In today’s era, for many enterprises, implementing digital transformation has become one of the key strategies to improve efficiency and enhance the capacity to resist crises. Take Honeywell as an example, we have invested an unprecedented amount of time, energy, and funds into IT infrastructure. By streamlining systems and strengthening our data analysis capabilities, we have realized an enhancement in value, even though the specific gains from this process are not easy to quantify.
The importance of digitalization for business operations is self-evident, especially during crises such as the COVID-19 pandemic, inflation, and geopolitical risks. A lack of clear and consistent digital strategy significantly increases the risks of running a business. Honeywell is dedicated to providing cutting-edge digital, automation, and sustainability solutions for various industries. These solutions enable customers in fields such as aviation, industrial facilities, warehousing, and urban architecture to integrate all devices, products, and sensors within the systems, thus achieving operational efficiency and business growth.
Since becoming the Chief Operating Officer in 2016, I have deepened my understanding of the company’s overall picture through my leadership of the Performance Materials and Technologies Group and the Safety and Productivity Solutions Group. I quickly realized that Honeywell’s systems needed improvement, with over 150 Enterprise Resource Planning (ERP) systems, approximately 2,700 applications, and 1,700 websites, but lacked an overarching plan for data collection and use. Therefore, to more effectively resolve customer problems, we had to deepen our digital transformation.
The team reflected on a key question: “Can we transform a diversified industrial group into an integrated company through digital means?” We aimed to achieve this not just by changing the data processing methods but by connecting various business sectors and shifting the business focus. We reimagined both internal and customer-facing systems, improving production efficiency, transparency, and agility on one hand and extracting information from sales systems to provide additional value to customers on the other hand, such as tracking emissions, saving energy, and enhancing safety.
After becoming CEO, I identified the following four priorities:
- Encouraging the company’s organic growth
- Maintaining and improving profit margins
- Embedding lean management principles with digital attributes into software products
- Allocating capital more effectively
Digital transformation is crucial to these goals. We have worked to streamline IT infrastructure, control the number of data sources, and developed a structured, accurate core database to centrally manage data on products, customers, and employees, among other aspects. We aim to effectively collect, analyze, and utilize data to better understand customer needs and enhance operational efficiency.
As a manager with an engineering background, I firmly believe in the power of data to strengthen the decision-making process. The various positions I’ve held throughout my career have given me a deep understanding of how discrete systems work and the elements needed to form a cohesive system, providing a solid foundation for me to lead the company’s digital transformation. During my years as a junior engineer at General Electric Aerospace, I was involved in the development of core technologies and algorithms, gaining a profound appreciation for data analysis and quantitative methods.
My second job was at Booz Allen Consulting, where I gained in-depth knowledge of industry trends, corporate operations, and client issues. I learned to think from the perspective of the company, identify the necessary information, uncover the causes behind problems, design interviews, find the right sources of information and data, and master how to more effectively advance and implement business strategies.
Then, I joined Ingersoll Rand to work in business development, acquiring knowledge on mergers and acquisitions—evaluating target companies, integrating inorganic growth with organic growth strategies, and learning the art of deal-making. Following that, over the past six-plus years, I managed various service and product businesses, gaining practical experience with different business models.
Continuing my career, I became the CEO of MachJet, a privately held IT company with close to three hundred million dollars in annual revenue. Under limited resources, I learned the importance of quick adaptation to environmental changes, continuous innovation and taking swift action, or risk being phased out by the market. With Honeywell’s acquisition of MachJet in 2008, I assumed multiple roles with expanded responsibilities and operational scope at Honeywell.
Initially, I focused on the meticulous management of daily corporate operations. Later, when I was responsible for larger P&Ls and teams, I had to rely on data, processes, and structures, and could not do everything by myself. After becoming CEO, I realized the need to integrate the efforts of the entire company to execute a unified strategy. This became not just a challenge, but a business opportunity.
