Digital Transformation – A Way towards Sustainable Ecosystem?

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The Unknown History of Digital Transformation

A long legacy has followed through the corridors of technology. Invention of computers to advance microprocessors, generations has defined the way we have adopted technology. The history defining transformation especially the digital-front has a long tenure to bring under the scope. Ingraining its roots in the 1940s, digital transformation has been continually affecting global businesses. Strategies for digital transformation was gradually defining board rooms in the 1960s and by the 1970s the spread of telecommunication, radio and television further empowered digital transformation.

Then in the late 1990s with mass advent of internet the word digital transformation found new potential and yes budgets. By mid-2000s, advance computers with generation crony about sharing and communicating made digital transformation a real serious space to look into. Newer roles, teams and companies added focuses started defining this new-age of digitalization. Today, digital approaches has made the global market looks seemingly ‘Local’.  With the growing market demand and transformations, digitalization emerged to support customer interactions. Hence companies further started dricing their digitalization ambitions. This enabled organizations to leverage digital data on their own activities and interactions. Connected to customers, suppliers, and other stakeholders, companies realized that they operated in digital networks. To make better use of the vast amounts of information, companies started to connect all processes and devices into networks. Seeing potential in connectivity, organizations focused on digital platforms connecting all system players rather than the traditional method of doing business through intermediaries. Companies began to experiment with new digital ways of doing business, trying to leverage data more effectively, create greater agility, and retain talent.

Challenges Digital Transformation Adoption Facing 2022

Businesses not accepting/responding according to the needs of digital transformation fail miserably. Organizations find it challenging to match the pace of digital transformation, especially for the ones sticking to traditional operational methods.

While the ones fiercely adopting digital transformation stay longer in the game and are recognized as leaders.

However, the simpler it sounds, the more challenging the execution is.

  • More than 50% of digital transformation efforts fizzled completely in 2018. (Forrester)
  • 70% of digital transformations fail, most often due to resistance from employees. (McKinsey)
  • Only 16% of employees said their company’s digital transformations have improved performance and are sustainable in the long term. (McKinsey)
Digital Transformation

With more Agile-oriented companies entering into the picture, these new-age digital companies have transformed human life. The leaders in the market are implementing new technologies while ensuring faster time to market. The way of transporting, communicating, shopping, everything has taken a significant shift. These new companies have the natural ability to quickly adapt to changing market conditions and become dominant players in the industries.

This signifies a competition more robust than ever, with traditional companies rushing to adapt themselves digitally. The change of business environment puts pressure on the overall functioning of traditional companies, be it with organizational structure, customers, stakeholders.

Trying to handle these multiple expectations without proper planning, overall co-operation, and lack of flexibility leads businesses to fumble on the ground. It isn’t easy to maintain the equilibrium between digital challenges and to put the right amount of focus to handle current business processes, stakeholders, and customers. Companies specialized in genres apart from IT may find it challenging to learn the best digital transformation technology that suits their business and functional requirements.

How Semiconductor Companies are coping up with Digital Transformation

  • It’s projected more than 75 billion IoT devices will be installed worldwide by 2025
  • A ‘smart car’ will generate more than 4,000 GB of data/day
  • In the period of 2016-2025, the volume of data generated will increase tenfold to 163 zettabytes
  • 5G technology will reach 1.3 billion subscriptions by 2023
  • Emerging ‘smart’ technologies (tablets, drones, smart phones) will reach $6.9 trillion by 2030

Even before the pandemic hit, the semiconductor industry, while being at the leading edge of product research and development, needed an overhaul in terms of adopting better automation, IoT and other Industry 4.0 technologies. The cost of a semi plant—between $2B to $4B—and the time it takes to build—2 to 4 years—means many semiconductor companies are running on older, close to obsolete equipment and systems. Companies in other industries, such as automotive, oil and gas and food and beverage, had already embarked on the transformation journey, understanding the benefits it had to offer and witnessed the proven success of digital transformation.

The pandemic came in as a wakeup call. There were two waves of ‘whiplash’ for the semiconductor industry. The first came with cancelled orders from primary OEMs, a result of the pandemic shut down: car sales were down, elective surgeries were cancelled, stores were closed. The second wave brought recovery—and in a flash, demand was up over pre-Covid rates. As an article in SIA states: “during the second quarter of 2020, when automakers understandably reduced production, chipmakers saw surging demand for semiconductors used to enable remote healthcare, work-at-home, and virtual learning, which were needed during the pandemic.”

