The 4 Tiers of Digital Transformation

By Damani Short

“Digital Transformation” means different things to different leaders.

If you’re a leader in charge of a transformation, learning from other companies’ use of digital technology can provide guidance – and inspiration. Here are the four examples of how Ford Motor Company, Caterpillar, GE and Peloton have used digital technology to make smart investments and gain competitive advantage.

Tier One: Operational efficiency.

Ford uses augmented and virtual reality, the Internet of Things (IoT) and AI to implement a new automated vision-based inspection of paint jobs in its plants. In this case, new technologies generate data from factory assets, which AI uses to detect and prevent manufacturing defects in real-time. 

Tier Two: Advanced operational efficiencies. 

Caterpillar installs sensors on its construction equipment to track each piece of equipment used on a сonstruction site. It discovers, for example, that customers use their motor graders to level lighter gravel more often than to level heavier dirt. Using this insight, Caterpillar introduces a low-cost motor grader primarily intended to level gravel rather than dirt.

Tier Three: Value chain data-driven services. 

GE monitors product-sensor data from their jet engines, analyzes it with AI, and provides real-time guidance to pilots on how to fly to maximize fuel efficiency. GE then appropriates a portion of their customers’ cost savings via new annuities derived from “outcome-based” revenues. This does more than just improve operational efficiency because it generates new revenue streams.

Tier Four: Data-driven services from digital platforms. 

Peloton uses product-sensor data from its exercise equipment to build a user community and match individual users with appropriate trainers. That is quite similar to how Uber matches riders with drivers using data from their apps. As a result, like GE in the previous example, Peloton generates new revenue from its data-driven services — but this time by expanding its products into digital platforms. 


Of course, not every company will want or be capable of engaging in all four tiers of transformation. Some may choose to focus on just one or a few, but every company must remain aware of the countless opportunities presented.

If you’re looking for assistance in successfully navigating a digital transformation, contact Lexico.