38# Business unit strategy: how to succeed in digital and cultural transformation

In 2023, companies must continue to strive to keep pace with technological developments and adapt their processes and business models accordingly. For years, digital transformation has become an unmistakable buzzword in the corporate world. One such company is Mitsubishi Electric Europe, a global leader in the CNC industry. Roman Gaida, current Head of Division EMEA, rolled up his sleeves and joined Mitsubishi in 2017 to initiate long overdue changes.

In this article, we join Roman Gaida and Christian Underwood on the journey of digital and cultural transformation. Starting with the goals and challenges through to the strategies for success. Both examine how Roman tackled the technical and organizational aspects of the transformation and how he managed to reconcile change, innovation and people.

In addition to the actual main topic of this podcast episode - initiating fundamental changes in deadlocked companies - Roman's professional development also shows that it is never too late for far-reaching transformations. After working as a cutting machine operator in shifts for six years, Gaida trained as a mechanical engineering technician on the side and completed his vocational baccalaureate.

At the age of 27, he began studying industrial engineering at the Baden-Württemberg Cooperative State University and then joined Oerlikon in Switzerland in 2013, where he was responsible for Global Business Development for almost four years. During this time, he completed an Executive MBA at RWTH Aachen University in cooperation with the University of Sankt Gallen and attended further training courses at MIT and Stanford. He also wrote two and a half books and is now co-host of the successful podcast "Working Dad". The digital transformation at Mitsubishi Electric should be just as successful as his professional transformation.

Before we dive deep into the subject matter, let's take a step back and look at what Mitsubishi Electric Europe CNC actually offers. The company produces control systems, drives and software for machine tools such as lathes, milling machines and grinding machines. In addition, the company also offers services for customers in Europe, the Middle East and Africa (EMEA).

Although Mitsubishi Electric itself is active in various sectors (automotive, transportation, semiconductor industry, building management, elevators and robotics), the CNC division specializes in machine tools.

When Roman moved to his new position as Head of Sales and Marketing in the CNC Division at Mitsubishi Electric Europe in 2017 after his time at Oerlikon, he started with the comprehensive goal of implementing a Europe-wide digital transformation program.

But what does digital transformation actually mean in a corporate context? It refers to the process of integrating innovative technologies into all areas of business life - from everyday processes to strategic decision-making. It is not just about switching from analog to digital processes, but also about a comprehensive change in corporate culture. It enables companies to adapt to the changing needs and expectations of their customers and optimize their own business processes in order to remain competitive.

However, the initial situation at Mitsubishi Electric CNC was tough and characterized by a historically grown business area. Inefficient work processes had crept in and their insular knowledge offered little room for growth. The aim of the programme was therefore to become more scalable through modernization, simplify processes and thus create resources for growth.

To overcome these challenges, Roman initiated a gap analysis across the European sector. All areas, from technology to administration, were examined to determine what could be improved. The focus was on both KPAX and OPEX management. Rather than opening the door with his criticism, Roman opted for restraint. He took his time, listened to people, got involved everywhere and looked to see where change was needed.

As is so often the case, the engineers in the company initially tended to push ahead with the change using only new IT tools and digitalized process introductions. However, the fact that a change mindset must first be created among the employees and the interfaces between the departments must also be connected was initially ignored. In practice, many companies seem to make the mistake of restructuring the organizational chart first instead of preparing employees for this restructuring. Christian calls this "strategy follows structure".

Roman and Christian talk about how important it is to initiate a cultural change in the company during the digital transformation. The conclusion: it is not enough to just change the technologies and processes - the employees also need to be involved. Because without the right attitude and the willingness to change among the workforce, the digital transformation cannot be brought to a successful conclusion.

However, if employees are not aware of the absolute necessity of change, it will be slow to materialize. Things couldn't have gone better for the mechanical engineering industry in 2017, so the tone of the headwinds was clear: why do we need change at all?