In the multifaceted transformation, Honeywell internally required a centralized database to increase transparency and efficiency to guide business decisions. We called it Honeywell Digitization. Externally, we began to provide a system that could leverage customer data in new ways, namely the Honeywell Enterprise Intelligent Integration Software Platform.
The internal project was divided into three phases:
- First was the simplification and reorganization of the infrastructure, which included reducing as many as 150 ERP systems to 10, shrinking 1700 websites to fewer than 100, and reducing 2700 applications to no more than 1000. These streamlining measures significantly reduced maintenance costs and minimized technical risks.
- In the second phase, we defined primary databases for products, employees, customers, and other aspects. The primary databases would solve the problem of data silos, ensuring data recency and consistency. However, constructing these databases required a significant cleanup effort, including resolving data conflicts, sorting inconsistent data, formatting data for compilation, and installing the necessary systems to store these data centrally.
Developing a strategy that maximizes the utility of data is an exciting and challenging task. The implementation of this strategy starts on a small scale, such as introducing new systems within key functional departments of a company like supply chain, human resources, or finance. Subsequently, once the systems are deployed and operational, the focus shifts to integrating cross-functional department data, to achieve transparency across the entire value chain.
This integration not only guides all corporate activities, such as employee planning (how budgets are translated into specific departmental staffing needs?) and product pricing (what demand have we seen at the product and business unit levels?), but also impacts external affairs of the company.
Meanwhile, external affairs management becomes more complex, given that Honeywell’s four strategic business groups—Aerospace, Specialty Materials and Technologies, Building Technologies, and Safety and Productivity Solutions—all involve software businesses. Therefore, our task is to extract software operations within these divisions and integrate them into the Honeywell Connected Enterprise (HCE) Integrated Software Platform. This platform operates horizontally to increase the efficiency of company IT infrastructure usage and vertically combines domain knowledge to strengthen customer connections.
Honeywell Forge software solutions are technical products we’ve created based on this platform. Considering the operational systems in industry and manufacturing are often specialized for specific factories or buildings due to their complexity, our engagement at the hardware and systems level allows us to begin offering cloud-based Software as a Service, thereby centralizing all operational dynamic data into a “data lake” and, through analysis, helping customers create value.
For example, the Forge Connected Warehouse software solution can automate data collection, monitor warehouse dynamics in real-time, and offer recommendations by identifying bottlenecks, assisting in reducing downtime and improving work efficiency. All this is achievable on a dashboard optimized for tablets. Similarly, the Honeywell Connected Enterprise Integrated Software Platform is also applied to buildings, collecting real-time data regarding energy usage, comfort experience, and air quality. In industry, it can indicate maintenance needs and emission levels and is instrumental in constructing digital twins to gain deep insights into the building and software system conditions, shaping solutions.
In the aerospace industry, the Honeywell Forge Flight Efficiency software helps companies select more efficient flight paths to save fuel. In fact, a report from Martinair Cargo, a subsidiary of KLM Royal Dutch Airlines, stated that its four Boeing 747-400 freighters reduced fuel consumption by more than 540,000 pounds in a year.
In the field of cybersecurity, we offer an all-enterprise platform that integrates security features to make risk management more accessible. And the Honeywell Connected Industrial Workforce software allows customers to grasp their employees’ capability, efficiency, safety, and security status, regardless of their location.
Despite significant resistance and skepticism encountered during this transformation, such as often hearing internal opposition voices: “Why do we need to do this? It won’t work.” But to achieve change, it is necessary to overcome these challenges and gain the required recognition.
To ensure the successful transformation of the company, I have placed myself at the core of the company’s operational structure. As the CEO, I am acutely aware that the organization pays a high level of attention to my actions. In this context, for major strategic initiatives, I cannot simply delegate tasks. My action plan includes regularly presiding over review and operational review meetings to convey a very critical message: Honeywell’s transformation will be given my personal attention and be continuously driven forward.
