-language media call the "buzzword") is becoming an increasingly popular expression. According to IDC estimates, in 2018, investments in digital transformation will exceed $ 1 trillion – this is almost 10 annual GDP of Ukraine. At the same time, a large number of enterprises, especially in developing countries, quite successfully earn huge money with almost manual labor. What caused investment in digital transformation?

The reason is global competition. Over the past 30 years, global GDP has grown almost 3 times: from $ 31 trillion in 1997 to $ 80 trillion in 2017. The number of companies and enterprises around the world, as well as their production facilities, also increased many times. International relations and trade agreements have spread so much that in almost all countries of the world companies compete not so much on the local market as on the global market. Because of the wide range of choices of the end consumer, manufacturers are in a state of "war of all against all".

In such circumstances, to achieve economic success, every little thing can play a significant role. There are a number of industries in which margins do not exceed 5-7%, and reducing the cost of the product by even 0.5% means a multi-million profit and superiority over the competitor. Digital transformation is aimed at precisely such achievements.

Future technologies today

The essence of digital transformation lies in the search for new approaches and technologies for solving classical business problems. The main role here is played by modern technologies, united by the term Industry 4.0 or the 4th Industrial Revolution. These technologies allow connecting all production processes into a single digital system and maximally automating the management of this system.

Modern factories use the industrial Internet of Things (IIoT) to control machines and collect huge amounts of data. This data is processed by technologies of artificial self-learning intelligence, which then plans production processes using the APS/MES methodology. Based on the analysis of all information of the enterprise, the algorithms reveal the trouble spots in the value chain, select the most effective modes of operation and monitor the number of indicators with which people cannot cope.
The same data is used for predictive maintenance, which helps predict a problem with devices long before it occurs. By maintaining the parameters in which the equipment operates with the highest efficiency, enterprises receive an additional benefit, which translates into millions of profits.

Digital technologies are becoming a powerful management tool. With access to processed data in real time, managers can make informed decisions and plan the work of enterprises much more accurately. Digital Twin allows simulating production processes and seeing what results one or another system will bring. The technologies of augmented and virtual reality, whose potential is enormous, will help: from creating virtual training programs for personnel to obtaining virtual information about each object in production.

According to McKinsey, the introduction of Industry 4.0 technology gives a huge bonus to the enterprise in many directions at once: increasing productivity, reducing repair costs and time of product launch to market, reducing equipment downtime, improving the accuracy of business plans and much more. At first glance, it seems that we are talking about science fiction or about the distant future, but this is not so.

Leading companies in the world have already made a digital transformation. 68 % of companies surveyed by McKinsey in 2018 consider it their priority. There are successful cases of digital transformation in Ukraine: INTERPIPE, JSC FED, SE NPKG Zorya-Mashproekt. The transition to Industry 4.0 technology gives an edge over competitors right now and provides leadership in the industry in the future.

What is the snag?

Digital transformation today is in a paradoxical state: on the one hand, we say that it already exists. These technologies are used here and now. On the other hand, most enterprises have not completed or have not even begun this process yet.
There are many reasons for this: from the lack of competent specialists to the banal lack of investment. Even enterprises that have the necessary competencies and means do not always succeed.

Demand creates supply: as soon as Industry 4.0 was started to be taken seriously, relevant solutions appeared on the market. Both large companies and startups with a couple of people today offer separate learning systems based on VR, IIoT sensors and analytical programs. Each such solution can be effective in its own direction, but all this is meaningless without integration with other solutions.

In conditions when few managers understand what digital transformation is, only a few of them competently carry it out. Only a search for a system solution and full integration of systems will give the effect that is being talked about in business forums and is written by McKinsey. This is the main condition that should be remembered for enterprises that have taken the path of digital transformation.