PSI Blog

Escape the Digital Jungle: Chances and Risks of Digital Transformation

12/04/2019 - Industry 4.0, Artificial Intelligence

©wichai leesawatwong - iStockphoto.com; edited by PSI Metals

In recent years, the American steel industry has experienced a boom in business that has led to a wave of investment in the modernization of steel mills and new technologies. As this year's AIST Digital Transformation Forum for Steel Industry has shown, American steel producers are now striving to keep pace with other industries, such as the automotive industry, which has been promoting the use of Artificial Intelligence (AI) more and more. Without a doubt, an industry as complex as the metals industry can be digitally transformed with Industry 4.0 technologies such as AI, Cloud Computing, Big Data, Augmented Reality & Virtual Reality, Smart Sensor applications. But which of these technologies is the real game changer and which is just a hype in the pool of inflated buzzwords?

AIST Digital Transformation Forum (2019) © The AIST

A clear answer to this complex question is not possible. Industry 4.0 will not fall from the sky or soon be on the shelf - waiting for instructions and roadmaps is not the solution. What you can do is review the technological opportunities and put together your individual business strategy based on your existing conditions and your needs.

Some of these digital transformation technologies were presented in an ambitious agenda of 30 sessions at this year's AIST Digital Transformation Forum for the Steel Industry in Pittsburgh. About 240 representatives of steel companies, technology providers and academics met at the Omni William Penn Hotel Ballroom for the first major technical conference organized by the Association for Iron and Steel Technology. This event offered technology companies serving different industries the chance to connect with major steel companies and better understand the opportunities and interfaces with the steel industry.

Big Data and Predictive Analytics as Major Topics

Digitalization is about changing social interactions and business models to adapt or embrace the value of digital technologies. Digital transformation therefore refers to broader, deeper changes in industry, governance structures and ecosystems. Yet digitalization is, at the elementary level, about transferring information and data from paper to digital form. However, an important topic that is causing confusion among American steel makers is the question of how this huge amount of data from production processes can be collected, organized, securely and accessibly stored and utilized. Creating a trusted, business-ready analytics foundation by turning data into value was a particular valuable insight expressed by several steel officials.

Heiko Wolf with his presentation "Using AI Modeling for Predictive Quality and Routing" © PSI Metals
Heiko Wolf with his presentation "Using AI Modeling for Predictive Quality and Routing" © PSI Metals

More than one technology provider pointed out the relevance of predictive analytics. They can tell the operator when a production accident is most likely to occur and when an equipment failure will happen in advance. Heiko Wolf, Director of PSImetals FutureLab, pitched the idea of using artificial intelligence modelling for quality prediction. Based on the complete material, quality and process data from a Production Management System (PMS), including the complete material genealogy, artificial intelligence models can be trained to predict potential defects in the subsequent production steps. In his presentation, Mr. Wolf showed an example of how PSI implements predictive quality for a customer to make better decisions in a complex material routing environment.

The Top 5 American Steelmakers’ Expectations on Digital Transformation

On the last day of the conference, two panel discussions with steel officials and technology providers provided a comprehensive overview of the state of digital transformation in the American steel world. In the first panel, eight representatives from different steel companies talked about their current developments, their expectations of digital transformation and the challenges on the way to a digitally transformed company.

  1. Increased operational efficiency and production stability which leads to vast savings and fast returns
  2. More sustainable and agile production of metals products
  3. A great improvement of safety through optimized systems and workflows
  4. Improvement of the customer experience - creating a flexible, interactive environment for customers
  5. Creating conglomerates and innovative partnerships based on new business models through the utilization of digital technologies

The Challenges

The second panel discussion © PSI Metals
The second panel discussion © PSI Metals

As much as all the steel officials saw the opportunities of digital transformation for their businesses, there are also many challenges to face on their way there.

According to several steel officials, a great challenge for steel companies is change management. Although everyone agreed that digital transformation is the right way to go, there are some gaps in the knowledge when it comes to fully understanding the business impact of change.

The fear factor also plays an extraordinary role, with the question presenting itself: why would anyone change a winning horse that is already profitable? 

This lack of knowledge about the business implications of change is compounded by uncertainty or insufficient information about the economic benefits of industry 4.0.

Another challenge is the ability to choose the "right" strategy for digital change, to define a clear "roadmap" and to develop an ecosystem that supports both.

Not investing time and effort to align the whole organization for this new way of thinking and doing, and not to communicate the digital vision properly would lead to a failure.

Another challenge for some steel producers is convincing management that digital transformation is worth the investment. It must be made clear that digital transformation is not just hype, but a real added value for business and organization.

However, some managers still struggle with the acceptance of new technologies. Since trust is a primary condition for acceptance, it is important to use the technologies they can rely on and entrust their production processes to.

Getting professionals to trust new technologies is not always easy because, as the AIST Forum 2019 demonstrated, many steel officials are "digitally confused." There are a variety of buzzwords, innovative approaches and technologies that lead to a digital overload of offerings and thus create confusion. And as we know, the strategy requires a clear, compelling direction and the setting of priorities in order to filter out the "nice to do" from "strategically important to do." However, too many digital strategies bundle trendy projects to develop and leverage new tools, platforms and technologies without a clear focus and a thorough reflection on the results to be achieved and the longer-term goals.

Chasing "shiny objects" is not an option in the steel industry - if they have no value, don't chase them!

Finally, another challenge that came up repeatedly was the lack of qualified personnel who are digitally competent and literate. On the way toward digital transformation, considerable investments should be made in employee training.

Chances and challenges of digital transformation ©wichai leesawatwong - iStockphoto.com; edited by PSI Metals
Chances and challenges of digital transformation ©wichai leesawatwong - iStockphoto.com; edited by PSI Metals

Digital Dinosaurs Extinction

After three days of presentations and discussions at the AIST Digitalization Forum, it was clear that sooner or later the digital dinosaurs are going to die out. Companies that stick to their status quo will lose market segments or, in the worst case, disappear from the market altogether. Kodak, Nokia or Blackberry are just a few examples of how digitization has the potential to bring even the most established companies down. Since the flexibility for constant change is one of the most important success factors of the future, it is no longer possible to resist digital transformation.

Digital Transformation is not a direct change driver for steel, but it is a powerful change enabler. 

 Let PSI Metals be your partner on the way to digital transformation!

Raffael Binder

Director Marketing PSI Metals GmbH

After taking over the marketing department of PSI Metals in 2015 Raffael Binder immediately positioned the company within the frame of Industry 4.0. So it is no wonder that in our blog he covers such topics as digitalization, KPIs and Artificial Intelligence (AI). Raffael’s interests range from science (fiction) and history to sports and all facets of communication.

+43 732 670 670-61
rbinder@psi.de