The Remaking of Industries: INDUSTRIAL EQUIPMENT
October 18, 2019
Intelligent equipment and services, advanced analytics, remote monitoring, and predictive maintenance. These technology-driven trends are redefining customer demand for industrial equipment and platforms. And supply chains are reeling from volatile prices of raw materials, shortages of skilled workers and uncertainties of global trade wars. Clearly, industrial equipment companies are under enormous stress today. While most are fighting back, only a small group of innovative companies are distinguishing themselves in this disruptive era. We call them the Industrial Equipment Champions.
This report explores what sets them apart.
Industrial equipment companies are facing unprecedented challenges today. Customer engagement no longer hangs on competitive prices and diligent maintenance. Technology is creating discerning customers; they want smart, pay-per-use industrial equipment they can operate remotely from an office rather than an underground mine or a drilling rig. It shouldn’t come as a surprise then, that they prefer to crunch data to figure out how to optimize operations or when to repair equipment before any breakdowns, saving on unplanned downtime.
On the supply side, industrial equipment manufacturers are hamstrung by volatile prices of raw materials, an acute shortage of skilled engineers and factory workers, and looming uncertainties of global trade wars.
While industrial equipment companies are facing unprecedented economic and social pressure, they can tackle those by exploiting new value propositions to capture 21st century market opportunities.
Industrial equipment manufacturers are merely scratching the surface of these new value propositions. And all these efforts to please the consumer are not cheap. It is therefore no surprise to see that the industrial equipment companies interviewed for our survey are making the most innovation investments in design and engineering.
To make good on these new value propositions, industrial equipment companies must digitally reimagine the products and services they offer. Not only must they innovate to create value across key business functions, but also scale their proof of concepts (POCs) and ensure higher returns on digital investments (RODI).
Too few companies are accomplishing that. Out of the 138 industrial equipment companies with annual revenues in excess of $1 billion we studied, only 28 percent are successfully scaling more than half their POCs and earning higher than average RODIs. We call them the Industrial Equipment Champions.
Most others—almost three quarters of the companies in our research—earn an RODI lower than the industry average (12.3 percent), irrespective of how much they scale. This implies that simply scaling more doesn’t guarantee success.
A closer look at the Industrial Equipment Champions underscores the importance of how you scale POCs over how many POCs you scale. These leaders view innovation and the associated costs differently, spending more time and money than their peers to design and build differentiated products.
They have the courage to scale new digital innovation at the right pace so they neither miss the moment nor overreach themselves. It is their progressive mindsets that allow them to pivot their organization to new value propositions and earn higher returns on digital investments. We distilled three distinct mindsets.
Industrial Equipment Champions consider innovation spending as investment and show strong commitment to it.
Industrial Equipment Champions achieve tangible and timely returns on their investments.
Most companies continue to work and collaborate in conventional ways to avoid racking up costs. Champions make unique, differentiated investments in growth levers to enhance productivity and agility.
The critical question today is how can businesses simultaneously prepare for unprecedented social, political, environmental and technological challenges—both imminent and distant?
We’ve learned from our research that only a handful of companies are taking on disruptive forces, making dynamic decisions and successfully remaking industries. We call them the Champions.
The Champions understand that digital technology is creating more discerning customers who want connected products that don’t pollute, save time, and are easy to use. But Champions also know how to create these products.
Our research shows three mindsets work best in concert to help any company that wants to become a Champion. First, view digital innovation as an investment that needs thoughtful allocation, not a cost that ought to be cut. Second, set timely and robust expectations on return on digital investments. Third, invest in five in-house levers to scale digital innovation—skills, platforms, technology, partnerships and leadership.
The payoff from adopting these mindsets can be substantial, and help any company answer this simple question: Will you move beyond the usual guardrails and remake your business to successfully face off the forces before they take you down?
For more detailed insights on how Industrial Equipment Champions are remaking their industry, read the full research report.
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