Podcast: The Art of the Practical in digital transformation

Jeff Winter has nearly 20 years of experience in the manufacturing industry, with a focus on automation, safety, controls, and OT and IT systems. Jeff became a thought leader in the fields of Industry 4.0 and digital transformation, and has actively participated in industry associations, academic groups, advisory boards, and industry research teams.

Jeff has teamed up with Scott Achelpohl, managing editor of Smart Industry, to create (R)Evolutionizing Manufacturing, a monthly series of chats about how industrials of all sizes and budgets can embrace technology.

The two experts plan to cover a range of topics, including digital twins, predictive maintenance, cybersecurity, IT and OT convergence, automation, and much more. This episode examines practical approaches to digital transformation, highlighting strategies that lead to real success.

Below is a partial transcript of this Great Question podcast:

Scott Achelpohl: Jeff and I are picking up where we left off in November from our two-part chat, the Art of the Possible in digital transformation, and now the art of the practical. Jeff introduced these two companion topics during episode four, so I'm going to turn our chat over to Jeff for introductions.

Jeff Winter: Sure. So, this started a few months ago. I did a post on LinkedIn on these very topics because I kept seeing the same thing over and over. Companies limiting their visions and not knowing what they should do, especially to start. So the art of the practical, our topic today, it grounds us in reality, where the art of the possible, which was the topic for episode four, allowed us to dream a little bit. And the art of the practical acknowledges that while our aspirations should be universal, what we actually achieve, and the path to getting to achieving it, is highly personalized.

And this approach isn't about limiting our ambitions, but rather understanding and embracing our unique corporate landscape, our company size, our industry, our culture, and any specific objectives that we may have. And that's why today we're diving into the Art of the Practical and digital transformation.

We've dreamed big. We thought about how industry 4.0 can push boundaries. We visualized what excellence looks like, especially when we take advantage of all the disruptive technologies that are out there. But now we're going to talk about the practical terms, how we reach those goals, and how we achieve our targets.

SA: Last time we talked a lot about goals, having the right ones for your business and being satisfied once they're reached. The question is, which goals? Our goal setting is, as Jeff said, determined by our company's needs and objectives.

Much of corporate goal setting is about achieving ROI. Of course, we've all heard about ROI. So maybe I should ask this question to you, Jeff, before we dive into questions that have come in since episode four in November. How do we make sure that our dreaming, the art of the possible, meets ROI to conform to the art of the practical?

JW: Great question. The key to making sure that the art of the possible translates into the art of the practical and ultimately drives real business impact is rethinking how we define success. And I'm going to point out one key thing in your question that I want to focus my entire answer on. ROI. Return on investment. Too often, digital transformation initiatives are evaluated through the lens of ROI. But the reality is ROI is better suited for continuous improvement projects, not transformational projects.

When you're making incremental gains like optimizing supply chain efficiency or reducing machine downtime, ROI is a great measure because you can compare costs before and then after and determine the percentage improvement and the relative gain associated with that. But transformation is fundamentally different because it's not about improving the existing system.

It's about building something entirely new. New revenue streams, new business models, new market opportunities. The very nature of transformation makes it difficult, and sometimes even impossible, to measure with traditional ROI formulas.

A perfect example of this is actually AWS, Amazon Web Services. So, AWS wasn't created because of a clear ROI calculation. In fact, when Amazon first started developing it in the early 2000s, Wall Street analysts and industry insiders were skeptical, even dismissing it as a distraction from the company’s core ecommerce business. After all, why would an online retailer get into cloud computing? The decision didn't make sense if you're judging it purely on short-term ROI.

But internally, Amazon didn't see itself as just a retailer. It saw itself as a technology company that happened to sell products online. And it recognized that it needed scalable and on-demand cloud computing to run its own operations and that other companies probably need that too. So AWS officially launched in 2006. And on the first day, it was something like 12,000 developers signed up, a clear signal that there was a massive demand.

But still, AWS didn't generate substantial profits right away. It took years of investment, refinement, and customer education before the world truly understood the value of cloud computing. But today, AWS is the largest cloud provider in the world, contributing more to Amazon's profits than all of its retail operations combined. Now, if Amazon had measured AWS solely on its ROI in the first few years, it might never have been launched. Or it would have shut down before it became the giant that it is today.