People Risk: An Overlooked Dimension in Digital Transformation

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Successful approaches with Digital Transformation

Today, most organisations, especially Small Medium and Enterprise (SME) manufacturers that are pursuing an Industry 4.0 journey, will find that they are driven into undertaking as a prerequisite a strategic digitalisation program. This is where they invest heavily to digitally transform the key values of the organisation across and throughout their entire organisation in a holistic manner. 

Seems reasonable enough. Well, there is a slight issue. Despite the many benefits that Digital Transformation brings when being deployed and integrated throughout the business - success is not one of them as it is still elusive and remains an overwhelming challenge for many businesses, particularly in SME manufacturing... 

It’s Not All About Technology

An inconvenient truth is that most digital transformation programs in manufacturing will likely fail. This is simply due to them starting with and focusing on the latest hyped but often immature technology. However, 

In essence and in the broadest strategic sense, the Digital Transformation should achieve a well-managed balance between improving performance holistically across the business but also in reinventing the business processes and workflows. Simplistically, the holistic performance is measurements that reflect the organisational priorities, such as the financial performance, organisational and supply chain health, talent and capabilities, and of course focus on the customer experience. Business reinvention on the other hand involves pursuing an ambitious and significant shift in a company’s core operating model, product portfolio, with innovative strategic models, all underpinned by advanced digital and analytics capabilities.

The holistic performance approach to digital transformation across the organisation is the desired  future state but getting there is a long and tortuous path. However, this all-encompassing approach is often simply a catalyst for short-cuts disguised by the introduction of new key technology levers. For example, a digital program may entail deploying such technologies as the advent of IoT Applications, as well as the adoption of Mobility apps with online ordering and payment systems. They may utilise Cloud or Hybrid platforms with their compute and storage capacity providing networking and analytics at vast internet scale. However, without a similar focus on people and reinventing existing business processes then generating significant business or customer value may prove to be difficult. 

Digital Transformation as an Infinity Loop

Digital transformation was never supposed to be just about technology. Instead Digital Transformation for Industry 4.0 should be considered to be a strategy for delivering ongoing evolutionary change. But this change isn’t just any random change; it should be strategically planned and tactically informed, delivered as an infinity loop which is focused on a balance, within and between the core domains of People, Processes and Technology. 

A Holistic Approach to Digital Transition

To take a truly holistic approach requires an equal attention to technology, peoples’ skills and business processes. For example, connecting machine tools on the plant floor may well be beneficial but fall short of delivering substantial business value if undertaken in isolation. However, should marketing, logistics and after sales be integrated into the mix to share information and realtime data, then this provides employees with the tools to tightly integrate and communicate with customers, vendors and suppliers over Social Media platforms, which will doubtless bring rewards. 

 When technology, people skills and processes are deployed and used appropriately, at the right time and place, such as when connecting AI analytical tools with omni-channel communication channels to Social Media Platforms, they may well improve performance, increase business reach and agility, deliver better customer experience, and even surface new revenue opportunities. Whatever, to be effective the people, processes, and technology, will need to dove-tail in order to generate optimal business value across the entire organisation. This is commonly well known but seemingly less understood. The evidence for this is that most organisations focus on processes and technology with people being sadly an after-though. 

Keeping People Prominent In Digital Transformation

As a technology, Digital Transformation is primarily about reengineering business processes and utilising advanced technology to deliver real business value. Sadly, People and their skills are often forgotten about until it’s too late. Then they are conveniently forced to fit into the transformational model. There is some logic to this as people are uniquely pliable as they can adjust and adapt to change better than the other components in the puzzle. However, as organisations go about the strategy, execution and delivery of their individual business model transformations, they are soon realising the challenges confronting them are not just about upgrading to the latest hyped technology; it's far more deeper and complex than that. And People, and their inherent limits, play a much more significant role than first thought. 

