UK manufacturers are applying new technologies to their operations, but must do more to avoid being further outmaneuvered by global competitors who are fast becoming digital champions. That’s the main finding from new analysis from PwC’s Strategy&.
The Strategy& study, Digital Champions: How industry leaders build integrated operations ecosystems to deliver end-to-end customer solutions, reveals that UK manufacturers currently demonstrate a sound level of digital ecosystem maturity with adoption of technologies from predictive maintenance and manufacturing execution systems to connectivity and the industrial internet of things.
But they have a lot of catching up to do - only 1% of UK firms have attained ‘digital champion’ status compared to 19% of Asian companies and 11% of businesses in the Americas.
Over 1,155 executives at global manufacturing companies in 26 countries, including 72 in the UK, were asked about their views on Industry 4.0. and digital operations. The survey concluded that digital champions are those firms already investing and focusing more on digital operations as well as digital product and service offerings. This collaboration ranges along the end-to-end value chain both within the organisation and with strategic partners and delivers significant additional value through a range of integrated ecosystems from customer service to digital solutions.
The surveyed companies expect rich rewards by investing in digital operations and digital product and service offerings. UK manufacturers expect an average 10.8% revenue boost and 9.3% increase in cost efficiencies over the next five years, as well as an increase in productivity. This is in contrast to more ambitious Asian companies eyeing up digital revenue growth of almost 17% with EMEA peers anticipating growth of 12.7%.
UK firms believe in their digital product and service offering, expecting to double income from digital content, services and solutions by 2023 (6% to 12%) with traditional products and services falling by 7% to 73%.
When asked how their corporate culture and organisational structures enable digital transformation, 32% of UK firms stated their employees have the required qualifications for a digital future compared to just 23% of EMEA manufacturers.
UK respondents also matched global peers with regards to their focus on providing a digital customer experience throughout the customer journey (35%), ahead of their EMEA counterparts (30%). It seems that the UK has the required ingredients –but is it setting the right focus?
Darren Jukes, PwC UK’s Industrial Manufacturing and Services leader and Industry 4.0 champion, said:
"While the UK's Industrial Strategy reinforces the huge potential technology can offer, making radical shifts across the manufacturing process or supply chain is neither quick nor easy to implement. As this report shows, there is also a risk that if UK companies don't pick up the pace, they could find themselves outmaneuvered by digital champions in other territories.
“Employees are a crucial cog in this digital evolution - they enable and support the efforts of a company’s strategic direction, solutions, performance and operations. As they navigate this transformational road ahead, firms must not only assess the status quo of their workforce - advancing the best and brightest and most digitally-oriented existing talent while training others to match these skills - but inject new talent into the organization where gaps in people’s skill sets and capabilities are revealed.”
Emergence of AI
Across the Industry 4.0 spectrum, Artificial Intelligence (AI) is a key area of divergence. While one-third of digital champions have adopted AI across major functions, primarily for automating manual and cognitive tasks, 98% of digital novices have no AI activities at all. Asian companies are at the forefront with AI, with 15% implementing significant AI solutions, compared to just 5% across EMEA.
Here in the UK, AI sits at the bottom of the implementation chart with manufacturing business leaders more uncertain about the return on investment, the maturity of technologies and the reliability of data than their global counterparts.
Global: Asia Pacific manufacturers digitising at a faster rate than Americas and EMEA - with the gap set to widen
The Industry 4.0 manufacturing survey shows that:
Two-thirds of respondents don’t have a clear digital vision and strategy to support digital transformation and culture. Only 27% believe their employees have the required qualifications to master a digital future.
10% of global manufacturing companies are digital champions - viewing digitisation in ways that are far-reaching and aggressively innovative, well beyond mere automation and networking - while almost two-thirds have barely or not yet begun on the digital journey.
32% of Asian companies plan to establish mature digital ecosystems in the next five years, compared to 24% in the Americas and 15% in EMEA and 19% have achieved digital champion status, compared to 11% in the Americas and 5% of companies in EMEA.
Automotive (20%) and Electronics (14%) have the largest share of digital champions. Consumer goods (6%), Industrial manufacturing (6%) and Process industries (6%) are lagging significantly behind.
Cara Haffey, PwC UK’s automotive leader, said:
“A high level of supply chain integration and well integrated end-to-end planning are just a few of the reasons why the automotive and electronics sectors are surpassing other manufacturers when it comes to digitisation. A decades-old push to gain efficiencies, accelerate output, reduce waste and recoup working capital through lean techniques means auto firms are always looking for better ways and new technologies they can fine-tune their already well-established supply chains.”
Dr. Reinhard Geissbauer, Partner at PwC Germany and co-author of the report, said:
“Asian companies are far outmaneuvering their Western counterparts because they have the advantage of setting up robust digital operations from essentially a blank slate in terms of factory automation, workforce and even organization information technology networks. Therefore they don’t have numerous complex legacy systems and facilities to upgrade, integrate or discard. In addition, Asian companies appear to be keener to try new business models and develop innovative products and services.”
About the report
In late 2017 PwC’ Strategy& surveyed 1,155 executives at global manufacturing companies in 26 countries about their views on Industry 4.0. and Digital Operations. PwC developed an index that ranks companies by digital maturity, from Digital Novices, Digital Followers, Digital Innovators to Digital Champions. The goal was to explore the role of Digital Champions and what distinguishes them – to uncover the secret recipe that potentially allows them to outpace their competitors.
Through four distinctive ecosystems, the report describes what Digital Champions do differently and lays out the strategic, operational, technological and people-related capabilities that are needed to be one of those companies. For a deep dive into each of the four ecosystems and to download the report, please visit: https://www.strategyand.pwc.com/industry4-0 or for UK analysis www.pwc.co.uk/industry4
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