Our first priority as CIO’s is on reliability, stability, and consistency of our environments. If our application and infrastructure ‘just works’ then we can get on to other more important results for our companies. Conversely if our environments are not stable we exert too many resources getting back to reliable or stable and consistent. This distraction impacts our results and more importantly our credibility with our stakeholders. Who wants to get a call from a peer executive complaining about access to systems, slowness of response, or just plain frustration of their team’s inability to be productive? No one ever! When our environments are reliable, we then turn our attention to benefits of investment in technology. We recognized a few years ago that Pacific Coast Companies (PCCI) needed to upgrade our environment from legacy ECC 7.x to S/4 and BW/4. What drove this decision?  A realization by the Presidents that our ability to scale was limited due to the years of customization in our ECC environment.  The environment was reliable, so long as we didn’t make any changes.  The project to migration to SAP S/4HANA has enabled us to remove customization, move to standard and improve our agility. It was not an easy decision. The first time PCCI decided to move off a home-grown system, it was a start, stop, and restart over three years. The pain of that change was scared in many leaders’ minds as they were part of the original migration. Making the decision to move was based upon solid logic, compelling reasoning, and a realization that we would be impacting our company’s growth if we did not take the initiative. Since moving to SAP S/4HANA we have doubled the number of customers, doc types, and total documents we share using EDI/CPI; completed the integration 7 new companies and greenfield startups and implementing Transportation Management.  Stability yields opportunities to deliver results! Recently our parent board asked each subsidiary to define their 3-5 year strategy.  In addition, I was asked to outline our strategies for the coming years.  In this presentation, I called our 3 business challenges that I believe would be impactful on them.  They might sound familiar to you as well.  They are:

• The Great resignation and Covid changed how employees think and act requiring more technology and automation to offset the inability to hire employees to do manual jobs

Pacific coast has three types of businesses:  Manufacturing, Distribution, and Specialty Contracting. During Covid-19, all three businesses were considered essential as part of the construction industry and so we had continuous operations during Covid-19. Like most companies, we had employees get Covid-19 and most returned to their jobs after following appropriate protocols. But we did lose employees too. Like many industries, some employees took the opportunity to change jobs, take on new roles, try different industries and as this occurred, we had to better manage our staffing and shifts. At one point, we had so many openings that if we could have filled them, we could have run at extra shift at each plant. For manufacturing and our distribution yards, the automation of jobs is possible, and this investment will enable us to shift our resources away from monotonous tasks to more valued added work. Running a factory with fewer employees is the ultimate promise of technology; to automate that which is done manually. Robotics and autonomous vehicles are also time/people savers; and these devices will also have input and output demands that reduce the number of workers. But is there unintended consequence of more automation? IoT devices will significantly increase, the demand for the information from these devices will need to be collected and managed, networks inside the factories will not be hard wired, but will use Wi-Fi or CellFi to collect the data and edge computing will become the norm. Our company has been actively moving to cloud-based solutions in the enterprise allowing us to have greater reliability and make changes faster and more accurately. Automation will be a bit of a reversal as we will need to add hardware back to the edge to provide appropriate response for vision and automation systems requiring data collection/use to be available on the factory floor. The amount of data being collected will now fall into the Big Data category and those systems will need to be closer to the edge. All of this presents new challenges for the technology department to integrate data from disparate systems and make the role of Analytics significantly more important. Compounded by the fact that no single supplier will be providing all the equipment, the integration from different data sources will also be critical. And this all goes back to reliability, stability, and consistency.

• Our customers, partners, suppliers, and competitors are going to force us, drag us, to provide them with tools that facilitate their ability to do business with us

Lead or follow? A fundamental question we should ask about Digital Transformation. Our company tends to be more of a follower. We are not the ‘800-pound gorilla’ that can force markets to move. And that also means that while we can watch to see where the industry is going, we know that at some point we will need to respond. I believe that once a capability becomes at least 20% of the available market, the next 60% goes fast, exponentially fast. While we can wait and watch a while, we also know that at that tipping point we will need to move quickly. Competitors of course play a role here too. As they transform, our leaders hear about it and want to know “why we can’t do that too?”  The push and pull from customers, suppliers and competitors all play a role. The question again is lead or follow?

• The ever-evolving risk to our companies from ‘bad actors’ will continue to challenge manufacturing organizations like us

Manufacturing has become the number one target for nation state actors. Why? The reasons fall into a couple of categories. With the on-going war in Russia with Ukraine, many conspirators are targeting disruption rather than financial reward. This payback in the US would impact operations, supply chain and ultimately financial performance.  Second, manufacturing tends to be insular; the engineering teams do it themselves and take pride in the fact that they can. This lack of partnership means the IT world is not as engaged and cyber threats or the risk of cyber threats tends to be a lower priority to output. Third, PLC’s running the equipment tend to run on older systems that are easier to hack into. Upgrading software, O/S, and even hardware tends to be a lower priority in favor of production results. Should a factory go down, there are significant impacts to the IT team as they ultimately get pulled into foray and start remediation taking them away from committed work. In summary, technology is ‘easy,’ but change is hard. Working with our business partners to make the right/best investments depends on how we interact, build relationships and trust to align people, process, and technology to help our companies win. Martec’s law does an excellent job of describing this. Without process and change management, no amount of money spent on technology will return benefits. Technology teams needs to focus on both Digital Transformation and Process mapping, simplification, and results.

Some encouraging thoughts as you begin your SAP S/4HANA journey and/or modernize your business.

1. Build strong bridges with your business partners and board  We created a Technology and Cyber committee that reports to the board.  Our committee is comprised of one member of the board, one family member, our CFO and two external members.  Their support and alignment enable IT to deliver for the companies.
2. Define clear roadmaps that outline the priorities for an enterprise. This creates valuable conversations with your stakeholders.  It doesn’t matter if my team and I agree on all the priorities.  What matters is the discussion with your stakeholders and using roadmaps is a great form of discussion.  Alignment occurs once discussion happens.
3. Listen, be curious, ask great questions and manage your biology. These conversations aren’t easy and too often we take things personally.  The leader’s ability to draw out from their stakeholders their objections, concerns, likes/dislikes gives them insight into the ability to deliver.  Reference Martec’s law that Technology changes much faster than organizations.  It was Jack Welch the CEO at GE that once said, “If the rate of change on the outside exceeds the rate of change on the inside, then end is near!”