Instead of being simply technology upgrades with process redesign for optimisation, organisations undergoing transformation are finding that it involves a much more complex ecosystem. They are discovering for example that digitalisation requires managing potentially new business models targeting exploratory market segments with different margins and operational conditions. Yet they are still required to deliver on shareholder expectations in delivering financial objectives. Moreover, these expectations will be required even when going through the rigours of a digital transition. This is the type of Industry 4.0 scenario that demands technical diligence and effective and informed decision making amid the chaos of emerging technology deployment, business model reinvention, and evolving regulatory environments, and last but not least - in handling the emerging but growing concern regarding People Risk.

What is People Risk

To fully understand the likely impact of the business transition you need to carefully consider People Risk. Well, unless your organisation is going to be a fully autonomous ‘lights-out’ factory with no workers. Typically, manufacturers need to consider when building coherent digital strategies or reengineering business processes, which will more than likely introduce automation, analytical processes and new advanced technologies - are there the people with the skills to deliver and sustain these ambitions?

But People Risk is not just in the difficulty in recruiting employees with the skills, competency, and qualification in desirable advanced technologies it goes much deeper than that. For example, graduates with relevant engineering or technology degrees are not cheap so their skills must be efficiently utilised. However, an objective of Digital Transformation is typically to produce new innovative workflows that merge advanced technology skills with legacy skills. This is where skill analysis comes into the picture.

People Skills Analysis 

People skills analysis is an often overlooked area but it should include identifying both the desirable legacy and future people skills within and across the entire business. This analysis requires bridging any skill gaps by reskilling and/or upskilling.or building a close team with a mix of cohesive and collaborative skills. On legacy brown-field manufacturing sites there is often an issue mapping existing or identified hi-tech skills to existing technical roles and job functions. In many cases these will often be further constrained by environmental, social, political and governance issues.

People Skill Planning

Naturally some will switch off at this point thinking that this is an Human Resources (HR) function, but it shouldn’t be. Indeed, HR are typically the least qualified in identifying the skills required to match a custom workflow that demands a mix of advanced technologies with legacy work. Identifying the unique proportions of each skill required by a workflow requires deep technical and business process knowledge. This is what is known as People Skill Planning but it is really more a workflow skill breakdown either way it is not as simple or intuitive as you might imagine for a number of reasons: 

  • The difficulty and expense in attracting and retaining people with relevant valuable skills
  • Understanding what new skills are required, what legacy skills need retaining and bridging that gap 
  • Building a community and culture of skill-first priority where employees or prospects are judged primarily on their skills rather than vendor certifications or college degrees requires detailed understanding of the employees and the workflow.
  • Employee resistance, employees will find It's difficult to share knowledge if knowledge or a skill is deemed to be a valuable differentiator. Hence, building a sharing skills culture is maybe encouraged by the organisation but rarely is it seen by the employees’ to be in their interests.

Despite these obstacles, this Skills First approach is a growing discipline and many businesses especially in Industry 4.0 and manufacturing are seeing it as an ideal way to map fast changing business processes and technology in finding, attracting, and importantly retaining suitably skilled employees.

Skills First Approach

The term 'skills first" places the emphasis on a person's skills and competencies rather than solely focusing on job titles or qualification. The Skills First approach places provable skills, competencies, and knowledge as the most valuable credentials. The importance in Industry 4.0 and Digital Transformation across industries is that job descriptions, experience, and requirements are very fluid. The skills important today may not be so important tomorrow, hence the importance of having flexible, generalist knowledge with wide ranging technical and business skills. More importantly, it is finding those candidates who are willing to engage and have a hunger to learn all the diverse legacy aspects of the business.

People-risk Priorities

When taking a Skills-First approach you need to address key people-risk priorities including identifying the range of required skills, existing or legacy experience and then bridging the skills gap, reskilling and then conducting some strategic workforce planning. This prioritisation is  a strategic response to the key ‘people-risk question’ often associated with Industry 4.0, such as “Which roles and skills will we need, by whom, and by when, and for how long?”. 

