Tech topics

What is a Digital Factory?

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A Digital Factory is an organizational model for creating and maintaining one or more digital products, services, or experiences.

An organization may stand up any number of digital factories. Each digital factory is composed of a vertically aligned, cross-functional team that fully addresses the lifecycle elements of digital product creation – from business opportunity analysis and epic/user story development to backlog management, application development, testing, deployment, and ongoing operations. A single business owner runs each factory, and all team members are aligned to the same goals.

Digital Factory

Why build a digital factory?

Despite a commitment of significant resources many enterprises struggle to realize the full scope of benefits they originally expected from their transformation initiatives.

Transformation challenges vary widely but often include IT skill mismatches and shortages, cultural change resistance, or failure to adopt a “fail-fast” attitude. Organizational silos within many businesses (or public sector agencies) – along with disparate KPI objectives that motivate divergent stakeholder teams – also reduce the effectiveness of critical transformation programs.

The organizational friction that results hinders IT from bridging functional boundaries and leveraging the talent of their best contributors to find creative solutions. Working at cross-purposes in a digital business environment may extend program delivery timelines or increase costs to unexpected levels.

Growing global competition in every market sector has made the creation of digital products one of the primary weapons in the battle for business relevance and success. To accelerate and scale the delivery of digital products, organizations require a new approach – the digital factory approach.

How does a digital factory work?

Digital factory teams are obsessively focused on digital product development. Aligned around synergistic objectives and incentives, team members can rapidly develop more insightful services and elevated customer experiences. The singular focus of each team results in deeper domain and marketplace expertise that may help to attract new creative talent to the organization.

An IT Center of Excellence supports all the digital factories. Here is where core automation capabilities across Development and IT Operations reside. Within this structure, technology teams become experts in workstreams and processes, duplicate toolsets are eliminated, and consistent technology governance is applied.

Ultimately, market opportunities can be more effectively exploited as each factory mobilizes to build digital products that address market needs. And as digital transformation because a repeatable practice – rather than an unrealized concept or the random result of periodic, heroic efforts – the overall efficiency of the enterprise will rise.

How does an IT Center of Excellence support a digital factory?

Originally, many IT teams were often structured to support employees – not to operate revenue-generating services. For them, the product focus of the digital factory represents a significant pivot. With the digital factory approach, each factory crafts their own digital products. Those digital products may interlock far-flung components, each of which may require their own technology stacks. While this “lego-like” assembly method accelerates product creation, it also adds complexity to underlying IT operations that already span multicloud and data center resources.

IT no longer has the surplus capacity or incremental funding to help each factory stand up unique processes or toolchains. Achieving even limited toolchain standardization within a large enterprise can be difficult. For example, developers are known for their ability to circumvent most constraints IT teams have placed on their timelines or toolsets. Access to on-demand cloud services driven by infrastructure as code have made this inevitable – especially when combined with the myriad of development environments and technologies that are instantly available to any development group.

For all these reasons, standardization is key to building a digital factory. Consensus must be reached across Development and IT Operations about the need for a foundational automation platform. The entire organization must also align around a toolset that addresses the lion’s share of vital requirements beyond simple financial benefits. Such alignment allows knowledge to be shared among teams, helping the IT Center of Excellence provide expert support for factory work at factory pace.

The role of the IT Center of Excellence is to mechanize the foundational automation elements required to speed development and operations execution. It does so by employing reusable tools and repeatable processes that establish best practices while conforming to enterprise-level funding constraints. As a result, the IT Center of Excellence accelerates product or service introductions and cuts technology overhead by reducing management staff and tool licenses.

In essence, the IT Center of Excellence delivers digital supply chain management for the digital factory.

What are industry perspectives on the digital factory and product strategies?

McKinsey & Company refers to a digital service-focused, strategic approach as building a digital factory.

As a business and technology consulting firm, McKinsey states that they consider the Digital Factory approach to be the answer to scaling digital transformation in large organizations. They describe the impact on executives from traditional organizations when they observe the creative energy inherent within cross-functional digital factory teams.

Forrester Research presents a similar approach that they call the product-centric IT operating model.

As a technology research and consulting firm, Forrester equates digital services to products and asserts that product management is a core capability for most organizations. They describe the product-centric IT operating model as a complementary approach for technology teams that can better support the business shift from traditional marketing-led product development to agile, iterative digital innovation creation.

Gartner defines their recommended approach as Fusion Teams.

As a research and advisory firm, Gartner advocates for the adoption of fusion teams – multidisciplinary digital business teams – as critical to finding success with digital transformation. In their view, technology leaders can foster distributed digital service delivery in their organizations by forming fusion teams to maximize business value while addressing the human aspects of digital business and innovation.

The Open Group recommends a digital-first enterprise approach supported by the IT4IT™ reference architecture.

As a global technology standards consortium, The Open Group and its members have collaborated to create “The Digital-First Enterprise” – a set of principles illustrating how digital standards might be used to accelerate the adoption of digital practices. In addition, they describe how IT4IT can function as a digital product backbone across an organization and how the IT4IT standard controls the key data objects to manage digital products using value streams. View their paper, The Shift to Digital Product.

What is an example of a digital factory?

