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A look at Honeywell's digital transformation strategy

The century-old, multinational conglomerate is going through internal and external changes. The survival of its brand will depend on maintaining its trust and reputation.

In the digital age, companies born in an earlier era are realizing that, to stay relevant and competitive, they must go through a digital transformation.

One conglomerate with a brand that has resonated with consumers around the world for more than a century and is now trying to transform itself is Honeywell, the industrial multinational.

The digital transformation of the company, based in Charlotte, N.C., kicked off in earnest in 2017 when then-new CEO Darius Adamczyk brought in a digital-first strategy. And, more than four years later, Honeywell's digital journey continues to expand.

2 types of transformations

Honeywell's digital transformation strategy is twofold, said Daniel Newman, analyst at Futurum Research. Internally, the company is changing the way it operates. Externally, the company is tapping into the software market.

Big companies, such as Honeywell, that are highly diversified with multiple business units tend to possess large, valuable troves of data, Newman said.

And, because of its history in electronics and home appliances, Honeywell already has a pre-built infrastructure it can use to adapt to the fast-growing world of edge computing.

"In a world where data is arguably one of the most valued resources on the planet and the edge being one of the most opportunistic places to collect and utilize data, Honeywell has a pretty significant opportunity to capitalize on that," Newman said.

In a world where data is arguably one of the most valued resources on the planet and the edge being one of the most opportunistic places to collect and utilize data, Honeywell has a significant opportunity to capitalize on that.
Daniel NewmanAnalyst, Futurum Research

Newman said that one question that Honeywell will have to face is capitalization. "Can they provide the data to systems of record in correspondence or partnership with Microsoft … and others to basically enable the value of this data to be unlocked?" he said.

Last year, the company integrated its Forge technology with the Microsoft Dynamics 365 Field Service ERP system. Honeywell Forge is an IoT-based analytics tool that helps enterprises manage their performance for digital transformation of manufacturing and financial operations.

Newman said that Honeywell's transformation is about building tools and software that are both compatible and extensible to traditional software systems of record and to help companies and enterprises do more with the data that's available to them.

"I think they're starting to realize that that's an untapped resource and opportunity to monetize significantly all of the information that they've had that hasn't necessarily been compatible with these broader IT systems," he continued.

Other digital transformation strategies

Beyond evolving externally, Honeywell is changing internally.

"When I got here, it was like we had 42 active transformational programs in place," said Sheila Jordan, chief digital technology officer at Honeywell.

Jordan was hired a few weeks before COVID-19 led many organizations to largely shut down their in-person operation and rethink their work strategies.

When she came on board, just about every department in the company -- including sales, marketing, engineering, HR, finance and others -- was going through one form of digital transformation or another, she said.

While that atmosphere of rapid change was exciting, Jordan said she thought the company could do more.

Honeywell's Chief Digital Technology Officer Sheila Jordan sits down for an interview with TechTarget
Jordan discusses some of the digital transformation strategies she's been a part of since being hired in 2020.

One key project Jordan embarked on right away was to redesign Honeywell's IT network.

Since Honeywell has traditionally been a manufacturing company, the network did not have the capacity to scale 110,000 employees in 83 countries.

With technology from vendors such as Cisco and Dell, Honeywell was able to redesign its network and get the new one working quickly, Jordan said. That included getting new laptops to all its different regions during that time frame and getting its contact center agents working from home at full capacity as well.

Jordan also took part in transforming and consolidating Honeywell's scattered ERP systems.

The reason for consolidating was to reduce the number of SKUs to shorten the supply chain and trim costs. Since last year, Honeywell has reduced ERP systems from 23 to 14.

Finally, Jordan said Honeywell needed an enterprise data warehouse strategy.

"The value of the data warehouse is when you can pull different data together to look for those insights," Jordan said.

The company merged its traditional transactional systems, including its ERP and CRM platforms, into a unified enterprise data warehouse strategy. This helped Honeywell launch a single inventory tracking console in 2020.

This year, the company is putting all its revenue and pricing information into the enterprise data warehouse so that it can more smoothly try to combat inflation, enabling Honeywell to tie pricing to inflation, Jordan said.

Looking outward

Honeywell Forge helps enterprises manage the connection of IT systems with operational technology systems running manufacturing sites, buildings and other installations, Jordan said.

The tool system includes software products and different services that help enterprises use data to improve their overall operations.

In September, Honeywell introduced Forge Worker Assist, a SaaS-based platform that enables workers in industries such as manufacturing, real estate and aviation receive remote assistance in the field.

"Now, we see what products and what raw material have inflation increases, and we can choose to pass some of that cost on through our pricing," Jordan said.

The challenge of recognition

In its digital transformation, especially as it seeks to monetize its traditional assets and become more of a software vendor, one challenge Honeywell will face is recognition, Newman said.

"If IT is driving the decision, can Honeywell convince the market that they have to be part of the story?" he said.

Although Honeywell has been around for more than century, Newman said the market must trust its changes to perceive the company as having changed its identity.

One strategy to establish that trust is with the right partnerships with vendors that have been in the software game for a long time, such as Microsoft.

Newman added that Honeywell's ambitions to change how it's perceived by the outside world should include ensuring the market understands that it's well equipped to be both a partner and originator of new systems.

"They can extract all this massive exponential growth of data at the edge," Newman continued. "They're able to do that, and they're able to unlock that. They're really well positioned."

However, he said the company must continue to show growth and disclose how significant the software and IT part of their business is financially and that customers are adopting Honeywell's tech products at scale.

"Seeing that this is becoming a clear revenue profit and recurring revenue stream for the company is something that the market is going to want to see," Newman said.

Next steps in digital transformation include AI

Jordan said Honeywell is using AI technology in its home and commercial building business.

The company is also rolling out e-commerce across the organization and can fulfill customers' needs and wants, while also predicting what the customer might purchase next.

Jordan said, with AI and data, Honeywell is just beginning to explore the possibilities as the veteran conglomerate continues to transform itself.

"The thing about data and AI is there's no real end," she said. "The more data you have and the potential to make you smarter and more intuitive, it's just going to continue."

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