One giant digital leap forward

When you make something, it’s been pointed out, you make something else. Put another way: Every product has its byproduct—something savvy businesspeople recognize as an opportunity. Decaf coffee producers sell caffeine to energy drink companies; lumber mills sell pulp and sawdust to all sorts of customers.

This was the dynamic that leaders at a global industrial manufacturer had in mind as they pondered a strategic crossroads. They’d successfully grown the company to billions of dollars in revenue on the strength of traditional hardware and services, but traditional success wouldn’t hold off a fast-changing marketplace.

The manufacturer’s industrial product base was becoming commoditized, bringing pressure for brand differentiation. Technological disruptions like artificial intelligence (AI) and the Internet of Things (IoT) were both reshaping customer expectations and uncovering new opportunities. Regulatory shifts toward sustainability suggested a demand for digital solutions to track environmental impacts.

Therein, the leaders knew, lay their opportunity in an untapped byproduct: data. The data from the manufacturer’s offerings could be captured and converted into an entirely new line of business—a digital services business. Digital services like intelligent monitoring and analytics, or preventive and predictive maintenance. Like asset performance management solutions.

Company leaders also knew they’d need to have a strategy to get there—and to do so from their back foot, so to speak: The company’s traditional market approach had done well on a decentralized operating model with minimal digital investment, but this meant their capabilities were dispersed, and a new digital business would be tough to scale. A talent gap—common in the industry—further complicated the picture. The company’s rural locations were attractive to a traditional, trades-oriented workforce, but could leaders entice the emerging class of tech-savvy professionals they’d need to expand digitally?

Whatever the details to come, one thing was clear: because of the scale of their ambition, the work ahead of them would involve nothing less than redesigning their entire operating model … without cannibalizing existing revenue streams.

To that end, company leaders reached out to Deloitte’s business strategy team, specialists in guiding companies in designing executable strategies and transforming and modernizing operating models.