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Industrial-Digital Players Are in a Sweet Spot

They are a force of engineering and can quickly mobilize some of the most diverse and talented engineers in the world to solve customer problems.

Three to five years ago, digital transformation consultants agreed the industrial world would be shaken up by “digital natives.” These digital natives were fast, agile, well-funded, and unstoppable.  They were and still are formidable competitors: Google, Amazon, Palantir, Ailbaba, Tesla, SpaceX, and Microsoft. They knew how to get, integrate, and extract value out of data.

The digital natives were going to disrupt the traditional eco-systems of what they called the “industrial natives.” That triggered a torrent of industrial companies starting their own digital transformations to get ready to compete in this data-rich new world. In contrast, these companies were slow, very bureaucratic, and very much product-centric.

The battle between digital and industrial natives promised to be ferocious and epic. Lots of very reputable industrial companies started early and rushed to become digital players. They were too early, hurried through the process of transformation, and lost some technological bets. The same consultants, which were paid billions for digital transformation services, quickly concluded that culture was critical in the digital transformation process and that digital was mostly about business model innovation and the ability of industrial firms to become ambidextrous organizations, meaning managing legacy businesses while innovating in digital at the same time. What a shocker! The same conclusions were reached by management scholars in the industrial revolution of 1900!

Since then, we have witnessed the emergence of a third type of player. They are not digital natives or industrial natives. They are in the middle, morphing their DNA to become what I call “in-digital players”. They have the traits of industrial companies and are mutating to become more like digital players. These companies have the following characteristics:

1. They have a strong legacy of success and have astounding customer relationships: large installed bases, long-lasting contractual relationships, and a strong customer co-development mindset.

2. Some of these companies have been around for over a century, and others for decades: they do not intend to disappear and they are now fighting back against digital natives that have great access to capital but poor success records.

3. They have product, software, systems technology in their DNA:  they are a force of engineering and can quickly mobilize some of the most diverse and talented engineers in the world to solve customer problems.

4. They are patiently making digital part of their renewed selves while navigating the need to migrate at the market pace and to educate players in their established eco-systems.

5. They are pragmatic and focus on leveraging their strong position in their legacy markets: they are focusing on making their core business even stronger and adding technology and digital solutions as part of their overall value propositions.

6. They have acquired some of the best digital, analytics technology, and software companies in the world to leapfrog in their development of integrated systems using AI, data analytics, and cyber-security.

These in-digital natives include companies like Siemens, Honeywell, Sandvik, Airbus, Michelin, Schneider Electric, ABB, Toyota, Medtronic, Stanley Black & Decker, as well as the company I work for, Thales, and others. They are strong and profitable players in their market spaces. They have acted deliberately and patiently over the past five years not to rush to make the wrong digital investments and pour billions into shiny and promising technologies. Their CEOs have managed to focus on the difficult balance of profitable growth, growth from digital, and cash flow control.

Some of the CEOs of digital natives regularly make fun of industrial CEOs by mocking them on how antiquated and slow they are. But I would like to encourage you to imagine the future, and I can guarantee these in-digital players are not going anywhere. In fact, in a few years, digital will be the new normal. The metamorphosis is going very well and the future is bright.

I write this short essay to ask you to pay attention to the transformation of these industrial champions as they continue to be stable, sustainable, and profitable companies. Of course, some of them will make mistakes and might stumble along the way. But this is going to happen to digital natives as well, especially as we read current stories about WeWork, Uber, and other failed unicorns. Consultants might disagree with my position, but I am predicting that their next round of content in the digital space will focus on the emergence of unstoppable in-digital companies that are making the world a more secure and connected one.

If you are working in an industrial company today, learn about these champions and embrace their best practices and how they are transforming their culture at a pace that makes sense for their customers, their employees, and their shareholders. Be an agent of change by scanning the B2C world and by identifying the best-practice nuggets that can be adapted and integrated into your unique DNA.

Stephan M. Liozu, Ph.D. is chief value officer at Thales Group and founder of Value Innoruption Advisors, a consulting boutique specializing in value-based pricing, digital pricing, and industrial pricing. He is the author of nine pricing books and is a frequent keynote speaker at industrial and digital conferences.

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