The digital transformation is a MUST for companies which want to survive in a dramatically changing competitive global environment. But before organizations can pick the fruits and benefit from the digital change, they need to invest in different ways – and analysts from leading market research companies are sure that it’s absolutely worth it.The so called Industry 4.0 stands for the dramatic change the manufacturing industry is facing and will change the way companies work in the future. Digital transformationis mandatory and an important step for every company. But the digital transformation is not for free, it requests financial investments as well as cultural changes. Changes in the way organizational structures are built, as well as changes in terms of management, departments, teams and employees. In fact, the IT-infrastructure and the manufacturing environment we know today, will no longer be the same. Every machine, every IT device as well as employees and production facilites will be connected within the entire supply chain of a manufacturing process – over all time zones and continents.
Industry 4.0: High expectations on the benefits
Getting there won’t be easy, says PwC in its global study “Industry 4.0: Building the digital enterprise” where 2,000+ industrial companies from 26 countries across nine industries participated. Though the PwC research shows that first movers are already transforming into digital enterprises, most of the companies are still on a low level of transformation or have not even started yet. But the prospects are promising as still 72% of the companies in the survey expect to achieve advanced levels of digitalization by 2020.
No doubt that Industry 4.0 will revolutionize industrial production and companies that are working in this area. And the players will gain enormous benefits. The PwC survey shows that industrial companies expect to generate 3.6% p.a. in cost reductions over the next five years, driven by internal improvements and by working more closely across value chains. They’re also expecting to generate 2.9% p.a. in increased revenues by digitalizing products and services. Companies as well expect to benefit from developing and offering new digital services, all the way through to hosting platforms for industrial ecosystems.
So expectations on the benefits of the Industry 4.0 are high. But the transformation into a digital enterprise is not as easy, as a walk in the park. It requests major efforts and a restructuring of existing processes and structures. PwC analysts explain that companies will need robust data analytics capabilities; that will mean making significant changes. They’ll need to focus on developing the people and culture of a company to drive transformation.
More than half of the companies expect a return on investment within two years
Due to the PwC survey, investments in Industry 4.0 capabilities are expected to reach around 5% of annual revenues. But according to the participants of the study there will also be quick return on investment. More than half of the companies expect a return on investment within two years. Another payoff will be the market position organizations expect for the future, as Industry 4.0 will redefine the global competitive landscapes.
Industry 4.0 will enable companies to change their portfolios of products and services. This will support them in meeting the individual needs of their customers and securing their market position. Companies that successfully implement Industry 4.0 no longer need to choose between focusing on a better top or bottom line. They can improve both at the same time. Most participants of the PwC survey expect to have digitalized horizontal and vertical value chain processes by 2020.
Big changes for customers
Not only will the manufacturing industry benefit from Industry 4.0 but also the customers will see big changes. In the future, customers will be at the center of the changes to value chains, products and services. Products, systems and services will be increasingly customized to individual needs. To meet this goal, many of the PwC survey respondents explained, that they plan to use data analytics to better understand their customers and meet their needs. Establishing a successful future-oriented industrial platform will also give companies a significant advantage over competitors. Ultimately, industrial companies will need to build relationships with the end customers that drive demand.
In summary, implementing Industry 4.0 will help the manufacturing companies to establish value chains, reduce their costs and gain more transparency. Customers will receive individual designed products that meet their needs and help them to make more and better business – a win-win situation for all participants.