Roman describes how, according to John Kotter, he first had to create a "sense of urgency" to convince employees of the need for change. He then organized the first town hall meeting in the company's history to make it clear to the 80 employees at the site at the time that change was a preventative measure. And this insight still applies today: it is important to train the "change muscle" at an early stage and thus develop strategic foresight. This is the only way to win over employees for change and successfully lead the company into the digital future.

"Compared to what Uber has done to the cab market and Airbnb to the hotel market, I have tried to explain when the right time for change is. It's not when we're in need. Because we need to have already trained this change muscle. Not just when we need it, but you have to do it beforehand." - Roman Gaida

The planned digital transformation began at the top floor - with the managers. In joint offsite meetings, they first discussed how they themselves would like to be managed. This involved examining their own and others' perceptions in order to recognize how they actually lead and how they motivate - or demotivate - their employees. They were then coached "in secret" for a year.

Finally, after one year, an online survey was conducted to investigate how and whether their management style had changed and to what extent the employees had perceived this. The aim was for managers to be able to draw their own conclusions from these surveys about the direction in which they have developed and thus create an organic "sense of urgency" from the results. This survey is currently being repeated after three years in order to consistently provide a mirror surface for the management level.

It turned out to be a weak point that the topic of leadership had often been treated as a side issue in the organization. There were also different ideas about what leadership means. As a result, some managers were dismissed from their positions or transferred to other positions within the company to give them the opportunity to relearn their leadership skills or find a way out. Roman emphasizes that it is important to deal sensitively with the changes in order to retain and promote these people within the company.

The term New Work has been around since the 1970s and was coined by the social philosopher Frithjof Bergmann. It describes a modern approach to the design of working environments and conditions that is based on self-determination, flexibility and collaboration. It is ultimately about breaking down traditional hierarchies and promoting a culture of openness and agility.

By examining leadership, Roman was able to gain access to employees and their needs. With regard to New Work, the digital transformation should not only address traditional topics such as working from home or flexible working hours, but also the principle of challenge and encouragement.

Roman emphasizes that ultimately it was not about giving employees a feeling of satisfaction, but rather a feeling of self-efficacy. This arises when employees have the opportunity to help shape and make decisions, when they are picked up along the way, have transparency in the information passed on by managers and when they are taken seriously and noticed.

But at Mitsubishi Electric CNC today, self-efficacy also goes hand in hand with responsibility. Employees can't just complain about a situation, they have to make suggestions on how to improve it. This type of collaboration can create a positive working atmosphere in which employees feel that their opinions and ideas are heard and that they are able to bring about positive change. And this is achieved by empowering employees and not just delegating. It is also about responsibility and the willingness to step out of the comfort zone, even as a manager. It is about creating a psychologically safe space in which open feedback is possible and grievances can be discussed.

It has now been 5 years since Roman initiated and successfully implemented the digital transformation. Today, he draws a positive balance: the phase of scaling and harvesting has begun. Looking back on the transformation, it is the sum of all the individual changes that creates the new overall picture. For example, they have brought a previously outsourced robot service back into the company and introduced remote services that enable employees to carry out the service directly on site at the customer's premises using Google Glasses. Chatbots were also implemented to support technical solution finding and NLP analyses were integrated into mentoring programs.

However, it was not only technological innovations that were introduced, the culture and structure of the company were also adapted. New meeting cultures were established and even sleep training for managers was offered. Through Europe-wide mentoring programs and a new innovation and competence center for Europe, the company was able to increase its competitiveness with almost the same workforce. All of these changes and adjustments have meant that the division can act faster on the market and bring ideas or products to market more quickly. In order to achieve a successful transformation, it is sometimes important to take risks and stay on the edge of your own possibilities.

Finally, Roman gives those entrepreneurs who want to initiate such a digital transformation themselves a helping hand. Roman recommends taking your time first and not rushing into anything. This makes it possible to evaluate the current situation, gain an overview and identify potential problems. It is advisable to listen and take time to understand the needs and requirements of those involved before taking action. By listening and observing, the really important things can be identified that will ensure the success of the transformation process.