Podcast #175 Continuous Digital Transformation

TRANSCRIPT

Ken:

Good day, and welcome to the Momenta Digital Thread podcast series. Today I'm pleased to host Dirk Ramhorst, former Chief Digital Officer and Chief Information Officer of Wacker Chemie, a $6 billion revenue German-based chemical producer employing over 16,000 people. Dirk has a long track record of successful digital transformation leadership in continuous process control companies. He has held the role of CDO and CIO at Wacker Chemie since 2017. Prior, he served as Chief Digital Officer at BASF, leading the digital transformation of the world's largest chemical producer for nearly eight years. Prior, he served as Chief Knowledge Officer and later SVP of Industry for Siemens. When he's not transforming the world's largest industries, he can be found organizing the world's largest annual sailing event in Kiel, Germany. Dirk, welcome to our Digital Thread podcast.

[00:01:34]

Dirk: Thanks for inviting me. It's a pleasure to be here.

[00:01:36]

Ken: It's a pleasure to have you. I've long looked forward to this interview because there seems to be a lot of information relative to digital transformation of discrete industries, but never enough around process industries. I always like to start with a general question: What do you consider to be your digital thread? In other words, what's the one or more thematic threads that define your digital industry journey?

[00:02:05]

Dirk: Thanks, Ken, for this session. What is my digital thread? Compared to the mentioned discrete manufacturing industry, the process industry is a different arena. We run 7/24; it's highly automated. Nevertheless, it's about all the people, and it's about the organization's transformation. We have very long-lasting assets in the process industry. Some have been running for 30 or 40 years so it's about generations of people and generations of machinery and plants. This is the biggest thread.

[00:02:44]

Ken: When I think of digital transformation of industries, as I mentioned, there's a lot around the discrete industry, discrete manufacturing; in fact, because you've done a lot of your work in Germany, much of the imagery of Industry 4.0 often reflects things like robots and automotive production lines. During your time at Siemens, you were Chief Knowledge Officer and then SVP of Industry. What attracted you to BASF or the continuous process space? What were some of your largest surprises?

[00:03:24]

Dirk: Actually, it wasn’t customer relationship. SVP of Industry served the German industry market as a service supplier, and BASF was one of my customers. I you have once visited a chemical plant, the term used for a plant in this context is “Verbund”. The inbound-outbound relationship of different plants in terms of heat from one plant is taken as the catalyst in another one. The whole assembly of different plants in one ecosystem in this “Verbund” is highly integrated perspective is fascinating. This was my perspective. Of course, when I started, it was purely about the I.T. product business, and that are not too many differences between discrete and process industries. I came closer to the core business in the process industry and realized the differences later, and that was the tipping point to start the digital journey of this industry. I've now been in this industry for 13 years, and my next steps will follow this summer, continuing in this industry. This is also very challenging from the perspective of topics like sustainability. Is the industry part of the problem or part of the solution we as humankind face?

[00:04:47]

Ken: Yes, especially the chemical producing industries. They certainly are both beneficial and vilified simultaneously, much like oil and gas, as one might generally say, too. I find it fascinating that you took on the Chief Digital Officer role at BASF in 2013 because that was a relatively early time for such digital leadership roles, especially in the process industry. What was your remit in this role? What were some of your key wins?

[00:05:16]

Dirk: It was a pioneering role. It was a role of discovering a new horizon, a new continent, and it was very much about being an evangelist to explain what digital is about. It was not implementing things. It was about understanding digital technologies like artificial intelligence, laying out a cloud strategy with each component because of this 7/24 perspective of running the plant. It was about understanding the potential of IoT; it was about bridging production, O.T., into the I.T. world. It was about understanding potentially new business models in the same space. As I mentioned, it was about laying out the perspective, a strategy, an idea of what digital could mean. This has changed. You said that my last engagement was with Wacker Chemie. My focus there was on execution and implementation. A couple of years later, this was my pioneering role at BASF in 2013.

[00:06:32]

Ken: It might have been the time relative to best in class for digital transformation in the market. As you said, your BASF role would have been more exploratory because you were early on there. By the time you joined Wacker in 2016, they were probably a little more established, but I would still say they're very exploratory at that point. I'm curious because when you went to Wacker in 2016, you took on the Chief Digital Officer role and the CIO role. The combination of those is interesting. Typically, I'd define CIO's remit as keeping the lights on. The CTO is digitally transforming the organization, the product, and the processes. Essentially, one of those roles is about minimizing disruption, and the other is about creating it. Assuming you see the perspective is fair, how did you manage both remits in one role over five years?

