Flevy Management Insights Q&A

How are digital twins being used in business transformation to simulate and optimize processes?

     David Tang    |    Business Transformation


This article provides a detailed response to: How are digital twins being used in business transformation to simulate and optimize processes? For a comprehensive understanding of Business Transformation, we also include relevant case studies for further reading and links to Business Transformation best practice resources.

TLDR Digital twins enable Business Transformation by simulating, visualizing, and optimizing processes, aiding in Strategic Planning, Risk Management, Operational Excellence, and Innovation.

Reading time: 4 minutes

Before we begin, let's review some important management concepts, as they relate to this question.

What does Business Transformation mean?
What does Strategic Planning mean?
What does Operational Excellence mean?
What does Innovation Strategy mean?


Digital twins are revolutionizing the way organizations approach Business Transformation, allowing them to simulate, visualize, and optimize their processes in a virtual environment. This technology, essentially a virtual replica of a physical entity, enables decision-makers to test changes, predict outcomes, and make data-driven decisions without the risks associated with altering real-world operations.

Strategic Planning and Risk Management

In the realm of Strategic Planning and Risk Management, digital twins offer a groundbreaking approach. Organizations can model different scenarios to see how strategic changes would play out in the real world. This capability is invaluable for testing new business models, entering new markets, or implementing new technologies. For instance, a digital twin of a manufacturing process can simulate the impact of introducing automation on production capacity, quality control, and workforce requirements. By doing so, leaders can identify potential risks and bottlenecks before they occur, ensuring that strategic initiatives are both viable and optimized for success.

Moreover, digital twins facilitate a deeper understanding of complex systems and their interdependencies. This insight is crucial when managing risks associated with large-scale changes or investments. By providing a holistic view of operations, digital twins enable organizations to foresee unintended consequences and mitigate risks proactively. The ability to simulate and analyze the effects of various risk factors on virtual models helps in crafting more robust risk management strategies.

Accenture's research underscores the value of digital twins in enhancing operational efficiency and resilience. According to their findings, organizations leveraging digital twins can anticipate operational issues before they arise, reducing downtime and improving productivity. This proactive approach to Risk Management not only safeguards against potential losses but also ensures that Strategic Planning is grounded in realistic, achievable goals.

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Operational Excellence and Performance Management

Digital twins play a pivotal role in achieving Operational Excellence and enhancing Performance Management. By creating a digital replica of physical assets, processes, or systems, organizations can monitor performance in real-time, predict future outcomes, and optimize operations accordingly. This capability is particularly beneficial in industries such as manufacturing, where even minor improvements in efficiency can lead to significant cost savings and productivity gains.

For example, in the aerospace industry, companies use digital twins to monitor the health of aircraft engines in real-time. This allows for predictive maintenance, where potential issues are addressed before they lead to failures, thereby minimizing downtime and extending the lifespan of the engines. The data collected from these digital twins also provide insights into performance trends, enabling continuous improvement and innovation.

Deloitte highlights the transformative potential of digital twins in streamlining supply chains. By simulating the entire supply chain, organizations can identify inefficiencies, simulate the impact of changes, and optimize logistics and inventory management. This not only improves operational efficiency but also enhances customer satisfaction by ensuring timely delivery of products and services.

Innovation and Strategy Development

Digital twins serve as a powerful tool for Innovation and Strategy Development. They provide a sandbox for testing new ideas and concepts in a risk-free environment. This encourages experimentation and creativity, essential components of a dynamic innovation strategy. For instance, in the automotive industry, digital twins are used to design and test new vehicle models. Engineers can simulate crash tests, aerodynamics, and fuel efficiency, speeding up the development process while reducing costs associated with physical prototypes.

Furthermore, digital twins facilitate a data-driven approach to Strategy Development. By analyzing the performance of digital replicas under various conditions, organizations can glean insights that inform strategic decisions. This capability is especially valuable in fast-changing markets, where agility and adaptability are key to maintaining a competitive edge.

According to Gartner, by 2021, half of the large industrial companies will use digital twins, resulting in those organizations gaining a 10% improvement in effectiveness. This statistic underscores the strategic value of digital twins in driving business transformation. By enabling organizations to simulate, visualize, and optimize processes, digital twins play a crucial role in enhancing decision-making, reducing risks, and fostering innovation.

In conclusion, digital twins are a transformative technology that offers organizations across industries a competitive advantage in their Business Transformation efforts. By leveraging digital twins for Strategic Planning, Operational Excellence, and Innovation, leaders can make informed, data-driven decisions that propel their organizations forward in an increasingly complex and volatile business environment.

Best Practices in Business Transformation

Here are best practices relevant to Business Transformation from the Flevy Marketplace. View all our Business Transformation materials here.

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Explore all of our best practices in: Business Transformation

Business Transformation Case Studies

For a practical understanding of Business Transformation, take a look at these case studies.

Digital Transformation for a Division I Collegiate Athletics Department

Scenario: The organization is a prominent Division I collegiate athletics department striving to enhance its operational efficiency, fan engagement, and revenue generation.

Read Full Case Study

Organizational Transformation Initiative for a Mid-Sized Educational Institution

Scenario: A mid-sized educational institution has recently undergone rapid expansion but is struggling to adapt its organizational structure and processes to accommodate this growth.

Read Full Case Study

Strategic Corporate Transformation for Luxury Fashion Brand

Scenario: The organization, a high-end luxury fashion brand, is facing stagnation in its established markets and is struggling to adapt to the rapidly changing luxury retail landscape.

Read Full Case Study

Organizational Restructuring in Ecommerce

Scenario: An ecommerce company specializing in health and wellness products has encountered operational stagnation amid a rapidly evolving market.

Read Full Case Study

Business Transformation for Technology-Driven Retailer

Scenario: A prominent retail firm, heavily reliant on technology and digital platforms for its operations, faces challenges with managing a comprehensive Business Transformation initiative.

Read Full Case Study

Aerospace Company's Market Penetration Strategy in Defense Sector

Scenario: The organization is a mid-sized aerospace company specializing in the production of unmanned aerial vehicles (UAVs) for the defense sector.

Read Full Case Study


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David Tang, New York

Strategy & Operations, Digital Transformation, Management Consulting

This Q&A article was reviewed by David Tang. David is the CEO and Founder of Flevy. Prior to Flevy, David worked as a management consultant for 8 years, where he served clients in North America, EMEA, and APAC. He graduated from Cornell with a BS in Electrical Engineering and MEng in Management.

To cite this article, please use:

Source: "How are digital twins being used in business transformation to simulate and optimize processes?," Flevy Management Insights, David Tang, 2025




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