Turn digital transformation into an asset
When most people hear the name SKF, they probably think of bearings and seals—and rightly so. Chances are they probably have SKF parts in their manufacturing equipment.
They might not think of SKF as an information provider. But the bearing manufacturer has realized the importance of the operational insights that can be gleaned from data, and it’s turning this digital transformation into a major part of its business—so much so that the company hired a veteran with more than 20 years of experience in driving digital innovation at major firms, including having been head of digital customer experience at Verizon.
Michael D’Argenio, SKF Americas vice president, digital transformation and customer experience, headed up the talks at SKF’s recent annual press conference in Philadelphia by suggesting: If any company today hasn’t begun in earnest the digital transformation journey, putting it off until tomorrow could result in losing out to the competition.
D’Argenio pointed to Kodak, which holds the first patents in digital photography. Kodak, now a shadow of its former self, shelved the patents and digital technology so it wouldn’t compete with Kodak’s film universe. Alternatively, Encyclopedia Britannica, which embraced digital technology, ran for 244 years on paper and realized digital was the future when in 1994 Microsoft Encarta came out on CD-ROM, soon followed by community-driven Wikipedia. Accepting the digital challenge, Britannica gave up print and now has a website where its value proposition is a provider of reliable, high-value, verifiable knowledge. Its digital product suite has been especially successful with educational institutions.
Encyclopedia Britannica chose not to let external digital technology disrupt it, but capitalized on adopting that disruption internally and rewriting its business strategy, says D’Argenio. “Are you being disrupted, or are you pushing disruption internally as part of your strategy? Forward-looking companies are following the latter. They’re looking at disruption as an opportunity built on new successes, new customers and creating their value in new ways. And they’re taking decisive action by applying strategic plans that help anticipate new market potential that previously hadn’t existed.”
“The short story on data is that today with the capabilities we have, data is a strategic asset,” says D’Argenio. “To be successful with it, companies need to break down the legacy silos so they can see this data in a holistic way. Then they need to focus on developing the capacity to transform that data into meaningful insights that create value.”
“Competition used to be a zero-sum game between very similar companies,” says D’Argenio. “But now digital companies have come into the space, and they are about what’s referred to as ‘platform creation’—rather than just product creation. Which means that your competition tomorrow can come from nowhere. And a lot of times, it comes from companies that look nothing like yours.”
For example, D’Argenio pointed to Hilton Hotels, one of the world’s largest hotel chains, which owns properties and rents rooms. Today, its largest competitor doesn’t own one single hotel room. It’s a technology company that has built a platform on Airbnb. It has changed the world of hotel strategies because it wasn’t in Hilton’s space. Airbnb wasn’t similar at all to Hilton’s business model.
Today, digital technology changes the way research and development is done. Historically, innovation was a big-bet, high-risk process run by senior leadership making big investments for the future. “New digital technologies have changed the innovation management process so we can now create small experimental—fast, flexible continuous innovation,” says D’Argenio. This allows innovating and testing new products at much lower cost.
Companies need to be sensitive to value. “Value needs to be dynamic and adaptable,” says D’Argenio. “Successful businesses are looking continuously at their value, and they’re adapting and pivoting to the changing needs of the market to meet these rising expectations and maintain their relevance and competitiveness.”
“SKF has been known for bearings, seals and lubrication,” says D’Argenio. “We’re taking a look at our company, customers and industry through a new lens. We’re identifying the value proposition. That value lies in the area of knowledge and insights. So after a hundred years of engineering expertise, we’re able to deliver products and services to customers. It’s as much about insights as it is about bearings and seals. We’re investing heavily in this area of emerging technologies; we’re developing new business intelligence abilities that provide powerful insights—both internally and externally to our customers. We recognize that the SKF of the future will look different than it does today.”