upFront.eZine 1,095: Agility Eats Black Swans for Breakfast

Aras CEO Keynote at ACE 2021

The Business of CAD | 10 May 2021

Aras ceo Peter Schroder gave the keynote to this year’s Aras Community Event (ACE) 2021 user conference. Here is my transcript of his talk, which I edited for clarity and brevity. For the full presentation, see events.aras.com/ace2021/agenda.

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For many of us, digital transformation projects in 2020 got derailed. It could have been through politics, the pandemic, the recession, or the semiconductor supply chain problem. We had a lot of black swan events, those rare-occurring, significant, one-in-a-lifetime things — we had them all last year. There is no readiness planning for black swans, as we can’t prepare for these things.

Let’s call 2020 the “Year of Lessons Learned.” But I gotta tell you, there was no single impact; it was like a flock of swans.

I have this saying that I have been using for years, “No plan survives first contact with the enemy.” Did your project have such a rigid plan that it was easily derailed?

To be clear, not all of the impact in 2020 was negative. If you happen to be a cloud provider, a medical company, or if you work for a software company named “Zoom,” those black swan events created a huge opportunity for you — if you were ready. There was also the negative impact: the automotive industry had a tough time.

We have to ask ourselves, “Did we respond well?” How we respond to a crisis — or the opportunity, depending on which side of the coin we’re looking at — how we respond really matters. We respond with speed, resilience, and agility. Agility eats black swans for breakfast.

We’ve sometimes talked about resilience as “being sustainable.” A sustainable digital transformation project has to be able to withstand the hiccoughs, the failures, and the bumps in the road that are absolutely normal.

My lesson from 2020 is that we add empowerment to the mix. Organizations not only need their workforce to have the right tools, but they also need to have the attitude and aptitude to adapt quickly.

Chess Master Project Planning

From McKinsey we learn that 80% of digital transformation projects fail — probably nobody is surprised by the number. Of those that don’t completely fail, about 16% deliver some kind of improved performance. Digital transformation is very expensive, very risky, serious initiative.

In company after company, it is done through top-down management approach. Let’s call it the “chess master” as an analogy. There is someone at the top (CEO, CIO, CDO, the smart guy who’s in charge) who has been dictating, driving digital transformation projects. There are grand ambitions involving AI, big data, machine learning— we want to do all this stuff. But it’s not working. Frankly, it is divorced from reality. The top-down isn’t working quite right.

By the way, none of this stuff is cheap. We are investing millions of dollars in data lakes [sp?], in moving to the cloud, in hiring data scientists, we have Chief Data Officers now — all to run our digital transformation projects, and still 80% are failing. Not just failing, but failing spectacularly.

What is it about this chess master top-down approach that’s not working well? This is just my opinion, but external things are changing just too fast. Information technology is moving very quickly; AI’s evolving; your competitors are moving faster; supply chains are breaking faster.

When we do big top-down projects…

  • We underestimate the cost and impact of change, particularly organizational change

  • We underestimate the lack of consensus across the organization when we dictate something top-down

  • We seriously underestimate the readiness of our data

In our context, let’s consider engineering and operations data, specifically. We severely underestimate how ready that data is to support an AI project in our digital transformation.

Why is this data problem so difficult? We are underestimating the difficulty of adapting or upgrading all the PLM [product lifecycle management] legacy, ERP [engineering resource planning], MES [manufacturing execution system], and so on.

Surfacing the Data

I’ll give you a prediction: no digital transformation project is going to succeed, It’s just not possible if engineering and operations systems are standing between you and real-time data accessibility. If we can’t surface this data and enable it throughout the rest of the organization, and if it’s not part of your digital transformation, then you are really stuck.

We think about typical PLM users. They are on an old version of Teamcenter, 3dexperience, Windchill, or SAP. It’s a very difficult upgrade path to get to modern technology. If we can’t get to the latest versions, we’re not getting to the openness and we’re not getting the technology that has the connectivity. How are we going to work with data that’s in a proprietary, closed system?

In general, what’s going on here is that we underestimate the amount of technical debt we have. It’s the technical debt of three or four decades of very silo-oriented modernization. Your PDM [product data management] systems, the ERPs, the CRMs [customer relationship management], the MESes.

I am hearing that there are an average of 500 legacy systems at any one of the large manufacturing companies. There was a lot of investment in creating silos that we now have to break to get to some kind of digital transformation. How much of your IT budget is for the constant maintenance required to keep those old systems running?

There is no Big Bang approach to turn it all off on a weekend and then turn on something new.

Going to the cloud is not going to fix this either. The cloud, in fact, is not ready today for your processes. I know that SaaS [software as a service] is considered the silver bullet for a lot of this digital transformation, but it only makes sense if you’re prepared  to give up your unique competitive processes and run your business the way that a cloud provider has decided it should work. It makes no sense to do that.

Cloud is part of the solution; SaaS is part of the solution. But we need to rethink how SaaS is implemented to actually make that work. If you are on someone else’s hard-coded platform, there is zero ability for you to navigate the next black swan. You gotta have control.

How many of you still have your bills of material, your suppliers, your quality data sitting in Excel, or it’s in a mainframe, or it’s in emails? Or you have the same data duplicated across multiple single sources of the truth? (That’s my first oxymoron for this presentation; I’m planning on having two.)

