Digital disruption threatens to replace around half of the companies in the current S&P 500 over the next ten years. But digital also drives industrial reinvention. And in today’s disrupted markets, that is the key to profitable growth. Accenture defines this digital reinvention of industry as Industry X—when businesses use advanced digital technologies to transform their core operations, their worker and customer experiences and ultimately their business models.
Artificial Intelligence (AI) is the power behind digital reinvention. When combined with other powerful digital technologies, AI creates Industry X products that evolve with their users and continually enhance the customer experience. If industrial incumbents can establish such digitally reinvented products in the market at scale, they will dramatically boost top-line growth, and thus their market capitalization.
Winning companies start out with the conviction that AI can shape the future of their products and businesses. They clearly envision the value it generates. They commit senior management and financial resources to building necessary skills and adjusting the business model to accommodate AI. And they work with an extensive ecosystem to achieve scale.
Yet, our research found that only a small group is already leveraging AI in a way that Accenture refers to as Applied Intelligence – intelligent technology and human ingenuity, combined with analytics and industry expertise, applied at the core of business – at scale. For instance, almost all (98 percent) have begun integrating AI into their products in one way or another. And they clearly understand that by combining AI with other digital technologies—especially mobile computing and Big Data Analytics—they can drive both higher operational efficiencies and more differentiated customer experiences.
But many struggle to realize their AI dreams. Only 24 percent recognize that digital reinvention drives top, as well as, bottom-line growth. More than 75 percent take an unstructured, scattergun approach to the challenge. And most leverage only their immediate ecosystem, rather than an extended network of partnerships, which could complement and strengthen their existing capabilities.
A four-stage journey to success
While different industry sectors and geographies take rather different approaches to the challenge of AI-driven industrial reinvention, our investigations—a combination of case study research and survey analysis—confirm that all successful companies stay the course of a sequential, four-stage journey:
Stage 1: Believe
Digital reinvention starts with conviction. Companies need to really believe in the power of AI to shape the future of their products and businesses, and to bring key stakeholders with them. The good news is that nearly seven in ten display such conviction.
Stage 2: Envision
When it comes to transforming conviction into a commercially viable vision, however, only 16 percent of survey respondents qualify. In many cases, it’s the CEO who puts the data-driven stake in the ground, authorizing top teams to start developing the investment and ecosystem strategies to acquire, process and secure the data needed to drive maximum value from AI. These industrial visionaries can also see the big picture: 82 percent rank enhanced customer loyalty and deeper insights from product and service usage as key value drivers for themselves; and the same proportion say that both greater safety and smarter solutions and services will be critical outcomes for their customers.
Stage 3: Commit
Armed with a robust vision and data-driven strategy, the next step is to commit appropriate management and financial resources to two critical areas: gaining the skills needed to ensure frictionless integration of new IT with legacy infrastructures; and shifting elements of the business model to embed AI. Just 5 percent of executives surveyed reach this stage, but they are very clear about the reasons for their success. Most cite strategic and tactical partnerships as key to amplifying the data skills they consider most important; while 64 percent say they have changed or will change critical elements of their business model to deliver customer relevance across the product lifecycle.
Stage 4: Execute
Only 2 percent of survey respondents achieve the scale they need to drive market value from their digitally reinvented products. They do so by working with ecosystem partners to identify, in granular detail, the AI components they want to combine with other digital technologies, now and in the future, as part of their customer value proposition.
Take action now
Over the next 100 days, C-suite leadership needs to take the following concrete actions:
- Believe: Articulate your belief in the digital reinvention of the product and communicate it with simple and authentic passion.
- Envision: Define the product you want to digitally reinvent, identify the value to be built and owned, and determine the impact on both top and bottom lines.
- Commit: Ensure that senior management is committed to securing the strategic and tactical partnerships that create value and mitigate risks.
- Execute: Leverage your ecosystem to innovate, adopt a “fail fast” approach to the journey, and empower your workforce to develop and service digitally reinvented products across their lifecycle.
No industrial company is yet a perfect practitioner of digitally reinvented products and services. But a few are well advanced on the journey. They know that proactive, self-learning and collaborative products and services are the future of industry, and that AI, leveraged strategically in combination with other digital technologies, is the key to creating that future.
By moving forward with conviction, leading players are developing new business opportunities and accelerating the implementation of new business models that can exponentially enhance customer value and thus their own.
The time to join the journey to digital reinvention is now.
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