When it comes to the long-term development of an enterprise, the main asset is people, not technology. Interview with Sergiy Detyuk, Chief Executive Officer of Metinvest Digital
In the period of development of the digital economy, the digital transformation of the company becomes a matter of not only competitiveness, but also survival in general. Oleksiy Yankovsky, partner, head of the consulting services practice in the field of information technology and cybersecurity KPMG in Ukraine, spoke with Sergey Detyuk, Metinvest Digital CEO, about the challenges and opportunities, technologies and talents, as well as about the strategic vision from the position of CEO on digital transformation in century of rapid change.
In one interview you said that the task of your company is to become a digital business partner. What do you mean by the definition of digital transformation?
We understand digital transformation as a fundamental change in a company based on digital technologies and are aimed at creating new opportunities, new efficiency, a new product, a new business model and added value. This is a change in the entire business paradigm along with a cultural ideological revolution within the organization.
It is necessary to distinguish digital transformation from automation or the introduction of the latest technologies in existing production, because to automate a single object or process, or simply translate analog data into digital, this is in no way a digital transformation.
Automation has been used at industrial enterprises for a long time, but it is digitalization that unites disparate enterprise systems and makes them ‘think’: find certain patterns, predict and optimize costs, influence the quality of finished products, forecast resource consumption, report problems in the technological process and things like that.
What goals does your company set within the framework of digital business transformation and how do you measure the result?
A very good question, key to any business. We see a gap between how we can work based on digital technology and what really happens with customers. Our goal is to get rid of this gap. We measure success by the growth of business value.
The success indicators of our projects differ depending on their goals and objectives, as well as the scope of application — building IT infrastructure, managing information systems, servicing user workstations or ensuring information security. We are aimed not just to implement IT solutions, but to create business value on its basis. After all, it is possible to achieve design indicators, but it will not amount to value. Which, by the way, can be observed in the market: acts are signed, money is paid, but there is no result. When we talk about digital transformation, each of the projects should have its own business value, its own business goals and indicators. I will give an example. The introduction of a unified procurement platform has reduced the time for tendering by 50% and saved the budget — the annual economic effect is more than $18 million.
Where do you think innovations need to be generated — internally or in an external organization?
The decision depends on several factors: the state of digital maturity of the company, organizational features and business culture. A well-developed ecosystem of searching and testing new ideas is critical for the long-term success of any modern company. Business mainly lives in the day-to-day format, and digital changes must be deep and systemic. Not all business cultures are mature enough to make out.
At Metinvest Digital, we are developing internal expertise, as well as focusing on the development of a partnership ecosystem. We have our own R&D center, which works with the market and customers internally to find innovative solutions that we want to experience. We also created a platform for external participants — Co-InnovationLab. On it, we plan to gather our partners and not only for a joint search for solutions in those areas that are not covered by any one vendor, or in areas where solutions do not exist at all. Now we are also discussing close cooperation with two incubators within the SCM group.
In operational events, we very often use the pilot as the best way to implement digital projects, to show the concept, test it, and only then move on to replication.
How to organize the management of digital transformation?
In digitalization projects, even within the same industry, there are no template solutions that can be taken and replicated. Metinvest Group implements a large program for digital transformation in the areas of production, sales, marketing, sales and service. Each strategy is a personalized solution for a specific business task. I do not believe that the necessary changes can be implemented only by the forces of IT or managers of business units. We have a cross-functional team and a cross-functional approach to project implementation. Both parties should work as one team, have a common goal. But it is very important that the transformation begins with the first persons who believe in it. It is necessary to build systemic relations with business, help him formulate a strategy and a roadmap, understanding his needs and priorities. In fact, we work in a matrix structure: operational functions — Services & Operations provides support for all available infrastructure and operation of systems in all enterprises. The Solutions Delivery block is fully responsible for all projects and new developments. It includes the Project Management Office as a separate structure with certified project managers, works according to the methodologies of Waterfall, Agile, Scrum. There is also an R&D center.
To manage the process, we have centers of expertise and competencies for the development of business applications, process control systems, infrastructure and an extensive ecosystem of more than 95 partners. All this gives us knowledge, technology, access to the resources that we transfer to business. With each business we build interaction and the so-called ‘business engagement’. In addition, there are account managers who are responsible for the development of their functional areas, determine the priorities and projects that should be implemented.
What are your views on Connected Enterprise? Are you developing something similar within the Metinvest Group or Metinvest Digital?
