Ulrich Faisst is Digital Transformation Officer at TRUMPF, a 96-year-old family-owned German high tech company with an annual turnover of €3.8 billion, that does business by over 70 subsidiaries in all of the world’s leading markets. The company specializes in machine tools, lasers for semi-conductors, track and trace solutions for production as well as 3D-Printers for medical devices and space. Faisst is responsible for group-wide digital transformation initiatives with special focus on enabling the business to transform into an integrated provider of hardware, software and services. In previous roles at ZEISS, an optical industry leader, he was responsible for digital solutions and customer interactions. Faisst studied industrial engineering at the University of Karlsruhe and business informatics at the University of Augsburg, where he received his doctorate. He then spent several years with Bain & Co. in strategy consulting, specializing in larger digital and IT transformations and in private equity and corporate venturing. Faisst participated in a fireside chat with The Innovator’s Editor-in-Chief Jennifer L. Schenker at the Platform Economy Summit in Frankfurt on Sept. 17. He agreed to a separate interview about TRUMPF’s digital journey.
Q: Why is it necessary for your company to go digital?
UF: Looking at our customer base and their needs we wanted to have an integrated offering of hardware, software and services to help them become more successful with the horizontal and vertical integration of sensors, machines, production lines and even whole factory networks. Platform plays a role because there is a need to get all their machines on one IoT platform, including dashboards, condition monitoring, remote services and predictive maintenance.
Q: The majority of your customers are small and medium sized businesses. Does this represent special challenges.?
UF: A lot of our customers in the machine tool sector don’t have their own IT managers so servicing them requires education and engagement and a consumer-like delivery of any solution. It needs to be all plug and play.
Q: What steps are you taking to transform your own company?
UF: We have developed a big picture vision for our digital transformation but we leave it to the different areas of responsibilities to break down their functional digital ambition and interpret it with their team. What will digital mean for our order process? How do we go from waiting for customers to call us with orders to proactive lead generation? How do we move from being classically top down? We held seminars and trained all 1,300 of our company leaders, in all management levels in all regions, in 37 two-day events. We made sure during the training that company leaders had a chance to influence the content as well. If they told us ‘hey your solution is not useful we told them ‘ok make a proposal about how to approach this better and come back in a half hour.’ This creates engagement. We also emphasized that digital transformation is honoring the change DNA and heritage of our company. We had been kings of punching tool technology and then came to the end of the tech S curve and were among the first to adopt laser technology. Laser cutting was a kind of disruption in the 1990s and we learned from that. We invested in the 1980s a lot of money and then spent five to ten years optimizing laser cutting. We had to hire more physicists. Long-term employees remember that the first three years nothing worked at all but our customers were patient and after a couple of years it worked. Then the company adopted the SYNCHRO Lean principle and this also took us a couple of years to do but we successfully ingrained it in our operating system and culture. Now we have the next wave of change: digital transformation. It is going to require more software engineers, again a big change. When we first started hiring software engineers we were surprised when they told us ‘we don’t work with functional product descriptions we are agile and we create prototypes.’ This move to design thinking changes the corporate culture. It is not enough to combine hardware and software as ingrained components. We need to make machines and even the production network talk to software and cloud. For our customers there is big value to have all their machines and to be able to track their status on one platform. What we found out is that all of the players in this space have their own ecosystems and own machines so the challenge is how to find a common ground?
Q: If everyone wants to be the platform how will machines talk to each other?
UF: At last count there were about 750 industrial IoT platforms. The good news is that at a recent trade fair for the machine tool sector we found a common ground on how we want to work in future.
Q: Digital transformation involves much more than technology and standards. What kind of change management issues are you confronting?
UF: We have people in upper management who are trained in mechanical engineering. They are still learning that software business models work differently, meaning we can’t always earn money with software. Sometimes we have to give it for free as part of a package to sell more hardware. There are also hurdles in terms of scaling. We have a presence in more than 40 countries and we have to build up field-level support in terms of sales and service and it takes a while to have enough experts in the field.
Q: What advice do you have for other companies tackling digital transformation?
UF: Figure out the big picture and determine how what you are doing relates to customer value. This will help you to determine if your chosen route is the right one. It is also not easy to find the right partners. You have to decide if you are going to bet on one platform or dilute your resources by joining two or more. These are the strategic choices that you need to make. Whatever you decide prepare to build up sales, services and operations behind that. Finally, you need to realize that although it sounds easy to build up an ecosystem it is not. And especially if you are in a B2B niche don’t expect for your long tail that there will be plenty of startups sitting around waiting to help you. It is really difficult to be open although you want to be. There needs to be enough competency to handle new interfaces and technology. If you can streamline the end-to-end processes there is a lot to gain for everybody but you need to have courage, persistence, and the openness to fail in the first attempt but then do it better in the second attempt. This all needs to come together with the owners and the upper management. If you give up, especially in economic downturns, you are passing up on a big opportunity and you will not be able to catch up at all. As a family-owned business with a turnover of €3.8 billion we are constantly monitoring new approaches or technology that could wipe out all the work the company does. We try to apply every industry trend, every technology trend and relevant new business model. That requires us to constantly be curious and courageous.