[New Wave] Digital Transformation Strategies Needed for Traditional Companies

Myeonggu Kang AWS Executive Technology Partner

Traditional companies possess differentiated technologies and know-how in their respective manufacturing or service sectors rather than digital technologies. They have complex internal processes and systems spanning dozens or even hundreds of stages from development to sales. Due to the complexity of operations, there is a strong interest in innovations that can enhance efficiency. For such companies, digital transformation can be defined as innovating from a people-centered operation to a system-centered operation by utilizing digital technologies.

In the case of Amazon, billions of products are delivered at high speed every year. Since 2007, Amazon has been using a machine learning-based demand forecasting solution. This algorithm predicts future demand by learning from various data such as the location, age, and purchase timing of customers. The algorithm becomes more sophisticated as it learns from more data over time. Although Amazon handles a variety and volume of products that overwhelm competitors, the fact that its inventory turnover rate is 2 to 3 times higher than competitors demonstrates the power of the demand forecasting solution enabled by digital transformation.

According to statistics from the government’s Smart Factory Planning Group in 2018, there are no advanced-stage companies in South Korea that can automatically predict and respond to future situations using cutting-edge technologies such as machine learning and digital twins. A total of 98% of traditional companies, including 76.4% at the basic stage and 21.5% at the intermediate stage 1, still operate in a people-centered manner rather than system-centered.

For traditional companies to successfully pursue digital transformation, innovation in corporate culture and the technological capabilities that support it are necessary. Data pipeline technologies that collect, transmit, and store data form the foundational technology for various digital transformation tasks. Many companies attempt digital transformation within their existing IT environments, where they face constraints in resources and technology needed to build foundational technologies.

Cloud computing provides unrestricted resources and technologies to solve these problems. Companies can use resources on the cloud at a lower cost. The cloud offers data pipeline technologies for collecting, storing, analyzing, and learning data, along with various artificial intelligence (AI) services and new digital technologies such as blockchain, augmented reality (AR), and virtual reality (VR). For traditional companies with weak internal digital technology foundations, the cloud becomes an important tool for innovation. From this perspective, establishing a successful cloud utilization strategy is crucial for securing competitiveness.

Volkswagen utilized the cloud on AWS to build a data platform called the Digital Production Platform (DPP), rapidly developing various digital transformation tasks such as digital shop management, predictive maintenance, and digital mold management. By using the cloud as a hub for developing digital transformation solutions, Volkswagen accelerated the pace of innovation. As in the Volkswagen case, what matters most for traditional companies is not the digital technology itself but the innovation solutions. Using the cloud as a tool to secure technology and resources and building a data pipeline platform, each company needs to focus on rapid innovation necessary for their business. Efficient cloud utilization has become the most important factor for continuous innovation and strengthening competitiveness in companies.