But more recently, Japanese companies have struggled to translate their leading innovation of the “product era” into the same level of success with digital products and services. Accenture research reveals that the majority of companies have not prioritized the engineering and manufacturing of digital products and services:

However, most companies also recognize the need to make significant changes to engineering and manufacturing to compete in the digital era.

• Nearly 90% expect to invest more in engineering digital products and services than physical between 2022 and 2025.
• More than 80% plan to make digitizing manufacturing a priority.
• Overall, companies expect, on average, to invest 1.25x more in engineering and manufacturing over the next three years (from 4.4% of revenues today to 5.5% by 2025).

The key questions are where should they direct those investments and how can they reorient their operations to become innovators in the digital era?

Our research identified a minority (13%) of Japanese companies that are driving value and growth from their portfolios of digital products. Their example should prove instructive for companies seeking to make the required pivot to engineering and manufacturing digital products and services. These digital innovation leaders are both more heavily weighted to digital products and they are achieving higher profitability and growth than their peers.

Digital leaders distinguish themselves from their peers through four attributes:

• Their CEOs adopt and articulate a progressive vision of their company’s digital future.
• They build a tech-savvy board to help steer the vision through the enterprise. On average, close to 20% of leaders’ board members have relevant technology experience; almost twice the average for other companies surveyed.
• They use the combination of technology and talent to drive seamless collaboration across engineering and manufacturing functions. They start by making the right technology choices, followed by creating the environment where technology and talent are combined to maximize value with digital products and services.
• They deliver the best designs, quality and services across product lifecycles by continually building their data-driven capabilities to ensure cross-functional collaboration. Between 2018-2021, leaders invested in data capabilities including digital twins and data lakes as well as low-code development platforms to enable access to data by all their teams. 53% of innovation leaders benefitted from greater data-driven decision-making over the past three years, compared with only 41% among others.

Those seeking to emulate leaders’ success with digital products need to start by evaluating their existing digital product vision or developing one, with a view to increasing the digital intensity of their product portfolio. They also need to build a digital engineering and manufacturing engine for the future and analyze skills and capability gaps in their manufacturing and engineering domains.