This is not as easy as it first seems as only 38% of manufacturing companies report that they know what skills they currently have in-house today, and 65% report that their business plans are insufficiently clear to know what skills they will need post digital transformation. This is before considering what specific skills will be required for strategic or operational decision-making.

Buy-in or Upskill

Many organisations on the Industry 4.0 journey are naturally looking to adopt a skills-first approach. This is due to the changing roles and processes demanding unique combinations of advanced technology skills such as AI and Machine learning coupled with data streaming pipelines and advanced analytics but they still require to retain the essential legacy manufacturing and operational skills. These unique combinations of skills do not conform naturally with traditional roles or college degrees. Hence, the organisation’s difficulty of finding and retaining employees. The conundrum is; does the organisation recruit candidates with advanced technical skills and degrees then train them for the legacy skills or vice versa? Each approach is problematic for both parties, as the technology graduates want to use their full range of skills to the fullest to avoid skill erosion (use it or lose it). Similarly, the organisation doesn't want to be paying a huge salary for all the residual skills not being utilised hence the problem with retaining staff and consequently a growing interest in taking a focused skills first approach. 

Identifying the Required Skills

However, building or finding a custom collection of relevant modern technical and legacy skills is not easy. Indeed many organisations are realising that it's incredibly difficult to break down routine jobs, let alone some complex workflows, into granular skills insights for routine operational tasks let alone managerial decision-making purposes. Nonetheless, as work roles are reconfigured to embrace such collaborative technologies such as  Generative AI coupled with advanced data pipelines and real-time data analytics, organisations must consider rethinking the critical skills they need and focus on reskilling and upskilling employees.

To accomplish a skills first approach to proactively respond to new opportunities requires that organisations rethink  and redesign jobs with workflow skills at the forefront. To do this requires the following approach:

Deconstruct Workflows

  • Analyse the tasks and activities and identify the skills that underpin the workflows.
  • Identify tasks that are best suited for automation or redeployment to alternative talent.

Redeploy tasks

  • Determine which workflows can be enhanced through automation or other means including outsourcing, shared services, and understand the impact on the business.

Reconstruct Work

  • Create new jobs and workflows based on the new work options.
  • Discover the skills you need for more efficient and sustainable operation.

How do you get to the desired state?

To break out of the rigidity of existing organisational hierarchy, organisations need to be prepared to redesign existing people/skills frameworks to support the reinvention of work transformations that are fluid and provide the maximum agility. This involves:

  • Start by breaking down the workflows (current and future tasks), not with existing job roles
  • Identify opportunities for combining people and automation
  • Considering the full array of work alternatives freelance working, alliances, joint projects and others
  • Allow talent to “flow to work” rather than being dedicated to fixed, permanent jobs


Today in modern Digital Transformations the successful transformational organisations who have achieved stellar success are those using a hybrid mix of holistic performance measurement and rigorous process reengineering. Their success has come from appreciating the critical role peoples’ skills play in successful transition and sustainable operations. Nonetheless sourcing and retaining these crucial skills must be financially feasible and not place a burden onto the business through soaring operational costs via unsustainable salaries. These new skills have to be either bought in via recruitment or obtained through reskilling and upskilling of existing employees. The former approach carries a large large amount of people risk with excessive salaries and the increased operational costs in addition to employee job satisfaction concerns. The latter, skills first approach,  is also not without people risk but here the concern is around the ability to identify core specific skills required for major operational and business workflows and then if feasible and realistic to train or upskill the current employees. Currently in successful digital transformation programs the skills- first approach is getting a lot of attention as it provides for cost effective upskilling of the workforce whilst simultaneously mitigating much of the inherent People-Risk associated with obtaining advanced technology skill sets in the workforce.

About the Author

Written by Alasdair Gilchrist, a technology polymath that has spent 35 years in the field of technology spanning roles as a computer technician, data analyst, network engineer, security professional, OT data engineers, cloud native developer as well as serving as an IT Director.