It is also vitally important to be receptive to various ideas and to value feedback. In the process of driving reform, I maintain an open attitude towards personnel allocation, process optimization, and decision-making processes until I can thoroughly understand each link. While some leaders may hesitate to ask questions for fear of others doubting their ability, I firmly believe that asking obvious questions is far better than realizing a mistake and making decisions afterward.
In order to successfully launch Honeywell’s Enterprise Connected Integrated Software Platform, this customer-centered plan, we organized a two-day offsite working session. The project required carving out a part of the company’s existing business to establish a new business, and I realized this move would inevitably attract widespread attention from colleagues. Therefore, I chose not to implement this through direct orders but by convincing employees of the value of the plan and encouraging them to actively engage in it to promote its success.
In the company, there was a public debate about the plan for future transformation, the reasons for implementation, action strategies, and discussions about approaches that do not work. We encouraged all participating individuals to freely express their views, feel that their voices were heard, and openly discuss challenges in order to jointly develop action plans to overcome difficulties. Ultimately, the team unanimously believed that this project was very valuable, and in the long term, its benefits for Honeywell were self-evident.
In the process of digital transformation, I began to realize that we might have underestimated the value it brings to us and our customers. Some changes might seem trivial at first, like being able to access data from the central repository and automatically generate reports or even create PPTs at nearly real-time speeds without spending days poring over spreadsheets and writing reports. We can now have a detailed understanding of the performance of each business unit in pricing, new product launches, and productivity, among other aspects.
Other changes are particularly striking, such as the Honeywell Accelerator operating system. Initially designed as a learning tool, it has now become a platform for absorbing the company’s past successful experiences and promoting standardized business practices across the company. This includes using the system to improve the performance of slow-growing businesses, or to rapidly integrate newly acquired companies. Just as our culture and processes naturally formed an organism in the past, we can now deploy operational tools efficiently across the enterprise.
The complex situation over the past few years has been a significant test for every company, but it has also reinforced the importance of digital transformation. It helps businesses maintain competitiveness and enhances the resilience of enterprises. Take remote work during the COVID-19 pandemic, for example. In many companies, access to information largely depended on face-to-face communication. However, when the pandemic broke out, we had already spent years building a solid data infrastructure. Operating a company in an environment where data is not easily accessible is not only very inconvenient but also greatly reduces work efficiency and also loses the ability to clearly understand the business situation. In such a case, we need to quickly adapt to the new reality.
I believe, by the year 2022, the “Lean Digitalization” transformation phase can be said to have successfully concluded. Since 2016, the company’s average organic sales growth rate has risen from 3.4% to 5%, while the segment profit margin has also increased from 18.3% to 21.7%, which signifies that we have taken firm steps on the path of digital transformation.
Honeywell is undergoing a transformation, by unprecedentedly interweaving four strategic business groups, the company is entering a whole new stage of development. This transformation has not only reshaped the internal structure but also established Honeywell’s image as a model of innovation and growth in the external market.
In 2023, I stepped down from the position of CEO to become the Executive Chairman, and I had the privilege to witness the fruits of the company’s digital transformation, which is the key step to lay the foundation for future success. My successor, Vimal Kapur, is leading the company in further business adjustments, focusing on three key trends: automation, future aviation, and energy transformation. At Honeywell, the accelerator operating system and the enterprise connected platform software represent the core of this strategy, which are important drivers to push the company’s continuous competition and growth.
Every job that I have experienced in my career has provided valuable experience in terms of leading and executing digital transformation strategies. Among them, the training as an engineer and the insights from my first job made me profoundly understand the power of data-driven decision-making. Each learning experience has deepened my understanding of how to create, share, and use new data within an organization.
The essence of digital transformation lies in establishing a system capable of capturing and effectively utilizing data, which can empower the enterprise and propel it continuously forward. By using this system, historically massive and complex processes will be reactivated and transformed. To achieve such a transformation, we must consider all the components of the system and understand them through personal involvement.
