Automate a bad process or fix the process first?

As consultancies start expanding their robotics process automation offerings (RPA) and the software and related services begin permeating through enterprises’ procurement, human resources, IT, and even internal audit, a curious debate has surfaced between the merits of opting for careful and meticulous process assessment, documentation and improvement or just deciding to throw some robots at the process to get the cost savings benefits as quickly as possible.

I’m not surprised this discussion surfaced, given the rapid adoption of RPA solutions by companies in a wide variety of industries and the sustained investment by IT services vendors and consultancies in the people and assets needed to implement RPA (see any of our reporting in the last year on EY, Accenture, PwC or Capgemini). What surprises me is where the vendors and clients come down on this debate. At a recent three-day event, I listened to fairly passionate discussions on this topic, with clients taking the position that a company needs to do the standard evaluate-improve-refine process for their processes before applying automation. In contrast, the consultants — the ones best positioned to provide advisory services around that standard approach and charge for those services — argued for the fast fix-and-go approach. One consultant noted, “Throw robots at a bad process if it saves time and money now. … Then reinvest those savings into whatever else you need completed.” One client, who changed her mind by the third day after absorbing the consultants’ lessons, described some processes as tasks that employees “deplore, but must be done accurately, timely and repeatedly to help run the business.” She said RPA could be applied to these, with the savings poured into new artificial intelligence or other desired-but-not-a-priority initiatives.

Of course, it’s not that easy, or robots would be doing every deplorable task and automating every aggravating process

And plenty of consultancies will continue to offer process optimization and change management as core elements to most engagements. I’ll be watching the consultancies that have invested heavily in RPA and how they describe their engagements, which clients they highlight, and how their talent models shift over the next year. I’ll also be looking for examples of companies embracing rapid RPA deployments, knowing not every process was improved, but they threw the robots at them. Most importantly, we will be asking about the redeployment of those costs savings.

My colleague Jen Hamel’s Digital Transformation Customer Research, published in March, noted that clients haven’t been investing as much in data management, “despite the struggle organizations face with underlying data integrity and standardization issues that hamstring generation of actionable insight and limit analytics solution value.” She went on to note that TBR expects “this trend will be exacerbated by the proliferation of connected devices, ingestion of new data from the incorporation of additional sensor technology and breakdown of silos accelerating data inputs as processes are transformed.” So, if I had to bet, I’d say the smarter enterprises will be plowing RPA savings into the less-exciting, more-impactful data management tools or enhanced capabilities around risk and compliance. As Jen also pointed out, “[As] 66% of DT [digital transformation] services buyers used a vendor from a prior IT services engagement, existing relationships in clients’ IT organizations are a good starting place for ascertaining and accessing DT budgets.” We’ll be watching this closely, all the while wishing I had a robot to do the watching while I do the thinking.

Colfax is an industrial conglomerate with two operating companies under it, ESAB and Howden. ESAB produces equipment and filler metals for most welding and cutting applications, and Howden delivers precision air and gas handling equipment for numerous industrial applications. Both are worldwide industrial suppliers with multiple manufacturing plants and globally distributed support apparatus.

I learned about the conglomerate during a PTC customer panel at PTC’s LiveWorx 2018, where Colfax was represented by Ryan Cahalane, the company’s vice president of digital growth. I found his story, among others, to be an intriguing view into the development and deployment of Internet of Things (IoT) applications by an actual customer of vendor IoT solutions. Often, the real stories get lost in the marketing morass of the larger IT and operational technology (OT) companies pushing solutions. Cahalane and I connected over our thoughts on the importance of solving “the business problem” (and our intriguingly similar last names), and I took the opportunity to learn about Colfax as a customer (one could argue it could increasingly be placed as an ISV) and its experience implementing IoT.

Colfax began its journey like many of its peers: IoT was the buzz, and the company tried to react as fast as it could. Like many manufacturers or those in heavy industry, Colfax’s leadership kicked around the idea of harnessing IoT to drive new growth and differentiate from peers in a competitive marketplace, primarily via new IoT-enhanced products or digitally enabled service offerings. However, Colfax ran into challenges.

Internally, Colfax experienced the same roadblocks that plague most companies investigating IoT, especially federated ones like itself:

• Colfax had a sizeable number of people working on IoT, but the company lacked communication and alignment across the various business units and initiatives.
• Plenty of good ideas were being developed via shadow IT, but the company lacked cohesion and developments were technology-focused — not guided by business problems. This failed to differentiate the company, and Colfax’s messaging got lost in a crowded market.
• Colfax initially tried to go it alone with a do-all solution, but that led to generic offerings that were not best-in-class, and handling all of the components, including design and management, was difficult for a diverse, distributed organization.

