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Digital capabilities can do more than change the way you do business. They can change the business itself.
By Torben Høeg Bonde, CIO, Vestas
There is not an IT leader in the world today who not focused on digital transformation in one form or another. Here at Vestas, we are in the midst of a singularly fundamental change – using digital technologies to transform our very business model and value proposition. We are evolving from a company that makes very sophisticated hardware (the wind turbines that we have sold and installed in more than 70 countries) into a sophisticated service provider.
A Parallel Transformation
In some ways, our transformation at Vestas parallels the change that has occurred in the IT industry in recent decades. When I started in IT, everyone had to buy supercomputers. They were sold by just a couple of companies. And they were marketed based on their capabilities—CPUs, performance, and availability, for example. Today, you hardly think about the servers anymore. They’re more or less the same across brands—they may even be made at the same factory. The differentiator today is the software and service that the vendor provides with that hardware.
That has meant that IT needs to be much less technologically and operationally focused and much more business focused – even when the company’s business model remains unchanged. You still need to delivery administrative IT tasks, but you must also step in with your experience and competency to help lead the business in what is a more customer-oriented space. And that means changing the nature of the IT function, ensuring that it has the people, processes, and technology that work in lock-step with the business.
We have had to carry out changes such as these while continuing to support a business in high-growth mode. Now we’re looking at changing the very nature of that business.
A Big Data Opportunity
There is more sophisticated technology in our product—the wind turbine itself—than ever before. There have been sensors in our turbines for as long as I can remember. In the beginning, they monitored very basic information like temperature that could assist the workers who might service the product. Our new models run SCADA (supervisory control and data acquisition) software to monitor and control individual turbines remotely. We are in contact with 27,000 turbines, with 1,300 sensor points in each. Every ten minutes, data is sent from those machines to our data repository. Those petabytes of data, combined with additional information like service history, enables us to be more proactive about maintenance.
But that big data also present a big business opportunity for us. Five years ago, we began exploring how we could use that to provide more value-added services for our customers. Today, it’s something we’re incorporating into our future business strategy. For example, it’s critically important to our customers that turbines run when the wind blows. If we can service that turbine when the wind is not blowing, we’re helping to optimize their business case. By combining data related to the turbine with weather data, we can schedule service visits in a way that reduces or eliminates expensive downtime. We’re currently looking at all the ways we can take the data we’re already collecting and combine it with our information to bring it back to our customers as a value added service, something that goes beyond simply manufacturing the product.
Giving Customers What They Want
There are a number of challenges in developing this new services business. And chief among them is figuring out where the business value actually lives. There is endless data around which we could build new offerings. There has been no shortage of ideas about that within our organization. But the question is, what are the things that the customer will really value? The only way to do that is to go out and ask them.
In many cases, our customers haven’t even considered these types of service offerings—they didn’t even know they were possible. So you have to sit down with them and start a dialogue about what potential they see in this data. As an organization, that demands that we have new capabilities. We need more than the mechanics and engineers that have been building and selling turbines for the last 30 years.
Like many other manufacturers we were focused for years on creating physical machines that a customer would buy. As those machines have become more commoditized, we’ve had to change our approach. Selling the machine is just the entry point. What really makes a difference is how you transform that into a service relationship. Because we’re a relatively young industry, we are a bit behind in that respect, because we had to go through the early stages of the lifecycle to get there.
Automate and Collaborate
Within IT, we’ve had to further rethink the way we operate. We have reevaluated and determined what will be core competencies for us going forward and have outsourced everything else to strategic partners. We don’t need to have our own people performing detailed application development or support.
Internally, we have created a new operating model than enables a closer connection with the business. We have focused on engagement managers, architects, and subject matter experts who can work hand-in-hand with the business to define their needs. These people must be business savvy and capable of having high-level conversation in the language of the business function they support, whether its finance, human resources, or marketing. They have to understand the challenges of those functions.
We’ve found people with these skills in a number of places. Some have a technology background, but others come from the business. We just hired one person from our own financial department to head up engagement for all of our financial projects. He has that business knowledge along with an understanding of IT.
At the same time, we’re automating more and more of our business process. If you look at the way the company operates, it involves the integration of numerous complex business processes, many of which are performed manually by our employees throughout the value chain.
In IT, we are working with software vendors to find the right off-the-shelf IT systems to automate more of those tasks. Many of those functions, currently performed by humans, do not add real value at all. But because we’ve always operated that way, you assume you need a person doing it. In IT, we can look at those processes objectively and figure out how to make them leaner. Ultimately, five or ten years from now, when there is more intelligence within these applications, the software will be able to see patterns in those business processes, learn from them, and optimize them without human intervention.
Meeting in the Middle
For me as the CIO, this transformation requires that I not only get my IT organization on board with these changes, but the rest of the organization as well. It’s a digital transformation of the entire enterprise. That demands that the CIO be more of a salesperson—which thankfully is where I started as a professional, in marketing and sales functions. You have to be an evangelist for the change.
As much as we in IT understand the importance of meeting our business partners “where they are” in order to continue this digital transformation journey, the business is also beginning to understand that IT is a key component to their future success.
We intrinsically know how to manage a software and service business with a hardware component because that is the business that IT has always been in. It’s critical that the interest in collaboration come from both sides, and we’ve begun to see this happen. The business is increasingly asking for our help and inviting us to the discussion. In the past, IT just took care of everything down in the basement while the business took care of the customer. Now those two worlds are, happily and productively, merging.