The Status Quo Of Digital Transformation In The Manufacturing Industry

– Guest posting by Stefanie Naujoks, Research Director Manufacturing, PAC –

Stefanie Naujoks PAC 150dpi
Stefanie Naujoks, PAC

Digital transformation is a major topic in the manufacturing industry today. This is driven by the need to stay competitive in a global environment. Findings from our latest CxO Survey, in which we asked manufacturing companies in Europe about their major economic challenges show that reaching out to new customer groups and tapping into new revenue streams is considered the number one economic challenge, followed by the need to reduce costs and increase efficiency.

At what stage are European manufacturing companies in their digital transformation journey? We actually see lots of exciting projects where manufacturers are leveraging new technologies such as cloud computing, IoT, mobility, analytics, artificial intelligence (AI), robotics, augmented reality (AR), virtual reality (VR) and additive manufacturing. Many of these projects aim at optimizing the efficiency of processes in the fields of product development, production, and services. Our PAC Innovation Register currently lists more than 640 use cases related to IoT/digital transformation, of which more than 280 are related to the manufacturing industry.

Graph _ Blog_Stefanie Naujoks. PAC

However, we also see quite a large number of manufacturing companies in Europe that have not yet discussed digital transformation at all or are still at the planning and discussion stages. So what prevents manufacturers from diving right into their first digital transformation projects?

First of all, this is never about a lack of technologies. Most of the technologies mentioned above are known and also considered as relevant. What I discovered when talking with CxOs of manufacturing companies in Europe is that there is often a lack of business cases. CxOs simply have not yet managed to develop a robust business case by using all these technologies.

Another really huge challenge for manufacturing CxOs is people’s mindset. Whenever I talk with ambitious CxOs who understand why it is necessary to invest in digital transformation and ask them about their major challenges, in most cases they tell me that people theoretically understand the need for digital transformation, but when it comes to concrete implementation, projects fail due to factors such as lack of commitment, responsibilities, company culture, „legacy“ key performance indicators, and a general lack of change management.

In my view, manufacturers cannot handle this issue by themselves, so I see a strong need for external consulting. For those manufacturers that are brave enough to face the challenges linked to digital transformation projects, my recommendations are:

  • Identify a concrete problem you want to solve. This can be on the shop floor, in the warehouse, in your field service organization, or in the way you develop your products.
  • Elaborate how new technologies can help solve this problem.
  • Develop a business case for this concrete problem.
  • Start with a small project to have quick results.
  • Communicate project success, results and ROI internally to increase transparency, win the top management’s support for further projects, and motivate team members and potential „followers“ to initiate further projects.

I appreciate your comments and look forward to getting feedback from you on your company’s digital transformation efforts. Please feel free to get in touch with me to learn more about our ongoing research on the manufacturing industry.


Visit the IT2Industry forum panel discussion with Stefanie Naujoks, PAC, on ‘Das Industrial Internet of Things – Chance auf neue Geschäftsmodelle oder doch nur Cost of Business‘ (The Industrial Internet of Things – Chance on new business models or just even cost of business) [in German language] – Thursday, June 21st, 2018, 1:20 pm.
Learn more about the use of digital technologies for the IIoT at automatica 2018, the leading exhibition for smart automation and robotics, from June 19th to 22th, at Messe München.

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