CEOs on Why Digital Transformations Succeed or Fail
Leah Archibald: The introduction of large-scale technology can mean one of two things for a global manufacture. Your next bid for digital transformation can either be the rocket fuel that accelerates your company’s growth, or the dynamite the burns up working capital and puts your value chain in jeopardy.
But how do you know which is which? If only we could sit between two successful CEOs and soak up their conversation on how they avoid pitfalls and set up win conditions for digital transformation.
Today, we get to listen to just such a conversation.
Stephanie Feraday is the CEO of aPriori Technologies. She has held executive-level positions in many Fortune 500 companies, including Netegrity, Hewlett-Packard, and Symantec. Over the past 12 years, Stephanie Feraday has grown aPriori from a cost optimization specialist to a globally competitive solutions provider driving millions of dollars of value for customers at all stages of the supply chain. Under her leadership, aPriori has reached a valuation of $280 million, and has expanded to serve a worldwide base of customers in industries such as Aerospace, Energy, Automotive, Industrial Goods, and High-Tech Electronics.
Stephanie Feraday is joined by Jody Markopoulos, a senior executive with a long career at GE. She was the Chief Transition Officer negotiating the separation agreement of Baker Hughes and GE, during which time she managed the investment of over $300 million. Then she spearheaded GE’s digital transformation as President and CEO of GE Intelligent Platforms. Jody Markopoulos became the Chief Operating Officer at EOS Energy Enterprises where she grew revenue to $4 million in her first year.
Between Stephanie Feraday and Jody Markopoulos, we have a lot to learn about how to drive success in digital transformation. Their conversation begins with Stephanie Feraday asking Jody Markopoulos about the biggest trends she sees in manufacturing today.
Stephanie Feraday: What are some of the major trends you’re seeing in manufacturing right now?
Jody Markopoulos: If you think about 10 or 20 years ago, the industry moved to what I would call one of global presence. Folks started to increase their supply base, not necessarily in their home country. I think what we’re seeing today in a constrained supply chain environment – whether that constraint is in logistics, access to material, or access to labor – is a complete resurgence of what some folks would call reshoring or changing their partnership structures. They’re asking: Who do I do business with? What risks does that present to me?
I’m seeing a lot of folks saying: Let’s put supply base close to where we manufacturer – Let’s consider logistics costs in a whole new way. That includes looking at material supply. So, there is a desire to move all these things closer, and to move technology closer as well.
Stephanie Feraday: When you say move technology closer, what do you mean by that?
Jody Markopoulos: Moving technology closer means having a true understanding of when I manufacture a product what technologies are going into that manufacturing process. As technology develops, we need to have it close by to introduce it and change it into whatever shape it needs to take. Companies want to access that competency more, not less.
Before, I used to come to you and say: Stephanie, would you make this pen for me? And I’d just put it in your hands. Today, when you have all these risks – the risk of inflation, the risk of price creep, issues with access to material, etcetera – so you want to know exactly how the pen is being made. Some people call it reshoring or near-shoring, but the bottom line is dampening risk by being completely immersed in the detail.
Stephanie Feraday: So those are some of the major trends. What are the issues that manufacturers are facing right now?
Jody Markopoulos: The A-1 issue right now is access to capable skilled labor, and once you get it, retaining it. The human resource community has got to be going nuts right now trying to come up with new strategies. Because it’s one thing to get someone, it’s another thing to retain them, and it’s a third thing to invest all this time in skilling that workforce and then losing them. So labor, labor, labor, labor, labor.
That spins into another question about my product portfolio: How do I actually make it? What are my core competencies surrounding what I manufacture? Am I a caster? Or do I weld? Do I machine? What are those skills? And then, what are my opportunities to change that? Substitute the material? Substitute the manufacturing technique? And then what does that do to my SKU level? What SKUs do retire, redesign, or reinvent? That comes back to the core questions: How do I do it? Who do I do it with? And how do I set myself up for success?
Stephanie Feraday: A lot has changed in the last few months. We’ve got more supply chain disruptions as a result of the Ukraine war. Inflation is going up like crazy. How are you seeing that play into some of the challenges that manufacturers are facing today?
