Industry 4.0: Building the digital enterprise

Our research shows that first movers are transforming into digital enterprises. Industrial companies need to act now to secure a leading position in tomorrow’s complex industrial ecosystems.

  • 2,000+

    industrial companies participated in this year's survey

  • 26

    countries across nine industries were represented in the sample

  • 33%

    of companies say they've achieved advanced levels of digitisation today

  • 72%

    of companies expect to achieve advanced levels of digitisation by 2020

Industry 4.0 will revolutionise industrial production 

Digitisation brings enormous benefits. 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 digitising products and services and developing new digital service offerings, all the way through to hosting platforms for industrial ecosystems.

Getting there won’t be easy. Companies will need robust data analytics capabilities; that will mean making significant changes. They’ll need to focus on developing the people and culture to drive transformation.

And it won’t come cheap. Investments in Industry 4.0 capabilities are expected to reach around 5% of annual revenues p.a. The good news: more than half of companies expect a return on investment within two years. And the payoff will potentially be enormous, as competitive landscapes get redefined.

  • Explore the key findings

  • From talk to action
    Talk to action

    From talk to action

    The buzz around Industry 4.0 has moved from what some saw as PR hype in 2013 to investment and real results today. Looking ahead, our survey respondents expect to significantly increase their portfolios of digital products and services; more than twice as many expect to be at an advanced level in this area by 2020 compared to today. Similarly, almost three-quarters of companies expect to have highly digitised horizontal and vertical value chain processes. First movers have even more ambitious and far-reaching plans.

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  • Digitisation drives quantum leaps in performance
    Quantum leaps in performance

    Digitisation drives quantum leaps in performance

    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. Over the next five years, the companies we surveyed expect to reduce costs by an average of 3.6% p.a. and increase annual revenues by an average 2.9%. First movers who combine high investment levels with advanced digitisation are set to achieve even more dramatic gains. If even half of these expectations are met, Industry 4.0 will reshape the competitive landscape and bring fundamental change to established industries.

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  • Deepen digital relationships with more empowered customers
    Deepen digital relationships with empowered customers

    Deepen digital relationships with more empowered customers

    Customers will be at the centre of the changes to value chains, products and services. Products, systems and services will be increasingly customised to customer needs, and many of our survey respondents say they plan to use data analytics to understand and meet them. First movers who are able to establish successful industrial platforms will have a significant advantage over competitors. Ultimately, industrial companies will need to own relationships with the end customers who drive demand.

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  • Focus on people and culture to drive transformation
    Focus on people and culture to drive change

    Focus on people and culture to drive transformation

    Our survey respondents say that their biggest implementation challenge isn’t the right technology, it’s a lack of digital culture and skills in their organisation. This finding is also consistent with our Digital IQ research. While investing in the right technologies is important, ultimately success or failure will depend not on specific sensors, algorithms or analytics programmes, but on a broader range of people-focused factors. Industrial companies need to develop a robust digital culture and to make sure change is driven by clear leadership from the C-suite. They’ll also need to attract, retain, and train digital natives and other employees who are comfortable working in a dynamic ecosystem environment.

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  • Data analytics and digital trust are the foundation of Industry 4.0
    Data analytics and digital trust are the foundation

    Data analytics and digital trust are the foundation of Industry 4.0

    Data fuels Industry 4.0 and successful data analytics is the pre-requisite for successful implementation of digital enterprise applications. It’s time to move from a phase of discovery and understanding what data is available and what it is worth to one of insights and action. ‘First movers’ are already making the shift and using data analytics to help drive decision-making. As digital ecosystems expand, so does the importance of establishing strong levels of digital trust. Strong risk management and data integrity systems can help companies avoid breaches and better manage disruption to operations – the #1 data security concern of our survey respondents.

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  • Robust, enterprise-wide data analytics capabilities require significant change
    Robust, enterprise-wide data analytics capabilities require signifcant change

    Robust, enterprise-wide data analytics capabilities require significant change

    Industrial companies will need to develop robust organisational structures that support data analytics as an enterprise-level capability. Half of the surveyed companies have established dedicated data analytics functions, either on a corporate level to bundle talent or on a business unit level to remain close to the operational business. However, 38% of companies currently rely on selective, ad-hoc capabilities of single employees; another 9% have no significant capabilities at all.

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  • Industry 4.0 is accelerating globalisation, but with a distinctly regional flavour
    Accelerating globalisation, but with a distinctly regional flavour

    Accelerating globalisation, but with a distinctly regional flavour

    Industry 4.0 will create digital networks and ecosystems that in many cases will span the globe, but still retain distinct regional footprints. Both developed and developing markets stand to gain dramatically. Companies in Japan and Germany are the furthest along in digitising internal operations and partnering across the horizontal value chain. With high investments in technology and employee training, they view their digital transformation primarily in terms of gains in operational efficiency, cost reduction and quality assurance. China’s industrial companies stand out in all aspects of digitisation: they are expecting both above average cost reductions, as well as increased digital revenues until 2020.

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  • Big investments with big impacts: it’s time to commit
    Big investments with big impact: it's time to commit

    Big investments with big impacts: it’s time to commit

    Industry 4.0 investments are already significant and our research suggests that global industrial products companies will invest US$907bn per year through 2020. Major focus of this investment will be on digital technologies like sensors or connectivity devices, as well as on software and applications like manufacturing execution systems (MES). In addition, companies are also investing in training employees and driving organisational change. More than half of respondents expect their Industry 4.0 investments to yield a return within two years or less, given investments of around 5% p.a. of their annual revenue.

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Regional findings

Global

Global


35%expect revenue gains over 20% over the next five years
43%expect to lower costs more than 20% over the next five years
56%expect to increase efficiency by more 20% over the next five years
Go
Americas

Americas


37%expect revenue gains over 20% over the next five years
39%expect to reduce costs more than 20% over the next five years
50%expect to increase efficiency by more than 20% over the next five years
Go
Asia

Asia Pacific


39%expect revenue gains over 20% over the next five years
57%expect to reduce costs more than 20% over the next five years
68%expect to increase efficiency by more than 20% over the next five years
Go
EMEA

EMEA


39%expect revenue gains over 20% over the next five years
41%expect to lower costs more than 20% over the next five years
55%expect to increase efficiency by more than 20% over the next five years
Go


Industry findings Aerospace, defence & security

Capabilities-Driven Strategy + Growth

AD&S companies are currently one of the sectors putting the most emphasis on digitising product development and engineering; looking forward, they plan significant advances to digital business models too.

Blueprint for success

To move forward with Industry 4.0, digital capabilities are all-important. These take time and concentration; a step-by-step approach is important. But move with deliberate speed, so that you don’t lose the first-mover advantage to competitors.

Don’t buy the hype. Buy the reality. Industry 4.0 will be a huge boon to companies that fully understand what it means for how they do business. Change of this nature will transcend your company’s boundaries and lead to a complete transformation of your organisation.


Related content

Industry 4.0 Self Assessment

Is your industrial company leading or following? Find out.

2015 Global Digital IQ Survey

Will your digital strategy drive top-line growth or real disruption?

Industry 4.0 press conference and webcast

Global Industry 4.0 leaders for PwC and Strategy& launched our Industry 4.0: Building the digital enterprise report on Wednesday 13 April 2016. Watch our playback of the press conference and webcast.

Contact us

Jesper Vedsø
Partner, PwC
Tel: +45 3945 9144
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Dr. Reinhard Geissbauer
Partner, Strategy&, Part of the PwC Network
Tel: +49 8957 906 138
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Stefan Schrauf
Partner, Strategy&, Part of the PwC Network
Tel: +49 8957 905 317
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