Wednesday, 26th June 2019

UK and global companies to invest over $US 900 billion per year to become truly digital enterprises

Around 74% of UK firms expect to drive high levels of digitisation and integration by 2021, according to a new global report by PwC, Industry 4.0: Building the Digital Enterprise.

As manufacturing firms increasingly focus on Industry 4.0, PwC’s survey of over 2,000 global companies across nine industry sectors reveals that 33% of global firms already rate their level of digitisation as high, with this value rising to 72% when asked for a five year prediction.
“Industry 4.0“ - also called the fourth industrial revolution - focuses on the end-to-end digitisation of all physical assets and processes as well as integration into digital ecosystems with value chain partners. Data & Analytics is a core capability for Industry 4.0, where applications are fuelled by key enabling technologies.
Bjorn Johansson, director at Strategy&, part of the PwC network in the UK, said: “With those UK firms surveyed giving a self-rating of less than 20%, it raises the question of whether they are downplaying their current digital capabilities or simply have a major hill to climb. Their level of ambition is less ambiguous, with around three quarters expecting to show high levels by digitisation and integration over the next five years –a significant increase.
“Through our interviews it is clear that our industrial leaders are already shifting gears as they look to digitise essential functions within their internal vertical value chain.
“They are also challenging their organisations to identify and make use of new technologies and analytics to optimise and manage their extended supply chain.”
Investing for Industry 4.0 success
Building the Digital Enterprise outlines how that companies are enhancing their product portfolio with digital functionalities and introducing innovative, data-based services.
According to the survey, companies worldwide are set to invest approximately 5% of their digital revenues annually on digitisation – and based on the industry sectors surveyed, this would equate to a total global investment of $US 907 billion per year. In contrast, UK firms expect to invest approximately 2.5% of their turnover.
A major focus of these investments will be on digital technologies like sensors or connectivity devices, and on software and applications like manufacturing execution systems. In addition, industrial companies are investing in training employees, in-house technologies and driving required organisational change. However, for UK firms, the biggest challenge remains a lack of digital culture, talent and clear digital operations vision.
In the course of this anticipated transition, managers surveyed around the world expect to achieve cost reductions of on average 3.6% per year and an additional revenue of around 2.9% annually. In absolute terms, this corresponds to $US 421 billion in year-on-year cost and a simultaneous yearly increase in turnover of $US 493 billion.
Bjorn Johansson, added: “With the investments at stake, anticipated short payback times, and sizeable anticipated costs and revenue rewards for whoever take the lead, it is hard to see anything but an increase of pace and urgency with which companies address Industry 4.0 transformation.”
At the end of this transformation process, successful industrial companies will become truly digital enterprises, with physical products at the core, augmented by digital interfaces and data-based, innovative services. These digital enterprises will work together with customers and suppliers in industrial digital ecosystems.
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