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Mine fuel for growth in industrial equipment

Becoming leaner can free funds to reinvest in innovative solutions to service digital customers.

Overview

Industrial equipment companies are struggling to compete as demand drops, commodity prices rise, labor costs skyrocket and margins tighten. By working in leaner, more agile ways, industrial equipment companies will increase speed to market and free up funds that can be reinvested to develop the innovative, digitally enabled products and services that today's customers demand.

Accenture globally surveyed industrial equipment executives and investor analysts.

TO LEARN MORE, DOWNLOAD THE RESEARCH REPORT

VIEW THE RECOMMENDATIONS FOR HOW TO FUEL PROFITABLE GROWTH IN INDUSTRIAL EQUIPMENT, BASED ON OUR RESEARCH FINDINGS



Building A Leaner Machine

Industrial equipment companies are taking action to become more lean and agile to increase competitiveness. Total cost management is a top method.


82%
are focused on cost reduction to improve margins


41%
are focused on cost reduction and innovation to drive value

41%
strongly agree that their business "identifies and eliminates overlapping cost reduction exercises"

Only 18%

believe their business achieves the optimum balance between being agile and being lean.


Priorities are mismatched. Investing in growth is the top priority for investor analysts, however, it is not the top priority for industrial equipment companies.

Top outcomes driving cost management activities for industrial equipment executives:

Improving competitive advantage

Simplifying and increasing the flexibility to respond to market changes

Reinvesting cost savings into growth initiatives

Focus On Value

“The reliance on raw materials makes it difficult for manufacturers to reduce costs in the short-term, as costs are set by market forces.”

Industrial equipment investor analysts

Although execution of cost reduction strategies may be difficult, industrial equipment companies are sure to measure the success of such endeavors.

3 in 4 industrial equipment organizations


3 in 4 industrial equipment organizations

assess the return on reinvested cost savings through a formal review of investment success. Compared to other manufacturing industries, industrial equipment companies are thoughtful to ensure value when they reinvest for growth.

Top Priorities

Optimizing digital opportunities across the entire value chain, will help industrial equipment companies drive process excellence, gain agility and reduce COGS.

Top four priority initiatives for increasing operating efficiency

Balancing global efficiency and local effectiveness

Balancing global efficiency and local effectiveness

Digitizing operations /services

Increasing digital know-how and transitioning to a digital business

Increasing post-merger integration

When asked, “What would enable your operating model to operate at half its base cost?”

About 3/4
of respondents believe that increased technology and manufacturing footprint optimization will enable them to operate at half their base cost.

Industry analysts say industry growth comes from:


  • Acquisition of large contracts to grow their order book


  • Increasing market share


  • Achieving a price premium over competitors

Putting Savings Into Growth

To fuel growth, industrial equipment companies are focusing on innovation, offering digitally enabled services and maximizing the Industrial Internet of Things. Seventy-eight percent plan to funnel cost savings into growth and have enterprise-wide strategies in place.

Top areas for reinvesting cost savings


63%
Launching new products and services


55%
Digital technologies


53%
Expanding into new product/service lines or customer segments

Almost all organizations (96 percent) are willing to leverage new business models that could potentially initiate and drive out new capabilities. For example, they could become information providers thanks to the data their machines collect or offer digitally-enabled services in addition to their manufactured products.

About The Research

Accenture conducted quantitative and qualitative research across 700 executives in 13 industries and nine geographies to analyze the challenges and opportunities associated with creating cost-competitive operating models and reinvesting in growth. In parallel, Accenture interviewed 65 industry analysts across these industries to understand what external stakeholders measure, value and expect from the companies they cover.

Authors