Why and How to Create a Digital Factory

Post co-written by Benjamin Tolaval, Khaled Boudra, Yves Le Pors, Thomas Leblanc and Xavier Perret

Digital factories are a key part of digital acceleration. They help companies meet digital consumers’ increasingly pressing and urgent demands.

More and more examples of this digitization boom are emerging worldwide. On November 11 each year in China, on “Singles Day,” Chinese e-commerce operators “slash prices” for one day only and make record-breaking sales. The number of transactions is mind-boggling: in just 24 hours, Alibaba makes sales worth more than 20 billion dollars (in 2019, the company made one billion dollars in precisely 1 minute and 22 seconds!). In 2020, Amazon announced over 320 billion dollars in revenue. In just 20 years, French e-commerce company Veepee has gone from physical stock clearance company to digital drop shipping pioneer making sales of more than 4 billion euros in 2021.

One thing is clear: monetizing data is more than just a valuable resource for companies, it is the proverbial golden goose.

But how do these companies tackle the challenges involved in data collection, logistics, monetization, and compliance with the various statutory and legal frameworks imposed in recent years? As a core element of their digital acceleration strategy, companies often create a digital factory to solve these problems.

To guide you through this strategic minefield, Cellenza has created a series of new and original posts about digital factories in partnership with Microsoft. Every month, our experts will share their knowledge and feedback about digital factories with you.

What is a Digital Factory?

First, let’s agree on the definition of a digital factory: the issue, of course, is knowing what does and doesn’t constitute a digital factory!

A digital factory is an entity within the company created to deliver digital products. Its activity includes product design and the development and delivery of its own category of products.

This suggests it is some kind of “weapon of mass transformation” but it is actually just one step in the process. It is easy to confuse a digital factory with an idea incubator or a proof-of-concept factory, in other words, a place dedicated to research or a digital lab. The main purpose of a proof-of-concept (POC) factory is to explore ideas. It is an incubator for inspiration and leads to research activities. This is not what a digital factory does.

A digital factory creates digital products and puts them into production at a steady pace.

You need mass-production processes to achieve these objectives. The digital factory should make digital products that end clients can use in production while maintaining defined service levels (maintenance in operational condition (MOC), support and availability). This, and not functionality or intended purpose, is the main difference between a digital factory and a digital lab. A lab focuses on testing, learning, and exploring whereas a digital factory industrializes innovative products.

The organization and processes of a digital factory, combined with a powerful and innovative technical platform, make it possible to create products that meet your client’s needs fast (or, at least, faster than IT departments can). These needs may well be functional, but they may also be technical (availability in line with use/hardening based on how critical the data is and any risks identified, etc.)

so other key criteria should be considered when designing and developing your digital product. The general idea behind a digital factory is being able to deliver digital products at a reduced time to market compared with the conventional IT structure while taking into account security criteria, high availability, application performance, and budget considerations, etc.

How to Implement a Digital Factory

To set up a digital factory, you need to create a stand-alone structure within the company. Like physical structures of this type, think of the digital factory as a micro-enterprise. In other words, like any other company with its own clear and detailed strategy and business plan and, most importantly, with the ability to make changes easily.

Knowing and predicting when you will need to adapt to new requirements using clear and effective governance and Lean Portfolio Management is the basis of any agile organization. This governance can take various forms that focus on different strategies (quantity vs. product maturity) and therefore on greater or lesser integration levels (business and IT) within companies.

The digital factory entity should use identified needs to determine its route to maturity. The important factors are consistency, control, and communication. The project intake criteria should be compatible with the digital factory capacity.

It is therefore possible to have:

• a first digital factory that only produces MMFs (Minimum Marketable Features – a completed version of a software product with restricted features) and appropriate service levels to support the company’s innovative research
• another digital factory, within a different business environment, that will support the company’s entire digital strategy with mature and robust products

You need very different digital factories to achieve these two goals but they use the same broad principles as a basis, making it easy to adapt them as your requirements change.

What to Include in a Digital Factory?

Tailor your digital factory team to your needs and be sure to adopt a customer-centric and multidisciplinary approach. Your team needs a huge amount of autonomy since it will be relying on its internal expertise on a day-to-day basis. Your team should include product, architecture, security, development, infrastructure, and operations expertise at a minimum. The team can still collaborate with the rest of the company’s teams (business and IT) to share best practices and maintain good communication.

The team should maintain close relations with the operational branches to understand their needs. All in all, your digital factory should be open to all company departments but also, and most importantly, consider interactions with its environment. You should forge links between the various support teams (data, security). This is vital for the end product. Your digital factory steering and technical teams must ensure compliance with the company architecture defined by IT (in some cases, this may mean upgrading) and adhere to project life cycles and the IT department’s processes. In practice, your digital factory becomes the “client” of IT services such as network connectivity, authentication services, and the various user support systems (helpdesk, etc.).

Because of its disruptive nature, your digital factory should also have its own organization and methodology (agile usually) and its own technical platform. This requires a network of partners, integrators, and publishers to help your digital factory achieve its goals quickly. You will need to source any additional expertise needed, whether acquiring new skills or building on existing ones, from outside the company. Your digital factory should be independent but not isolated, either internally or externally, so you should give particular consideration to its technical and business ecosystems.

A Technical Platform Unique to the Digital Factory

Your digital factory should also have a technical platform that allows it to achieve its objectives while sharing the same characteristics (flexibility, adaptability, quality, and security). This platform does not have to rely on the same principles as the IT but it should be defined in collaboration with the IT teams. This will ensure that your associated production methods and equipment (development environments, build and deployment chains and monitoring, etc.) are appropriate to the often cloud-based technology target. This technology is usually chosen for its qualities (excellent computing power, scalability, high availability, specialized services) that meet the needs of a product development factory.

How to Finance a Digital Factory?

The last, and by no means least important, requirement for meeting the conditions above is funding for the digital factory. Your factory needs its own operating budget and that means a considerable investment. It is extremely difficult to set up this type of structure without sufficient planning and forethought as is relying on project budgets to make progress with peace of mind.

Re-invoicing systems, supported by success criteria, may be needed. After all, the ultimate goal of a digital factory often goes beyond being a simple cost center, it should bring value to your company by delivering a rapid ROI. Business teams no longer have to worry about bewildering project budgets and need do nothing more than arrange the purchase of an end product that is much easier to manage and understand.

A digital factory should combine three basic elements which might appear to conflict with one other but which are now perfectly possible thanks to cloud and DevOps technologies and tools: the ability to provide an internal or external client with an application as quickly as possible, with strict adherence to a structured security and IT compliance framework and, in particular, the ability to scale that application if it proves successful.

Xavier Perret – Azure Director (Microsoft France)

Learn more about Digital Factories::

• What is the Best Strategy and Approach for Your Digital Factory?
• How Do I Organize Teams in a Digital Factory?
• Digital Factory: Which Technical Foundation?
• Financing and Budgeting for a Digital Factory
• Digital Factory: Feedback From Saint-Gobain – Aari
• Digital Factory: Nexan’s Experience