[00:07:31]

Dirk: Traditionally, I would fully agree with what you said about the CIO role. It was purely seen as a cost factor; like you said, helping the organization keeps the lights on. But to enable a digital transformation, you need different species of I.T. I led two transformations in Wacker. One was the digital transformation, and the second was a prerequisite for the first. The I.T. transformation was to establish an I.T. shop seen as a business enabler rather than the cost sector. I see also that in this specific industry, I can talk about the process industry. These two roles belong together. It's a new species of CIO. For example, if you investigate the industry, in companies like Henkel or Covestro, they have established the CDIO role. They have combined the two roles into one title. I was a kind of role model for this under the two titles, two different roles, but like you said, with a lot of synergies.

[00:08:44]

Ken: It's interesting; I hadn't heard about this CDIO role. In the U.S., you tend to see the separation of those roles again along with those various remits. There's something to be said because I.T. is the enabler, or catalyst, for so much digital transformation. I.T. creates digital transformation largely around the change in business and business processes. When I look at your peers, the early movers in digital industry like G.E. in creating central organizations taking the subtitle of 'digital, some have been more successful than others. How did you organize for that success? To whom did you look for inspiration on your journey?

[00:09:30]

Dirk: First of all, I looked into two pillars. The one pillar is a kind of network of corporate partners. For example, to understand Microsoft's role and ABB, Schneider Electric, or Siemens. Being close with production means you talk to those suppliers in this space from an O.T. perspective. This is one ecosystem, and of course, ACP was also a significant partner. The second, more innovative pillar was a startup ecosystem. I worked very intensively with a handful of venture capital companies to gain momentum with very early innovations. Not mature innovation in terms of 10,000 times deployed software, but bringing our problems, our challenges to the table to find solutions with totally different fresh thinking that you find in the startup space.

[00:10:35]

Ken: That's interesting. As you know, Momenta is effectively a venture capital company in that we invest in digital industry startups. We find that the relationships with strategics, as BASF and Wacker would be considered, are valuable. Often underrated in terms of the ability to help grow those companies, or better yet, define their product-market fit; you were very forward-looking in reaching out directly, and that's something we've seen with some of your peers across all digital industries in terms of Chief Digital Officers. They have an outside-in-style innovation strategy that involves looking at the technology providers in the market, as you did in benchmarking yourself, and the potential disruptors in the form of startups. Kudos for having done that. I also noted that you did quite a bit of thought leadership work in Industry 4.0. How did you apply Industry 4.0 principles in your digital leadership roles at Wacker and BASF?

[00:11:40]

Dirk: First, it's a very big title, Industry 4.0. It's about many technologies that you can bring to the table. We have called them prerequisite enablers. In the end, it was about applying those requisites and enablers in concrete use cases to overcome specific challenges. For example, the supply chain in the American term could include production. For me, in this context, the supply chain is logistics, including head over to production but overcoming specific challenges into production. For example, I mentioned the term “Verbund” this is a very highly integrated connection and connectivity between different parts of one plant and on one side. For example, energy management optimization of yield, as those things have been part of the story. It was about applying the digital strategy, not as a separate entity to the corporate organization; it was always about making the whole organization more digital. And in this context, we used a central team within the organization as a catalyst to develop showcases. We have called them lighthouses. From there, we went into deployments. But lighthouse also means that some of those things failed. We have not started a big implementation because we could not showcase the benefit of what we're looking for.

[00:13:23]

Ken: You mentioned earlier an ongoing and perhaps heightened perspective of sustainability as an example of the industry. You've undoubtedly seen the next level of thought leadership from the E.U. Commission. They've termed it Industry 5.0, which I define as Industry 4.0 meets ESG, or environmental sustainability and governance. In essence, putting productivity goals on par with what I would consider planet and people goals as well. How do you see this expanded vision of industry changing? How would you digitally transform a company, especially a process industry?

