How SME Watkins Steel Transformed from Traditional Steel Fabrication to Digital Service Provision
Friedrich Chasin, Marek Kowalkiewicz, Torsten Gollhardt
This study presents a case study of Watkins Steel, an Australian small and medium-sized enterprise (SME), detailing its successful digital transformation from a traditional steel fabricator to a digital services provider. It introduces and analyzes two key strategic concepts, 'augmentation' and 'adjacency', as a framework for how SMEs can innovate and add new revenue streams without abandoning their core business.
Problem
While digital transformation success stories for large corporations are common, there is a significant lack of practical guidance and documented examples for small and medium-sized enterprises (SMEs). This gap leaves many SMEs unaware of the potential of digital technologies and constrained by organizational inertia, hindering their ability to innovate and remain competitive.
Outcome
- Watkins Steel successfully transitioned by augmenting its core steel fabrication business with new, high-value digital services like 3D scanning, modeling, and data reporting. - The study proposes a transformation framework for SMEs based on two concepts: 'digital augmentation' (adding new services) and 'digital adjacency' (leveraging existing assets like customers, data, and skills for these new services). - Key success factors included contagious leadership from the CEO, embracing business constraints as innovation opportunities, and a customer-centric approach to solving their clients' problems. - Instead of hiring new talent, Watkins Steel successfully cultivated its own digital experts by empowering existing employees with domain knowledge to learn new skills, fostering a culture of experimentation. - The transformation allowed the company to move up the value chain, from being a materials provider to coordinating and managing construction processes, creating a more defensible market position.
Host: Welcome to A.I.S. Insights, the podcast where we connect business strategy with cutting-edge research. I’m your host, Anna Ivy Summers. Host: Today, we're diving into a study that offers a practical roadmap for one of the biggest challenges facing smaller companies: digital transformation. Host: It’s titled "How SME Watkins Steel Transformed from Traditional Steel Fabrication to Digital Service Provision.” Host: The study presents a fascinating case study of an Australian steel company that successfully added new, high-value digital revenue streams without abandoning its core business. Host: Here to break it all down for us is our analyst, Alex Ian Sutherland. Alex, welcome. Expert: Great to be here, Anna. Host: Alex, we hear about digital transformation all the time, usually in the context of giant corporations. What’s the specific problem this study tackles for smaller businesses? Expert: The biggest problem is a lack of guidance. Small and medium-sized enterprises, or SMEs, see the big success stories but have no clear, practical blueprint to follow. Expert: They're often constrained by limited budgets, a lack of digital skills, and what the study calls 'organizational inertia'. It's tough to innovate when you're just trying to keep the daily operations running. Expert: The CEO of Watkins Steel summed up the initial mindset perfectly. He said, "I thought innovation was just another buzzword... Our business is steel fabrication. You cut steel, and you weld steel. You cannot innovate it." That's the barrier this study helps businesses overcome. Host: So how did the researchers get inside this transformation to create a blueprint? Expert: They took a very hands-on approach. It was a comprehensive, in-depth case study of Watkins Steel, which involved spending significant time on-site. Expert: They interviewed nine different people within the company—from the CEO to business development managers to the draftsmen on the factory floor—to get a complete 360-degree view of what worked and why. Host: And what were the key findings? What did Watkins Steel do that was so different? Expert: The researchers boiled it down to two core strategic concepts: 'digital augmentation' and 'digital adjacency'. Host: Can you break those down for us? What is 'digital augmentation'? Expert: Augmentation is about adding new digital services to your existing business. Watkins Steel didn't stop fabricating steel. They used technologies like 3D laser scanners and drones to offer new services on top of their core product, like detailed site modeling and data reporting. Host: And 'digital adjacency'? Expert: Adjacency means leveraging the assets you already have to build those new services. Watkins Steel offered these new digital services to their existing construction customers. They used the data from their projects and, most importantly, they leveraged their existing employees. Host: That’s a key point. Did they have to go out and hire a team of new tech experts? Expert: Not at all, and this is a huge finding for SMEs. They cultivated their own digital experts. They took employees who had deep domain knowledge—like draftsmen who were previously boilermakers—and empowered them to learn the new scanning and modeling technologies. Host: So the strategy and the people were key. What was the ultimate result for the business? Expert: It completely changed their position in the market. They moved up the value chain. Instead of just being a supplier delivering steel beams, they became a crucial partner coordinating the construction process. As their CEO put it, they went from being at "the bottom of the food chain" to "running the site." Host: That's a powerful shift. So, for a business leader listening right now, what are the most important, actionable takeaways from the Watkins Steel story? Expert: I think there are three big ones. First, you don't have to bet the farm on a risky pivot. The augmentation and adjacency framework shows you can innovate by building on your existing strengths—your customers, your data, and your people. It’s evolution, not revolution. Host: That seems much more manageable for a smaller company. What's the second takeaway? Expert: It’s that leadership has to be contagious. The study highlights how the CEO's passion and encouragement spread throughout the company. He created a culture of experimentation, saying the best resource he could give his team was a credit card to go buy new technology and start playing around with it. Host: And the third takeaway? Expert: Turn your problems into products. Watkins Steel initially invested in 3D scanners to reduce their own costly fabrication errors. But they quickly realized that the data they were capturing was incredibly valuable to their clients. They turned an internal quality-control tool into a brand-new, high-margin digital service. Host: A fantastic story. So to recap: innovate by augmenting your core business, let the leader's passion for experimentation be contagious, and look for ways to turn your internal solutions into external services. Host: Alex, thank you so much for bringing this study to life for us. So many valuable insights. Expert: My pleasure, Anna. Host: And a big thank you to our audience for tuning in to A.I.S. Insights. We'll see you next time.
digital transformation, SME, business model innovation, case study, digital service provision, digital augmentation, digital adjacency