For semiconductor manufacturers, this shift in demand meant urgent rethinking of supply and production strategy, and a shift in focus towards high performance modern products, in demand from the medical, electronics and gaming industries.

  • Semiconductor manufacturers faced massive variations in demand during the course of the pandemic, which meant faster introduction of new products, faster experiments, shorter R&D cycles and the implementation of automation, control and data analytics across the operation. All this change, unless anticipated, slows down existing transformation efforts and brings management back to the drawing board. Digital transformation if pursued in a piecemeal manner will always create results which are sub-par, and when faced with disruptions which affect the entire operation, areas which haven’t yet been prioritized for transformation may become bottlenecks.
  • This need to go beyond the manufacture of the chip itself. Providing services typically associated with other industries requires the establishment of partnerships and other collaborations. In turn, it requires more than just deals to be made; it requires operational re-engineering and connectivity across partner companies within a given value chain. While chips provide the computing power, with the value addition of AI and/or IoT or other services being provided at the manufacturers’ level, it opens up new avenues for revenue generation.
  • Data is the currency of Industry 4.0 and thereby should be monetized by chip manufacturers. AI resides on chips and manufacturers can leverage this to go beyond the simple chip manufacture and sales cycle. The service provided can be to analyze and present the data which passes through the chip and help customers improve their products.

Challenges for Semiconductor Companies with Digital Transformation

Supply Chain Management

Even before the pandemic, a rapid increase in demand for semiconductors was putting strain on the manufacturing capacity and logistics of the semiconductor industry. COVID-19 increased that strain dramatically in a number of ways.

First, it disrupted the supply chain both by complicating the shipping and transportation industry and by reducing access to labor. Unlike some other manufacturing operations, semiconductor factories are far too technical to continue operating effectively with 25% of their highly skilled workforce home sick or quarantined.

Second, the pandemic further accelerated demand for semiconductors by kickstarting a new wave of digital transformation and remote work. Digital transformations of products, services, and processes are significantly more complex and require larger data management and analytics on cloud platforms. At the same time, distributed workforces have driven up demand for edge devices, sensors, and mobile devices like phones and laptops. All that technology, of course, is built on chips which are built with semiconductors.

It’s easy to see how these factors have made supply chain management a significant pain point for semiconductor and high-tech companies—but what is the role of integration in this challenge? The key to better supply chain management is efficient communication and information exchange. Everyone involved needs to send and receive data quickly to adapt to constantly shifting circumstances.

The Shift to Data and Services

More semiconductor companies than ever are making significant moves to diversify their business models by offering data and services in addition to products and materials. Moving up the stack makes a lot of sense from a strategic perspective, given the competitive climate and the increasingly specialized goods that high-tech companies are producing.

As chips become more tailored to specific capabilities and applications (e.g., autonomous vehicles, 3-D printing, and high-end graphics for gaming), semiconductor companies’ specialized knowledge and data become even more valuable.

The move toward data and service-based business models is an ambitious shift with a lot of potential for growth. But companies are likely to bite off more than they can chew without highly efficient and cohesive software ecosystems. Not only does integration streamline the operations for the new business models, it also improves access to the data-driven strategic insights that are necessary for leaders to prioritize and optimize their efforts. There’s also customer service to consider—the standard for seamless customer experiences is rising across industries in general, and in services specifically.

Mergers and Acquisitions

Anyone who follows the semiconductor industry closely knows that there is a high volume of mergers and acquisitions. Analog Devices-Maxim Integrated, AMD-Xilinx, and Intel-Mobileye-Tower are just a few recent examples. These transactions represent amazing growth opportunities, but they also come with a variety of complex challenges. It’s hard to think of a better example of the need for integration of business processes and data pipelines. Integrating various business functions—from finance, supply chain management, and manufacturing, to customer service and partner management—is a highly complex and nuanced challenge.

For example, imagine Company A has 15 key partners, and Company B has 11. If six of those partners overlap, the process of consolidating those partnerships and presenting a newly united front for your business often requires significant time and resources. Add on to those complexities the priority of ensuring smooth operations of critical business functions, and it’s easy to imagine why company leaders want to  maximize the value of acquisitions or divestitures by streamlining the steps of the process.

References: https://www.deloittedigital.com/us/en/blog-list/2022/obstacles-to-innovation.html, https://www.netsolutions.com/insights/digital-transformation-trends/