If it seems like we’ve been talking about digitizing manufacturing for a long time, it’s because we have. Nearly 10 years ago, the vision for Industry 4.0 was launched at the Hanover Messe trade fair in Germany. That set off ambitious programs by governments around the world to support their industries’ embrace of digital.

Like most people at the time, I was excited by the vision laid out and what it could mean for manufacturers and entire industries. I was eager to see the transformation unfold as companies began to really ramp up their use of technology to create not just digital operations, but an entirely new breed of manufacturer.

But fast-forward a decade, and it’s clear we still have a long way to go to achieve the vision. In fact, a comprehensive Accenture study of 600 industrial companies in North America, Europe, and Asia has found that the average digital maturity of manufacturers’ end-to-end operations is a disappointing 39 percent—on a scale where 100 percent indicates all digital capabilities are deployed. Most of the companies in our research, while past the proof-of-concept stage, are still conducting pilots, with some partially scaling up.

Encouragingly, however, our research also identified a small group of manufacturers (17 percent of our sample), which we called Value Makers, that have had far different experiences with digital. These companies have highly mature digital operations capabilities that drive significant value (as measured by higher revenue and productivity).

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What explains the difference between Value Makers and the rest? According to our research, digital maturity—and the value it creates—boils down to two critical factors:

  • Sufficient investment in digital capabilities to make the desired impact. We found a strong, inescapable correlation between the amount manufacturers invested in digital capabilities—both infrastructure and platforms—and the resulting impact on their operating income.
  • Key enablers that are critical to digital’s success. Successfully embracing digital operations at scale requires significant attention to the key enablers that contribute to digital readiness—skills, leadership, and governance.

Investment and ROI: More begets more

Let’s look at investment more closely. The overall economics provide a compelling argument in favor of a major commitment to digital. According to our research, an average annual investment in digital representing 2.1 percent of sales in the short term and 3.4 percent in the medium term translates into massive boosts in operating income, asset utilization, and product digitization, and an equally impressive increase in workforce productivity. Furthermore, most players investing heavily in digital are seeing a significant top-line impact in the form of greater sales from connected services (such as connected products, connected services around the product lifecycle, and digital logistics offerings).

Value Makers are investing even more—on average, 3.1 percent of sales in the short term and 4.3 in the medium term.

Overall, by boosting asset utilization, workforce productivity, and service, digital transformation significantly improves ROCE through higher EBIT (from greater cost efficiency and better pricing of digital offerings) and reduced capital employed (from greater asset utilization and lower inventory). This is why digital transformation of operations can be a major creator of shareholder value.

Change and enablers: Skills, leadership, and governance

But there’s more to it than money. Manufacturers also must pay significant attention to the key factors that define how prepared they are to use that money wisely and get the ROI they want.

For starters, digital capabilities must be staffed with the right number of people with the required skills (notably, artificial intelligence and data science). Our research indicates these resources should represent around 1 percent of a company’s staff in the mid-term and up to 1.8 percent in the future.

Second, digital transformation can’t be scaled if leaders don’t embed it in their leadership role. Why? Because if leaders aren’t fluent in using data-driven analysis to make decisions, digital transformations will fail to live up to their potential. Value Makers in our study reported most of their executives are trained to use analytics in their decision making.

Finally, given its substantial impact across the enterprise, digital transformation must be driven at the highest level of governance possible. In our Value Makers group, the vast majority of companies govern and steer their transformation at the CXO level or above.

The time for experimenting is over

With progress toward the vision of Industry 4.0 slow in most companies, the question remains: Why are so many manufacturers still working on proofs of concept or pilots? Our research clearly shows that, with the right enablers in place, betting big generates a commensurately large return. Value Makers in our study know it, and are in the pole position to win the race for digital operations transformation. It’s time for the rest of manufacturers to stop experimenting and begin scaling so they’re not left behind.

For more on our research, read our second blog on the topic and the full report.

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For more on supply chain topics overall, please visit our supply chain blog.

Max Blanchet

Managing Director – Strategy, Industry X, and Supply Chain, Europe Lead

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