OpenText Product Services Delivery Center (PSDC)

OpenText has built a digital factory aligned with IT4IT value streams to help accelerate our own transformation. We are a large-scale, worldwide software organization performing a significant work scope. Our R&D organization has been structured along the IT4IT value streams, and our data model is aligned with the IT4IT reference architecture. Our tool chain supports IT4IT and employs our application delivery management, enterprise service management, and AIOps platforms, along with our OpenText™ Cybersecurity portfolio.

How do DevOps and IT operations management inform the digital factory?

Application delivery focus – Value Stream Management

Value Stream Management takes a development-centric view that addresses a common organizational misalignment between strategic business demands and high-speed IT execution and delivery. The execution gap between business and IT reduces operational efficiency, increases change risk, and negatively impacts the potential value delivered by products. Value Stream Management is the next step in the evolution from Agile to DevOps. It includes business priorities and is one strategy for building a digital factory.

OpenText™ ValueEdge™ DevOps Platform is designed to help organizations align high-value customer demands with high-value digital products and services – bridging the divide between business and IT. Its goal is to accelerate execution velocity without impacting the ability to innovate, while also adding needed compliance to limit risk and maintain stability. By measuring the business value created along each step of the development and execution lifecycle, IT can focus on improving competitive advantage and customer satisfaction from digital products and services.

The OpenText™ Application delivery management portfolio, built around the ValueEdge DevOps Platform platform, is one example of a product set designed to facilitate Value Stream Management within development teams.

Operations focus – Automation platform

As IT moves from a service orientation to the digital factory approach, they must pivot to function as a Center of Excellence (or platform team) offering technologies and processes that support digital product generation.

But IT Operations teams suffer from having to support both the full ancestry represented within their current services and the new technologies arising from digital factory innovation. So to reinvent themselves as a Center of Excellence, they require an automation platform that can facilitate digital supply chain management and unblock latent transformation potential.

Automation platforms have emerged to help IT manage the explosion of apps, tools, data, and user demands and to simplify the complexity of multicloud environments, rapid application updates, and frequent network changes. Without a comprehensive automation platform strategy, IT suffers from a fragmented toolset that is unable to see across the entire estate or allow AI to be effectively applied.

But not all automation platforms are created equal. Some require a rip and replace of all existing components or claim broad coverage but deliver only limited functionality. Others are blank slates bereft of best practice content or are impaired by the drawbacks of custom coding – creating brittle processes that may lead to unpredictable costs, delays, and difficult upgrades.

An effective automation platform will deliver automation along established industry-defined process streams, contain best practices, and provide the depth of functionality needed for IT to support factory innovations and manage complexity without rigidity. The goal of the automation platform is to drive IT execution along complete workstreams and to optimize organizational efforts.

As a Center of Excellence, IT becomes a machine that selects and offers the foundational elements needed to speed execution using reusable tools and repeatable processes. It is now better positioned to connect key digital factory functions without friction, shifting transformation from aspirational to anticipated.

The OpenText software portfolio with the OPTIC and ValueEdge platforms, supports the control of the key IT4IT data objects and value streams.

By 2026, 90% of Global 2000 CIOs will use AIOps solutions to drive automated remediation and workload placement decisions that include cost and performance metrics, improving resiliency and agility.

Articles about digital transformation

TechTarget – Top 6 reasons why digital transformations fail

Digital transformation has come a long way from being a buzzword to becoming imperative for business success. However, digital transformation failures continued to plague businesses, even as they invested more than $1 trillion in transformation efforts.

In fact, new research from Boston Consulting Group shows that an astounding 70% of digital transformation initiatives fall short of their objectives.

IDC – Top 10 future of work predictions for 2022

By 2023, G2000 LOB employees will use tools to automate their own work using codeless development, but 90% of these programs will fail without supporting COE and adoption methodology.

Digital transformation-related IT skills shortages will affect 90% of organizations by 2025, costing over $6.5 trillion globally through 2025 due to delayed product releases, reduced customer satisfaction, and loss of business.

IDC – Top 10 future of digital innovations predictions for 2022

By 2024, 55% of successful digitally innovative products will be built by teams that include people with creative, critical-thinking, analytical, and automation skills as well as software engineers.

By 2026, enterprises that successfully generate digital innovation will derive over 25% of revenue from digital products, services, and/or experiences.

Harvard Business Review – 4 pillars of successful digital transformations

For many companies, digital transformation starts with upgrading the company’s IT infrastructure as well as mobile infrastructure, data lakes, and the cloud.

Harvard Business Review – 3 tactics to accelerate a digital transformation

Nothing changes unless people’s behavior changes. Sure, digital transformation requires that companies upgrade systems and make sure people have the right tools and know how to use them. But those investments only lead to transformation if they are coupled with serious work helping people adopt and use that technology in meaningfully different ways.

Harvard Business Review – How to navigate the ambiguity of a digital transformation

In truth, when an organization is reborn with machine intelligence at its core, it is not just faster or better than its peers; it becomes different. And different is what you need if you plan to reshape industries and redefine competition in your market.

Harvard Business School – Where can digital transformation take you?

97 percent of respondents “agreed” or “strongly agreed” that organizations will not remain competitive unless they radically adapt to the demands of the digital era.

Digital Factory

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