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For industrial manufacturers, does understanding “digital” translate into action?

10 October, 2017

Bobby Bono
Industrial Manufacturing Leader, PwC US

For industrial manufacturers, does understanding “digital” translate into action? Not exactly. More than half of industrial manufacturing executives have a comprehensive view of what it means to be “digital.” They appreciate that digital is a large part of technological innovation, reaching well beyond traditional IT. But an adoption lag remains.

According to our 2017 Global Digital IQ® survey, only 49% of industrial manufacturing execs think their companies incorporate digital strategies into their corporate strategies vs. 70% in other industries. It appears that while understanding is high, industrial manufacturers are not rapidly integrating digital into strategy, perhaps missing some critical opportunities.

On the other hand, in a seemingly odd twist, 81% say their CEOs champion digital initiatives – 12 percentage points higher than in other industries. So, how does this CEO buy-in drive digital initiatives? Perhaps it’s revealed in the industry’s track record of successfully completing digital initiatives on time, on budget, and in scope.

Compared to 38% of all respondents, 59% of industrial manufacturing execs say that their strategic digital initiatives were generally completed on time in the past year. And nearly half add that their digital initiatives were usually completed at or below budget, compared to 32% of all respondents. Industrial manufacturers were also more likely to deliver digital projects within scope; an impressive 70% of industrial manufacturing execs say their digital projects are always or frequently delivered in scope, well above the 55% reported by all other industry leaders.

Manufacturing CEOs are more in sync with other industry leaders in their expectations of returns from digital investments. Most agree they invest primarily to grow revenue and, secondarily, to increase profits. Still, a whopping 81% of industrial manufacturing execs say they think their businesses focus on the ways new technologies will affect human experiences, compared to a collective average of 70% of all industry leaders. And 73% report that user experience and human-centered design are highly or quite important to their businesses, compared to an average of 61% of all industries.

But again we see a large discrepancy between ideas and action. Few industrial manufacturers make digital technology investments to enhance the customer experience or improve data analytics. In the past 12 months, they spent only 6% of their digital technology budgets on improving customer service, even less than the 8% average spent on customer service in all industries. Instead, the bulk of their digital technology budgets has been spent on IT (25%), operations (17%), and product and service development (15%).

Industrial manufacturers are relatively heavy investors in robotics and 3D printing, technologies that have already gained widespread acceptance in the industry: 45% of industrial manufacturing execs say they currently make substantial investments in robotics – compared to only 15% of all industries – and 43% say they substantially invest in 3D printing – much more than the 12% average. To a lesser extent, they are also investing in artificial intelligence and the internet of things. It follows that within the next five years, industrial manufacturing industry execs predict that robotics (35%), 3D printing (27%) and AI (16%) will be the most disruptive technologies.

Despite this recognition, industrial manufacturers are only investing modestly in emerging technologies. Spending levels are relatively stagnant and focused on product/service/business model innovation as a way to identify new sources of revenue. While there will inevitably be competing investment priorities, we think that digital technologies – both their disruptive effects and their potential to bring dramatic advances to business – are too important to put on the back burner. At the very least, this is the time to work on the organization and cultural changes needed to incorporate digital into corporate strategy.