We are moving in that direction. Metinvest Digital is trying to get value not from the automation of certain links, but from the integration of all processes. For example, you can simply enter CRM, and this will be one result. And you can connect CRM with back-end systems (software and hardware of the service — ed.) Logistics, shipments, accounting, planning and financing. In this case, the business will receive significantly more benefits. If we understand where you can immediately order a product, how much it will cost, how long it takes to make it.
There is one important point: any projects do not live in a vacuum, they are always connected with the existing ecosystem and infrastructure. I have seen many examples where departments and a digital transformation center separate and give him full project management. On the one hand, this is correct, because it is they who know what to do and what to focus on, and on the other, there is a profound discrepancy regarding the current operational levels. And when projects try to integrate into the existing business landscape, a huge number of problems and contradictions arise.
This complicates the course of the transformation and makes it longer. Metinvest Digital is building an interconnected multi-level digital infrastructure that provides for both the implementation of projects and their support, which is aimed at improving efficiency, reducing costs, improving quality while managing a digital transformation program.
If we talk about risks, for example, cyber threats, how significant are they? How to reduce or level them?
Cybersecurity is among the top global topics on the agenda of our time. On the one hand, each industry is increasingly dependent on IT, and on the other hand, cyber threats are very complex and heterogeneous, it is difficult to manage them. To manage information and cybersecurity in Metinvest Group, a separate unit has been created, in which the Security operation center is now being formed. We are implementing a set of tools related to monitoring, responding and managing the vulnerability of our systems. There is an information security committee between the digital team and the customer. It includes representatives of the holding company, our company and certain functional managers. Each month, the committee discusses the priorities and directions of development of the information security system. We also regularly conduct cybersecurity audits, which confirm that our level of protection complies with international industry standards.
Considering your transformation experience for Metinvest Group, are you planning to provide such services to other organizations in Ukraine and abroad?
Yes, we plan to do it. Over the next five years, we want to become one of the most reliable digital partners in Ukraine and Central Europe with a high level of trust. We already have considerable experience and expertise: we serve more than 30,000 users and implement integrated IT solutions not only in Ukraine, but also in enterprises in Europe and the USA. Our experience will be of interest primarily to large businesses from various fields: mining, metallurgy, telecommunications, banking, pharmaceutical, agricultural. And the list goes on. Using digital solutions and technological projects, we are ready to overcome the limit of improving productivity and efficiency. I think that in the near future we can focus on the industrial sector, in which we are able to give more value.
How, in your opinion, to maintain organizational health and work with representatives of different generations, to ensure their integration and synthesis of technologies?
Despite its name, digital transformation is primarily about people and only then about technology. The main value is represented by employees, and it depends on them in many respects what the final result will be. People who will be affected by the project or its results must be dealt with from the very beginning. To attract, inform, educate, motivate, perhaps even change their skills, understanding and attitude to the subject of transformation. People have been, are and will be the main factor in maintaining organizational health and achieving success.
Everything related to staff development, motivation, company culture, innovative spirit — have become priorities. Technology that will solve the problem and require the involvement of a small number of people and resources can be acquired. But when it comes to the long-term development of the enterprise, people are the driving force.
And yet your focus is to grow internal talents to attract them from the market?
Digital transformation also has its flip side. Thanks to the general digitalization trend, almost every industry is now high-tech. Business processes are automated and digitalized, and this leads to an increase in the need for IT specialists in all sectors without exception. This situation causes serious pressure on the labor market. We have a shortage of qualified personnel. It is expected that in the next two years more than 500 000 IT specialists will be missed in Europe. Given these trends, the answer to the question is simple: talents should be mainly cultivated. Firstly, as I said, the market often does not have enough specialists we need. Secondly, it is necessary to develop skills to readjust and retrain.
Look at the trends: today cardinal changes in the sphere of activity and profession are becoming the norm. According to estimates of the World Economic Forum, for more than half (54%) of all workers, there will be a need for significant retraining until 2022. And it's not just about IT professionals.
What top 3 technologies do you consider the most promising?
In my opinion, they may differ for different industries. But in general, from the position of the digital market, machine learning and artificial intelligence come first. On the second — the so-called computer vision and on the third — a digital double. If you expand this list, then you can add also the Internet of things as an elementary base, providing a combination of everything (connected everything).
And the last question: who is the competitive employer in Ukraine today?
This is a company that can offer an interesting job and knows how to drive people. The employer must motivate and give an opportunity to prove himself. It’s good when you are motivated by the system in which you work, its culture, when you can demonstrate ambitions and achieve something.