Digital transformation is a top priority for CxO’s worldwide, and a challenge for machine and devices manufacturing companies in particular. These companies now need to add software development as a new skill to their core product design and manufacturing expertise. However, software development has a history of more than 30 years and is not easily adopted.
During the last years, EACG has supported a variety of its customers in the digital transformation process. One focus is the design and development of SaaS offerings. Throughout these projects, we learned a lot and like to share some of the success factors in the following articles.
Recognizing cultural differences
When starting our first IT projects in the mechanical engineering industry more than 15 years ago, it were the small things that surprised us. Working hours, different roles and ways of communicating and escalating could differ significantly and provide cause for irritation. Cultural differences in mechanical and information technology engineering are not only significant, these disciplines are different animals altogether.
I found this surprising. I knew cultural differences from working in international projects, but seeing these cultural differences surface on the national level amazed me, especially with the level of training being the same. The thinking and problem solving process between mechanical and software engineers was and is still very different.
To succeed in digital transformation, cultural differences between mechanical and software engineering has to be recognized and actively managed
While the introduction of new processes, technologies and capabilities play an important role in this transformation, managing these cultural differences is key to the success of a digital transformation project. If you don’t know the rules of the game, even the fiercest efforts will fail. Understanding the cultural differences in the design and development process between these two engineering disciplines and merging them together is therefore of paramount importance.
Focus on customer demands
One of the most important aspects for each digital transformation project is the understanding that the goals have changed. Traditionally, product and service took centre stage. However, with the entry of digitalization, the demands of the customer gain even more attention and focus. The mechanical engineer strives to improve or invent a device that provides a unique capability, for instance fully automatic harvesting or gently stretching skin to support medical surgery, and this special capability makes the product valuable.
Digitally transformed companies focus even more on the customer needs
Digital companies follow a different principle by focusing on the customer needs, not a specific capability. Uber focuses on transportation, AirBnB on hospitality, Amazon on procurement (B2C). In all these cases, the internal implementation of the service delivery is secondary. The specifics of the logistics service delivery don’t matter to the Amazon customer, it is the direct contact and servicing the customer needs that matter.
This is not a completely new idea. Jack Welch’s focus on customer needs generated double digit company growth during his tenure. He recognized the importance of the service and maintenance business. Not only the number of sold products, but also customer centric maintenance services contribute considerably to the bottom line while providing the opportunity to study customer needs more closely. This in turn led to the creating of new revenue generating services.
Understanding the role of MVP
Software companies use the MVP approach to deliver product functionalities in an iterative fashion, providing new and advanced features with each iteration. The general idea is to deliver a product with minimal functionality early (minimum viable product) in order to occupy the market and gather customer feedback. Based on the customer feedback, the product is further developed and enhanced.
The product development concept is contrary to the way products in mechanical engineering are developed. The accepted way of developing a product consists of many clearly defined development steps and milestones that lead from the original product idea to the finished and mature, well tested product. Minimizing the risk of product recalls clearly determines the design process. Once the product is shipped, is it hard to provide additional modifications without incurring significant costs.
If you compare this to a digital product, the ability of adding to and improving the product never end and the MVP approach encourages continuous improvement through customer feedback. This concept is foreign to the mechanical engineer, who would see this approach as creating an endless sequence of pre-production prototypes rather than creating a production ready product.
Successful digital companies have excelled at balancing product functionality with a fast, MVP based product development approach
In order to combine product functionality and software successfully, these contradicting approaches have to carefully be brought together based on the company specific requirement and context. Based on the specific situation and required capabilities and features of the product, one of the approaches will take precedence.
What really matters is the way MVP based software development is introduced in the organization. An open discussion of the consequences is necessary. Engineers may be uncomfortable with the MVP approach and the way products are developed has to actively managed. This includes strategy decisions to determine the extent that software will determine product functionality as well as whether the MVP approach is an appropriate fit to product development. Without such communication within the company, negatives consequences are inevitable, as the product may suffer from a flood of continuous product updates or will lack profitability due to the small size of the production batches.
Management has to understand that the introduction of software development into the product development process – and therefore the digital transformation – will fail without the proper management attention.
Actively manage the production process
Another often neglected aspect is the software production process, where software development is erroneously limited to writing lines of code. The careful attention a mechanical engineer self-evidently spends on checking and validation the production chain is often missing in software development, with structured testing and deployment infrastructures and methodologies missing only insufficiently implemented.
The latest developments in software development such as the Infrastructure as Code paradigm are good examples of the high level of professionalism and maturity the software industry has reached. Within minutes virtual data centers can easily be created around the globe and put into production. This is a huge leap forward compared to only a few years ago, where this process would have taken months. It is mandatory that companies take advantages of these technical capabilities. The software supply chain has become the product supply chain of mechanical engineering.
The software development and deployment process has become the new product supply chain
This change requires a change in the way of thinking about product development. Previously, an engineer was working with clearly defined milestone and deliverables in a project mode. In the new world of product development with concepts and methodologies like MVP, this clear demarcation disappears. Continuous improvements and incremental changes on the one hand require a highly automated software supply chain and much more repetitive testing to allow continuous deployment. On the other hand the engineer’s responsibility does not end with the deployment/go-to market as it is the case in traditional product development, but binds the engineer to the product permanently.
Management of cultural change as central success factor
The combination of product and software creates new revenue opportunities. A product creates an emotional connection with the user and is tightly embedded into the manufacturing process, thus significantly increasing vendor lock-in. The digitalization of the product leads to improved customer satisfaction. The successful change management that closes the cultural gap between mechanical and software engineer is the key success factor to reap these benefits.
In the following articles, we will discuss further aspects relevant to the success of the digital transformation, such as the role of an agile organization. For discussion and further information, we can be reached at https://www.eacg.de.
(this article has been first published on linkedin)