Empowerment From the Trenches Up

CIOs are three times more likely than workers to see their companies as pioneers in information technology. Heads in the cloud. (That’s my SaaS joke for this talk.) The employees, on the other hand, are four times more likely to rate their company as a follower.

My point: If we can figure out empowerment, how to harness the intelligence, the knowledge, and the energy of those people down there in the trenches who really do know how the business is running, and let them drive the digital transformation. I think that is where we will see a higher success rate.

Black swans are more common; we’re seeing lots of them. (That’s my second oxymoron.) How do you drive a digital transformation project in that context? There no longer is any CIO chess-master who can drive this successfully as a top-down initiative. We need to distribute the decision-making right down to the trenches where the operational knowledge is.

At Aras, we switched our entire development to SAFe several years ago — the scaled agile framework for enterprise. (See figure below.) SAFe is a very structured way to distributing decision making. In this SAFe methodology, you are driving down the authority and tools for decisions to get made at all levels, but most importantly in the trenches. This has worked extraordinarily for us. We changed pawns to multi-dimensional queens.

If you are going to empower your players, you have to understand your goals and priorities. You have to have a continuous improvement culture in place before that next black swan event occurs.

We have seen our customers start with Aras PLM installed next to TeamCenter, over time incrementally moving the workflow from one system to the other. It’s a great way to get things done efficiently and successfully. It’s iterative: we’re talking evolution, not revolution.

In any major project like this, there are going to be setbacks. We want to be able to handle setbacks. There’s a direction we are going which doesn’t play out well, so we need to back up. You need to create a culture that allows for some disappointments, setbacks, and failures, to continue making progress but that doesn’t actually stop you. We have to enable low-risk failure.

We do need executive sponsorship. The C-level on down needs to allow us to make some mistakes, to allow us to work incrementally, and to keep us on the right path.

I am not creating new theory here: it is well known that incremental small wins create their own momentum. The momentum from winning can overcome the setbacks, the setbacks that will be there for sure.


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And in Other News

Dassault Systemes, the #1 CAD vendor, reports Q1 revenues of (approx.) US$1.4 billion, up 3% over a year ago.

In a switch from previous reporting to shareholders, Dassault revealed just percentage-increases for Solidworks, no absolute numbers; Solidworks revenues rose 18% and seats rose 22% over last year.

Monica Schnitger has more details at schnitgercorp.com/?p=18248.

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The big new thing in CAD is moving simulation from the end of the design process to earlier stages. A new release of Siemens’ Simcenter FLOEFD fluid simulation software now runs inside NX, Solid Edge, Catia V, and Creo to frontload CFD [computational fluid dynamics] simulations. It also does more in the areas of thermal and lighting simulation. Learn more from plm.automation.siemens.com/global/en/products/simcenter/floefd.html.

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The Nemetschek Group reported Q1 revenues of (approx.) US$191 million, up 11.7% over a year ago. The Design (CAD) segment “whose business activities are focused on Europe” increased revenues by 8.7%.

More details in the official press release at nemetschek-ag-com.mynewsdesk.com/pressreleases/nemetschek-group-successful-start-to-2021-with-double-digit-operating-revenue-growth-and-high-margin-level-in-q1-3095114 (hidden behind a Cookie Wall).

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PTC reported Q2 revenues of US$462 million, up 22% from a year ago. The company credits “the impact of up-front license revenue recognition under ASC 606” for part of the increase. PTC has set aside $34 million “related to an ongoing tax matter in a non-US jurisdiction.” Details at investor.ptc.com/resources/news/news-details/2021/PTC-Announces-Fiscal-Second-Quarter-2021-Results/default.aspx.

The same day, PTC announced the release of Creo 8.0, which features GDX generative design running on Atlas as an optional extra-cost add-on. Learn what else is new at ptc.com/en/products/creo/whats-new.

PTC also released a roadmap with the company’s plans “to SaaSify PTC’s entire portfolio onto the Atlas platform over time” with a target date of 2025. The company promises to “offer on-premise versions of core products indefinitely.”

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Here are posts that appeared recently on my WorldCAD Access blog:

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Letters to the Editor

Re: Onshape User Conference

In the Q&A you mention Cassini. Is this referring to the company and product CassiniPLM or something else? Could use a little more context. Thanks.
            - Stan Przybylinski

The editor replies: You're right, I made the reference too casual. It is a service that translates Solidworks files to Onshape with a hefty price tag. Here is the link to the software at the Onshape store: appstore.onshape.com/apps/Data%20Management/OR2Q3CQMIUVHUKAWN65HJ6UAEOGEDQGSZTDAJCI=/description

In the meantime, Noah Technologies is offering a free beta of their Solidworks to Onshape translator at cadtocloud.com. CEO Rami Noah tells me:

“Our product overcomes some of Onshape’s limitations, such as properties (attribute) mapping, correct positioning (no Y-direction issues), missing components, model duplication, and no need for a Zip file, as CAD to Cloud runs inside Solidworks as an add-on.”

Notable Quotable

“The effort to silence critics is an admission that the silencers’ programs can’t withstand criticism.”
- Glenn Reynolds

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