In Thor Olavsrud’s latest article in CIO Magazine entitled, “Digital twins: 4 success stories," Thor highlights the success that four “traditional” companies are having today by bridging the digital divide and creating competitive advantage.

I'm defining a “traditional” company as one that is not already data-driven. It could be a manufacturing or a services company, selling non-digital products or services (e.g., auto manufacturer, hotel), belonging to any sector (e.g., healthcare, natural resources, or energy).  They are traditionally a more mature organization or any younger company that is not natively digitized.

An easy definition of a digital twin is a virtual model designed to accurately reflect a physical object.  To put a finer point on it, these virtual models are built with and based on data. For example, in the case of manufacturers, that data is collected through sensors and the Internet of Things (IoT).  This data set then effectively becomes the real-time digital counterpart of the machine(s) it was collected from.  This enables the business to run simulations and optimize production, reduce waste, or perform predictive maintenance.

By creating a digital twin as just explained and executing digital initiatives with the captured data, traditional companies are bridging the gap to becoming digitally transformed. It’s well known that the world’s most profitable companies with higher valuations are digital, (e.g., Facebook, Amazon, Google, etc.), and are all fundamentally driven by data.

My call to action for you is this: if your PE firm has traditional companies in your portfolio or you’re the leader of a traditional company, and you want to increase the enterprise value of your firm, invest in digital twins to digitally transform your company.