Jody Markopoulos: You want less complication in your supply chain now more than ever.
When you think about industrial manufacturing, which I come from, the biggest question is access to raw material. Manufacturers need to trace their raw materials back to: where specifically does the iron ore come from? And the coking coal and steel – where am I going to get that? Then what is the cost build-up and the risk build-up to get it to me?
Stephanie Feraday: Inventory levels get into issues of cash flow. Can you speak a little bit to that?
Jody Markopoulos: Look, everybody believed that these supply chain disruptions were going to dissipate over time as markets opened back up. And here we are still suffering. Companies have now got to question their utilization of cash and where they are going to invest it. You are looking into the marketplace seeing high inflation and the potential for recession. Do you want to go long on material? Or do you want to use that cash and reinvest it where you can get a quicker return?
If you do hit a recession in six months from now or a year from now, and you’ve got material on your shelf that you bought at a peak, then you’re got to try to liquidate it while taking a hit to your margins. So, manufacturing really has to be thinking about cash utilization – in particular working capital – and re-investment of that capital into technology and opportunities with new products for the future.
I’m seeing a lot of companies really rethinking and evaluating: Who are we today? Who do we want to be a year, two years, or five years from now?
Stephanie Feraday: What role does technology play in all these difficult decisions?
Jody Markopoulos: Technology plays a huge role. There are so many iterations of it. One is that technology can tell me how well I perform and how I can perform better. That might be a manufacturing process, or it might be product serviceability.
There are also new technologies that completely disrupt how I manufacture today. For example: additive. Five years ago, your table was 2×2 – now it’s10x10. That trend is only going to continue to accelerate. And then, last but not least, there are new technologies that make it easier for my workforce to be productive.
In this dynamic of change companies are looking quite intently at how they can bring in technology quickly, evaluate the ROI, and get a return on that investment as fast as possible.
Stephanie Feraday: As you think about all the different players that could be touched by technology within an organization, one of the things that we’re seeing is that to accomplish accelerated returns the way constituents are working together is changing.
Jody Markopoulos: Yes, there is a tremendous amount of collaboration. Before you drove expertise into a lane – you wanted depth. What I’m about to say doesn’t mean that depth doesn’t matter – it does matter. But communication and the ability to have breath is even more important. You have to enable and encourage communication, because harnessing the ideas that can spring up becomes a huge opportunity for a company.
Stephanie Feraday: If we take the technology conversation a little bit further, how do you see aPriori playing a role in digital transformation?
Jody Markopoulos: I think there isn’t any place that you couldn’t play. Whether it’s insights on how you can negotiate better when you’re trying to shed costs with a supplier, or insights on your utilization of equipment, or insights on what a design requires for manufacturing, you cover the gamut of the technical application. And then you bring it to life.
Stephanie Feraday: If you are the executive sponsor bringing in a technology like aPriori, what drives a successful deployment?
Jody Markopoulos: You need to have a champion with a vision and a strategy for how they want to deploy. And that person has to be able to clearly articulate the value of the direction that they want to take the company. It’s change management. You have to bring people together. You have to show the progress. And then last but not least, if you want to ingrain the change you have to say: This is the only source of the truth. That finishes the cycle. You bring people through, they understand why they’re part of the change, and you measure from the same system. That’s the complete circle of the change.
Stephanie Feraday: Where have you seen the adoption of technologies fail?
Jody Markopoulos: I’ve seen it fail when they haven’t closed the loop. If that’s not done, if new technology is brought into an organization believing that everybody will see the truth in the same way and adopt it, that’s a recipe for failure. You’ve got to close the loop.
Stephanie Feraday: One last question to put you on the spot: Why is aPriori the next big thing compared to other investments that manufacturers are looking at?
Jody Markopoulos: Look, you have a set of tools that can apply in any market condition. Inflationary or deflationary, it doesn’t matter. You’ve assembled a platform that learns from itself and contributes, but then also spits back out the most current situation. With aPriori you get historical data, future data and learned data. It’s a win, win, win, win, win.
Stephanie Feraday: Jody, it’s been great to have you here today. Thank you.
Jody Markopoulos: Thank you. It’s been fun.