Getting the digital ecosystem right to achieve full potential

With the emergence of Industry 4.0, leveraging digital capabilities for business is more than a necessity; it can be a game-changer. To enable this transformation, digital vendors need to provide the right solutions, which can be scaled-up in the organisation. A critical step in this process is to identify and prioritise the solutions with a clear view on Return on Investment (ROI) and then to choose the right vendors.

The above premise can make or break a firm’s ability to realise value from its digital agenda.The next step is to understand the digital vendor landscape, which is both complex and nuanced.

There are two key dimensions to understanding the digital offerings of vendors for industrial goods and services companies: the technology stack which is a combination of tools and frameworks and the industry value chain.

While business managers understand the value chain components (e.g. sourcing, manufacturing, sales, distribution etc.) technology stack is clouded due to the IT jargon.

A simple way to relate to the technology stack is to think about it in two blocks. The first is the interactive part, where there is an interface to interact with either the customers, business partners or with employees. The second is the back-end of the stack, like the application Programming Interface (API), platforms and cloud, which is mostly within the domain of the IT department and acts as an enabler for the interactive stack. A few examples of digital solutions in the interactive stack are enhancing customer experience, improving internal processes like vendor invoicing or providing analytics support to improve efficiency, service levels, quality and cost position or to identify new sources of revenue.

While choosing a digital solution, It is important to make a choice in a way that the two components of the technology stack (interactive and the back-end) are synchronised.

Business managers of industrial firms are often inundated with digital offerings from many vendors and find it difficult to narrow down options. It is important to understand where these vendors fit in the landscape described above and if that fits well with the critical requirement of the company.A classification of vendors into six categories helps in understanding their broad scope and can act as a first filter. The six categories of vendors include large manufacturing players entering digital services market, technology outsourcing & consulting players, ITeS/BPO players, digital-focused pure-play IOT companies, software/platform vendors with IOT and analytics offerings and telecom companies with specialised IOT capabilities.

To complicate things further, within each technology stack and the value chain component (e.g. procurement vs. manufacturing vs. sales and distribution), the solutions are nuanced. It would be good to highlight a case as an example where we were supporting a regional logistics company for their network and route optimisation. We ended up recommending two digital vendors for two different aspects of the problem, one a leader in North America and another a startup in India.We tested the pilots with them and now the programme is being scaled-up.We found an almost 12% increase in pick-up and delivery productivity. Through dynamic routing we also saw a 25% reduction in the kilometres travelled that had the added benefit of reducing the environment impact.

At another leading metals company, which wanted substantial improvement in visibility of their products through the distribution chain and create a differentiated customer experience, we leveraged our internal technology experts to design and develop the prototype and after successful testing, we handed over to an IT firm to scale-up the solution.

Even for vendors who seem to have similar offerings on face value, the actual solutions and expertise across sub-verticals can be different. For example, digital solutions by two very similar IOT players could have different industry focus and capabilities.

In the Indian context where we have several multi-business companies and conglomerates, a one-size-fits-all approach at a corporate level could be risky and hence a nuanced understanding of the strengths across the technology stack and value chain, their capabilities in different sub-sectors is therefore very important. Additionally, companies need to be mindful of the disruptive trends before choosing their digital vendors.

Ultimately, Bain analysis narrows down the choice of vendors to the following factors:

The industry and the sub-vertical of interest: Many vendors seem to have similar offerings on the surface, but their actual solutions and strengths across verticals may be different.

Type and extent of digital solutions: It is important to understand the full range of solutions and prioritise the digital solutions for the company depending on the value at stake, ease of implementation and strategic importance.

Integration with the existing system: A vendor’s knowledge in the technology stack to which the solution needs to be integrated can be beneficial.

Ability to future proof: In view of potential disruptions, vendors with strong after sales service, with solutions that are expandable and compatible with other systems will be more a more prudent choice.

The bottom line: there is no silver bullet. Companies need to find their unique digital solutions and be the orchestrator across different pieces.

Views are personal.

Deepak Jain is a partner in Bain & Company's Advanced Manufacturing & Services and Energy & Natural Resources practices and leads the firm’s B2B Digital capability in Asia-Pacific. Neelam Phadke is a practice director in Bain & Company's Advanced Manufacturing & Services and Energy & Natural Resources practices.