How To Pull Off A Strategic Pivot

Roger Lvin built his career in part by helping manufacturers digitize their operations. But implicit in running fast with cutting-edge technologies was that, as technology itself was evolving, so would the role that his company, Hitachi, plays in the world of manufacturing.

So over the last couple of years, Lvin, as CEO of the new Hitachi Digital Services company, has been helping the Japanese industrial and technology conglomerate shift into a new realm of “enterprise transformation” that these days is being defined by factors such as generative AI and the adoption of the hybrid cloud.

It’s comprised a big strategic pivot for Hitachi, and there are lessons for other CEOs in the manufacturing environment in how Lvin has been pulling it off.

“We’ve been hearing from customers for the past couple of years [that] hybrid cloud architectures are growing more complex, requiring more efficient management,” Lvin says. “Data continues to flood the data centers, stalling everything from analytics to AI. IoT is booming and demanding heightened awareness.”

As part of that shift, he explains to Chief Executive, many manufacturers and other companies have been moving out of traditional enterprise-resource-planning systems such as Oracle and SAP. “[Our] particular business was once very focused on them,” Lvin says. “But as Hitachi pivoted to a more digital profile, I had to build out a company that was more diverse and could play in both physical and digital products.

“Over time, ERP [shrank] to about 30 percent of what the company does, and IoT, the DNA and bread and butter of the company, grew to become the tip of the spear and the identity of the organization.”

Thus, last year, Hitachi formed Hitachi Digital Services to leverage and grow with new market trends as it moved to exploit possibilities not followed by its existing Hitachi Vantara IT-services management unit. The company headquartered in Santa Clara, California, has partnered with other companies to boost its capabilities, including with Mitsubishi Heavy Industries to help it navigate big manufacturing markets.

Here’s Lvin’s advice for manufacturing and other chiefs on pulling off a big strategic pivot:

Let your customers lead. Hitachi Digital Services “let the market need pull us.” He pondered “what gives us the DNA that we can double down on” instead of just doing manufacturing execution systems, “and it was the industrial organization on which we’ve grown” and the notion of digitizing services it knew how to provide.

“You have to be pivoting to something, not from something,” he says. “You need to make sure your pivot is market-driven and that you know what you’re doing. Details of the journey may shape themselves, but you need to know where you want to end up. The technology of how you end up there is part of it, but it’s not the end objective.”

Get your people straight. Manufacturing chiefs need to make sure they’ve got the right people on the journey. Lvin identified “whether I had the team to execute” the pivot into Hitachi Digital Services.

“This organization was declining badly and wasn’t profitable. So I replaced 40 percent of the leadership team. That wasn’t my preference, and that wasn’t what I anticipated when I was coming in. I hope that most managers can get away with doing less” of that in their own pivots.

Test your proposition. Hitachi Digital Services began “investing in our capabilities, but we started building that success story right away with someone,” Lvin says. A previous employer of Lvin had assimilated an insurance company with 5,000 employees on which his company began building its capabilities in business-process outsourcing.

In  a similar step, once at Hitachi Digital Services, in the manufacturing arena Lvin worked a deal with Mitsubishi Heavy Industries and Hitachi Rail in which Hitachi Digital Services helped develop a digital approach to train maintenance as a service for railway operators. “It was a foundational deal at scale that gave us the skills and reputation to deploy in those [industrial] markets,” Lvin explains.

Sell the pivot internally. Lvin, inside the existing structure of Hitachi, laid out time horizons for the transition to Hitachi Digital Services. Then Lvin took a “heroes and villains” approach to invite internal embrace of the shift. “I said, ‘These are the organizations we can’t stand, that we have to beat at any cost. It was kind of fun. That united us all.”

Go all-in. Be 100 percent devoted to the shift. “The disasters I’ve seen are where a company has one foot in and one foot out,” Lvin says. “It’s difficult to execute this with some of your chips still on the table. You have to throw yourself into it.”

Be transparent. “The pivots I’ve seen that haven’t worked out have been sort of back-room pivots,” Lvin says. Executing a big shift successfully “takes a little bit of spine and a little bit of finesse because there are parts of the organization where you’re saying, ‘You’re part of our future but not our only future.’”