In the last two years, US manufacturers invested an average 2.6% of their annual revenue in digital technologies. In the next five years, they expect to lift that investment to 4.7% of revenue—for an estimated $350 billion in investments in digital operation technologies across automotive, industrial production and manufacturing industries alone.
Digital technologies are revolutionizing how America’s factory floors run, changing decades-old business models, and adding smarts to products. Many threads bind the digital fabric: the Internet of Things (IoT) and everything it connects including autonomous robotics, mobile, cloud, big data analytics, 3D printing, sensor technology, and virtual and augmented reality, to name a few.
In this report, PwC shares results from a survey of global industrial products companies, shedding light on what manufacturers are doing now to build out their digital operations and what bottom-line benefits they expect to yield through those efforts.
Since 2011, some $3.6 billion has poured into VC-backed start-ups across a selection of digital technology sub-sectors, with investment rising at a 47% clip--more than double the annual growth of total VC funding (18%) in all sectors over the same period.
According to a PwC/Strategy& analysis, more than $6.0 billion has been invested on “digital deals” in North America alone since 2012, comprising some 15% of all M&A deals over that period.
In the context of embracing digital operations technology, three of the top 10 challenge areas identified by surveyed companies relate to organizational readiness and financial concerns. Some companies anticipate high investment requirements with unclear return on investment, and lack of digital standards and issues related to data security and intellectual property are also noted.
Nearly two-thirds of manufacturers expect that adopting digital manufacturing technologies will translate into lowering operating costs by at least 11% mostly via efficiencies through automating processes and production. Meanwhile, over half of these manufacturers expect such adoption to boost revenues by at least 11%.
Manufacturers are just scratching the surface of monetizing digital manufacturing. Some key drivers to achieving cost-cutting and revenue uplift from digitization with the introduction of smart, connected manufacturing technologies and products and services include:
Building a digital strategy requires a thorough self-assessment to determine a company’s “current state” of its digital evolution—and, just important, defining its “target state”. This means tailoring digital operations solutions to a business’ assets and making the right moves at the right time—from ramping up data analytics capabilities, to monetizing product data to considering a “digital deal”.
The future of digital manufacturing holds many “what-ifs”. But, if it unfolds as dramatically as our survey indicates, most all manufacturers will be altered to some degree. And, for every “what if”, there are choices manufacturers ought to consider.
PwC's Strategy&, Principal, PwC US
Senior Associate, Advisory, PwC US