Externally, the company faced the usual challenges of the market. Its customers were interested in IoT, but Colfax found itself in proof-of-concept limbo as customers continually kicked the tires on IoT but never walked away with a key in hand. Cahalane explained that Colfax had trouble navigating customer cultures, such as garnering agreement from line-of-business, OT and IT managers from a technology viewpoint, and ultimately proving ROI for its digital solutions, from a business viewpoint, to C-level executives.

Many companies have shared the same struggles, and are now washing out, including behemoths such as General Electric, indicating no company is safe from the volatile and hypercompetitive IoT market. Colfax has persevered, however, because the company was quick to perceive the changing market dynamics. Here are my takeaways from my conversation with Cahalane around the company’s pivot:

• I’ll begin with something that Cahalane, being humble, didn’t share with me but that I believe was an important step for Colfax: The company established Cahalane’s position of digital growth VP to coordinate IoT initiatives across the company and foster knowledge sharing, ultimately helping Colfax organize for IoT. Instead of offering a number of distributed, unfocused and perhaps competing IoT initiatives, Colfax, with Cahalane’s help, is focusing and acting on key opportunities.
• What are those key opportunities? Colfax’s competitors would certainly like to know! Cahalane did share, however, the company’s new thought process for developing them: focus on the business challenges of its customers and narrow them down to what Colfax can best service with its technology and expertise. It’s no longer about developing fancy new technology and telling customers why they need it. It’s about listening to customers and solving their problems.
• Colfax is going to market with the technology discussion on the back burner. Instead, the company is approaching customers with a business-problem-solving outlook, fishing for the all-important CEO buy-in and leaving the technology details to be sorted out later. As Cahalane stated, “We are staying very focused on the business message, the real value that you get from the solution. The tech is just a vehicle. A business message allows us to really spend time on bringing our knowledge to more customers. The customers finally see how it all fits together. It’s in their language.”
• Cahalane noted that companies, such as Colfax in its early days, are often afraid of working with vendors or partners. Cooperation and coopetition among partners or working with a new vendor can be intimidating when a company knows it’s on the verge of a vertical breakthrough or solving the next use case, causing companies to keep their cards close to their vest. Laying the cards on the table and sharing technology, techniques, and customer relationships or entry points is a daunting step. Cahalane emphasized how Colfax had to shift its thinking from “How do we compete?” or “How do we keep this in-house to avoid paying for technology?” to “How could [a partner or new vendor] help?” or “How can they accelerate our goals?” Using the technology, expertise and capacity of Microsoft, OSIsoft and PTC now allows Colfax to focus on the solution components it knows best and to layer them on best-in-class platforms and tool kits provided by its vendors. This approach not only provides customer validation — for example, attaching to a well-known brand such as Microsoft for IaaS makes customers more comfortable — but also spreads out development and management. Instead of trying to support the entire load, which would be a challenge for an organization of Colfax’s size and structure, the company relies on its partners and vendors to take responsibility for their own components.
• Finally, Cahalane emphasized the need for companies such as Colfax to remain agile in the quickly moving and erratic IoT-enhanced products market. The company constantly looks for acquisition candidates that can not only increase its expertise in its core digital initiatives and target verticals but also deliver new business models.

What is next for Colfax? Cahalane noted that there is still a lot of work for Colfax and its partners to do to develop, and educate customers about the power of data. This means not only tying data together inside one organization but also sharing data across organizations. For example, Colfax’s welding solutions could be used by customers to apply predictive and prescriptive analytics to real-time operational data to have alerts sent to supplies manufacturers for automatic resupply. Cahalane also hinted that Colfax sees the importance of shifting toward prepackaged solutions, which reduce customization costs and complexity and are built around proven ROI, to induce more customers to buy Colfax IoT solutions.

That’s the Colfax story. Why is it important? Not only does it validate concepts we have been sharing since we began our IoT coverage, but more importantly, it serves as an example to companies similar to Colfax across all verticals that may still be spinning their wheels with IoT. As Cahalane explained, true IoT success stories can be few and far between, with numerous IoT projects stuck in the mud due to vagueness, overambition, immature IoT, or lack of organization or maturity among vendors and customers to apply IoT.

However, TBR’s survey work and the insight gained from my discussion with Cahalane, among others, suggest that many projects that start with a specific business challenge, are smaller in scale or divided into digestible parts, and are led and received by companies mature in IoT, are working and delivering actual IoT revenue. TBR believes vendors and customers should take lessons from companies such as Colfax: focus on the business message, organize your business’s digital and IoT efforts around key opportunities, and use vendor partners to fill gaps while focusing initiatives around core strengths. While Colfax, as Cahalane noted, isn’t gaining explosive IoT revenue, TBR believes it’s certainly on the right path.