[00:14:00]

Dirk: I think it's a game-changer. It's a game-changer to put the right actions or activities in this game. I mean, we have a game played in front of us, and you always have more opportunities than you have resources. This perspective of the combination of Industry 4.0 with the challenges that society, humankind, faces with ESG related topics is something that is not only becoming, but it is already a game-changer. What I mean by this is it's about finding talent. It's about understanding how you can showcase a particular impact in terms of environmental things. It's also about your role as an organization in society. I mean, specifically, with the challenges or the changes we have all faced, and even continue to, but hopefully, soon, it will be after the pandemic years of Covid. It's a massive disruption in ways of working, for example. Some of the people in society have been able to participate in this change; they have been able to work from home. But in manufacturing, it doesn't matter if it's discrete or process manufacturing as people still must come into shifts and cannot work from home. They have to work in the chemical plant on 7/24. We run five shifts a week to serve 7/24. It's about us, the corporations, making sure that work is not splitting the society from those that can benefit in a different way of working rather than those that stick to the old part of the game. And I think here, we all have a challenge ahead of us.

[00:15:53]

Ken: Yeah, I like your perspective of seeing this as a game-changer. You mentioned earlier that you're preparing for an even more prominent digital leadership role in the process industry. Given your extensive learnings in prior companies, and this time you've taken to reflect on next steps, what do you envision as your 100-day plan going into this company?

[00:16:15]

Dirk: First, it understands the business. It will be my third chemical company, but it will differ from BASF and Wacker. I will spend the first two months understanding the business and then develop my I.T. and digitalization responsibility in early summer coming from the business. It is also essential to transforming the I.T. to a business partner compared to what I can potentially take over there. This is perspective; it's about building up the networks within the organization. I'm a very strong networker and going into a new context means I have to build up a new network. I'm already working on this. And then, of course, when I take over my role, it's assessing what is going on. I mean, it's not a digital green field. They have done many things in I.T., so it's assessing those things and combining them. It's like becoming the chief conductor of a new orchestra. All the musicians have the tools and skills to play the instruments, but you need to come up with something new as a new conductor. This is part of what I'm looking at in the first 100 days.

[00:17:37]

Ken: It's a good analogy. Initially, a byproduct of any organization was the data. I think G.E., very early on, talked about the real value many times. The products you're producing or the service you're providing become almost secondary. In some sense, data is that common element. The music sheets, perhaps, and everything else corresponds to that. I like the analogy.

In closing, let's talk about your other leadership role as Regatta Chairman for the Kieler Woche, a role you've had for almost 18 years. As I mentioned, the largest sailing event globally. It's hard for me to believe it's so close to where I live in Switzerland, yet I've never had the opportunity. Tell us a bit about this event and this passion.

[00:18:25]

Dirk: Actually, it's really about passion. It's about my attitude to make things happen. While working in large corporations, sometimes it takes a while to make things happen. People tell you why things might not work, why things haven't worked in the past, etc. The Kieler is a 140-year-old event. I must correct you, I lead this now for the seventh year, and I've been involved for eighteen years. Leading this means during nine days, in the last week of June, I have up to 500 volunteers that show up here to make things happen. You will never find a discussion of why things might not work. You will always find the attitude of 'what do we have to do to make this happen?'

In the last two years of the pandemic, we conducted Kieler Woche in September versus June. This year we are planning for a massive Kieler Woche in September. It will be the largest event ever. We will have a couple of thousand boats, with several thousand participants, from 60 to 70 nations. It's also a large cultural festival, which is not part of my responsibility, but this is the third-largest cultural festival in Europe. Making things happen, such as this event, provides me a lot of energy for my business position, which is a win-win situation for both.

[00:20:05]

Ken: Yes. I can certainly see the conductor role coming out again. There are a lot of parallels. That is interesting because while we separate what we call work and life, especially in Europe and in the U.S., the most interesting things we do transcend both of those things. Certainly, playing conductor for the transformation of an industry or the world's largest sailing event sounds equally challenging and rewarding at the same time. Well, Dirk, thank you for sharing this time and your insights with us today.

[00:20:40]

Dirk: Thanks, Ken, for inviting me again. I hope to see you in Kiel.

[00:20:44]

Ken: Absolutely. And by then, hopefully, we will all get to understand this next big step that you're taking in your career. So congratulations on that.

[00:20:52]

Dirk: Thank you for sure.

[00:20:53]

Ken: This has been Dirk Ramhorst, former Chief Digital Officer and Chief Information Officer of Wacker Chemie. Thank you for listening, and please join us next week for the next episode of our Digital Thread podcast. Thank you, and have a great day.

You've been listening to the Momenta Digital Thread podcast series. We hope you've enjoyed the discussion, and as always, we welcome your comments and suggestions. Please check our website at momenta. one for archived versions of podcasts, as well as resources to help with your digital industry journey.

Thank you for listening. 

[The End]