In the era of Industry 4.0, leading manufacturing companies are increasingly seeking to harness technology’s power to achieve their goals.
Future technologies like data analytics, AI, and automation are helping businesses improve Days Sales Outstanding (DSO), simplify internal processes, improve operational efficiencies and reduce resource pressures.
According to a survey by EY, 68% of CEOs reported boosting their investment in digital technology in 2022.
Furthermore, research by Gartner found that manufacturing enterprises’ top three priorities are digital transformation, growth, and cost optimisation.
However, integrating a new digital vision with your business strategy (while ensuring the entire organisation is on the same page) is a major challenge.
To discover how industry leaders can overcome these hurdles, let’s look at the world’s leading construction and mining equipment manufacturer, Caterpillar and examine how it successfully embarked on a digital transformation journey.
Building tomorrow—navigating the digital transformation in manufacturing
It was in 2013 that Caterpillar first realised that digital was the path to future success. Moreover, they knew their customers and dealers wanted it.
By 2017, Caterpillar unveiled its transformation enterprise strategy, acknowledging digital as a critical enabler to business operations.
Its journey to digital led the company to exceed (for the first time) the $2 billion mark in e-commerce sales in 2022—a huge milestone for a 100-year-old business.
Following this success, Caterpillar raised its game further by setting the ambitious target of increasing online sales through its dealers by another 50% by 2025.
In March 2023, it launched an updated equipment app, VisionLink. The new app was designed to be integrated and brand-agnostic. Leveraging a vast network of over 1.4 million connected assets, VisionLink is very much a testament to Caterpillar’s commitment to innovation. It serves as the backbone for running advanced analytics models as well as empowers customers to oversee business operations, fleet management, service coordination, parts procurement, and routine maintenance.
Let’s learn more about how Caterpillar harnessed digital transformation to drive its service growth.
An industry ripe for digital change
Like companies in similar industries, Caterpillar was under growing pressure to keep up with the competition. The business found itself on a downward curve. At the same time, it looked on as its industry peers (such as automotive companies) actively embraced digital technologies to create new connected products.
Furthermore, as the world emerged from the pandemic, Caterpillar faced some specific challenges:
- Recruitment difficulties
- Pressure on resource allocation
- Adjusting to new remote work dynamics
However, having already begun exploring the potential of new technologies, such as a common cloud platform, Caterpillar was well prepared for both the pandemic and the aftermath. For example, they created a long-term digital strategy that outlined building a common technology platform and data architecture that would be the single point of truth for connecting all its applications—making it easier for both their customers and dealers to do business.
Today, Caterpillar has a new digital platform, a cutting-edge tech stack with generative AI capabilities and an advanced suite of applications.
To achieve this, let’s look at how the construction giant approached digital transformation.
Key steps in delivering impactful digital change
People and culture first
The path to making iron smart started with people and culture (you read that right—not technology). Why? Caterpillar realised from the onset that it doesn’t matter how well-planned your business strategy is—without a nurturing culture and investment in people, you will fail.
To deliver on this ambition, Cat Digital was born to make digital part of the overall Caterpillar operation (and not limited to the IT department).
Caterpillar’s Chief Digital Officer, Ogi Redzic, explains their approach: “Once you have smart people, purpose, and the right alignment across the enterprise, it’s just a case of building and nurturing that culture.”
What Caterpillar did:
- Ensured all teams understood the business outcomes and why they mattered
- Shared KPIs across all business units to build transparency and accountability
- Focussed on creating a sense of purpose by having clear goals and aims
Simplified digital strategy
The primary driver for digital wasn’t to create a product or a separate business but rather to empower Caterpillar’s business partners to be successful. Developing clarity on the purpose of their digital endeavours enabled Caterpillar to prioritise what solutions they wanted and needed to focus on.
What Caterpillar did:
- Aligned all business units with common goals and objectives
- Introduced a shared lexicon across all teams to describe things and communicate clearly and consistently with business partners without overcomplicating the message or the meaning—especially important when dealing with new technology like Generative AI, which can mean different things to different people
- Focused on building alignment with the enterprise, dealers and other stakeholders
Customer-centric approach
Aside from having the right people and technology in place, the most important thing for any business is ensuring a deep understanding of their customer needs.
Caterpillar was able to streamline and optimise both their customer and dealer experience by using advanced analytics and machine learning.
For example, Caterpillar provides customers with unique value-added applications by importing telematics from over 1.2 million connected assets into its digital platform. As a result, they easily anticipate customer needs by overlaying these insights with direct engineering data collected from the field. This type of vertiginous integration gives Caterpillar a competitive advantage amongst its peers. Furthermore, this approach is integral to helping Caterpillar bridge the gap between physical iron and the digital world.
What Caterpillar did:
- Moved to a cloud-based solution, Caterpillar named Cat® Helios, which acts as a single trusted data source and is the one-safe source for enterprise, dealer and customer data
- The Caterpillar Service Information Systems (SIS) is also cloud-based and has 2 million service graphics and 1.5 million parts numbers, which have been digitised to enable customers and dealers to easily and quickly access service information whenever needed
- Caterpillar offer customers enhanced product intelligence, productivity, and safety by having a connected ecosystem, enabling continual personalised improvements
Final thoughts
In the ten years since Caterpillar first embarked on a digital journey, it has demonstrated itself as an exemplar of reimagining business operations and customer experience by utilising innovative technologies.
More importantly, a key factor in Caterpillar’s success story is its ongoing commitment to driving digital innovation. Whether launching a new customer portal or growing investment in its e-commerce offer, Caterpillar has shown that it understands that digital does not stand still. To stay ahead requires constant transformation.
As Caterpillar´s CDO, Ogi Redzic, says, “What we’ve done in the last couple of years speaks for itself—but there’s so much more to be done. As technology changes, we can apply new technologies to some of the traditional problems and opportunities that we have had and then create even better solutions.”
Caterpillar’s forward-thinking approach has positioned Caterpillar as a frontrunner in the dynamic realm of digital transformation. The company’s journey serves as a beacon, illustrating the power of strategic simplicity and adaptability in navigating the evolving landscape of the digital age.
