INDUSTRY 4.0: BUILDING THE DIGITAL ENTERPRISE - PWC
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2016 Global Industry 4.0 Survey
What we mean by Industry 4.0 / Survey key findings / Blueprint for digital success
Industry 4.0: Building
the digital enterprise
2000+
respondents in 26 countries
US$493 bn
in digital revenue gains p.a.
US$421 bn
p.a. in cost and efficiency gains
US$907 bn
in annual digital investments
www.pwc.com/industry40
Contents
04 26
Introduction Blueprint for digital
06 What we mean by Industry 4.0 success
27 Map out your Industry 4.0 strategy
29 Create initial pilot projects
07
30 Define the capabilities you need
31 Become a data virtuoso
Executive summary 31 Transform into a digital enterprise
08 Key findings from our survey research 32 Actively plan an ecosystem approach
10 Blueprint for digital success
11 33 About the survey
34 Contacts and acknowledgements
Key findings from our survey
research
11 Industry 4.0 - from talk to action
13 Digitisation drives quantum leaps in performance
15 Deepen digital relationships with more empowered
customers
17 Focus on people and culture to drive transformation
18 Data analytics and digital trust are the foundation of
Industry 4.0
21 Robust, enterprise-wide data analytics capabilities
require significant change
22 Accelerating globalisation, but with distinct regional
flavours
24 Big investments with big impact: it’s time to commit
2 2016 Global Industry 4.0 Survey
Global Industry 4.0 Survey: Building the digital enterprise
PwC’s 2016 Global Industry
4.0 Survey is the biggest
worldwide survey of its kind,
with over 2,000 participants
from nine major industrial
sectors and 26 countries. The
study explores the benefits
of digitising your company’s Industry split of survey respondents
horizontal and vertical value
chains, as well as building Forest, paper & packaging 4 Aerospace, defence & security
% 2%
your digital product & service Metals 8%
portfolio. Based on the Industrial
21% manufacturing
findings and our experience Other 8%
working with first movers,
we’ve also crafted a blueprint
for success to help you secure Automotive 9 Industry
%
your company’s position as split
a leading digital enterprise
in tomorrow’s complex Transportation 9
Engineering &
19% construction
%
industrial ecosystems. & logistics
Electronics 10%
11% Chemicals
Participating countries
Denmark
Canada Sweden India
Netherlands
Austria
USA China
UK Poland
Japan
Finland
Middle East
Singapore
Mexico
Portugal
South Africa
Italy
France
Brazil Germany
Australia
Switzerland
Spain
Building the digital enterprise 3Introduction
Behind the scenes of the world’s leading industrial and
manufacturing companies, a profound digital transformation
is now underway.
Industrial leaders are digitising At the end of this transformation
essential functions within their internal process, successful industrial companies
vertical operations processes, as well will become true digital enterprises,
as with their horizontal partners along with physical products at the core,
the value chain. In addition, they are augmented by digital interfaces and
enhancing their product portfolio with data-based, innovative services. These
digital functionalities and introducing digital enterprises will work together
innovative, data-based services. The with customers and suppliers in
2,000+ companies that we surveyed are industrial digital ecosystems.
expecting to dramatically increase their
overall level of digitisation. While just These developments will fundamentally
33% rate their company as advanced change individual companies, as well
today, that number jumps to over 70% as transform market dynamics across
looking ahead to 2020. a whole range of industries. And that’s
true in countries all around the world
While terms like the industrial internet – in both the developed as well as the
or digital factory are also used to emerging markets. Here’s what’s driving
describe these changes, in this report change:
we use Industry 4.0 as a shorthand to
describe a journey industrial companies • Annual digital revenue
are taking towards a complete value increases of 2.9% on average
chain transformation (see What we mean – and a significant minority that
by Industry 4.0). expect total increases of more than
50% over five years. That adds up
to US$493 bn in increased annual
revenues for the next five years
across the industrial sectors we
surveyed.
• Cost reductions of 3.6% p.a .
on average. Digital technologies
enable shorter operational lead
times, higher asset utilisation and
maximum product quality; all told,
our survey respondents expect to
save US$421 bn in costs each year
for the next five years.
4 Global Industry 4.o Survey• Incremental and revolutionary Focus on people and digital Digital trust is key
product & service innovation transformation With so much change in store, there’s
To generate these additional The biggest challenge of industrial one area that companies can’t afford to
revenues, companies will introduce leaders isn’t technology - it is the ignore: digital trust. Digital ecosystems
new industrial products with digital people. While digital technologies are can only function efficiently if all
features and augment their existing rapidly becoming a commodity, success parties involved can trust in the security
portfolio. Digital services based on largely depends on an organisation’s of their data and communication,
data analytics, or even complete Digital IQ1, especially how well its as well as the protection of their
digital solutions serving a customer digital leaders like the CEO, CTO, or intellectual property. Protecting your
ecosystem, will drive breakthrough CIO define, lead, and communicate company and ensuring digital trust
revenue growth. the transformation. It’s also dependent requires significant investment and
upon the digital qualifications of clear guidelines for data integrity and
• A strong commitment to invest the employees who need to roll out security.
Industrial sectors are planning to digital processes and services. Radical
commit US$907 bn p.a. to Industry disruption isn’t always comfortable The key findings we explore in the
4.0 – around 5% of revenue p.a. for the people who make it happen, first half of this report confirm that no
A major focus of these investments so change management will also industrial company can afford to ignore
will be on digital technologies like be critical. And with data analytics the fundamental changes that Industry
sensors or connectivity devices, and becoming a core capability for every 4.0 will bring. The second half provides
on software and applications like industrial company, enhancing skills a pragmatic, step-by-step blueprint
manufacturing execution systems. and organisational structures will be for how industrial companies can
In addition, companies are investing critical. successfully build a digital enterprise.
in training employees and driving
required organisational change. 55% Please reach out to us for more details
of the investments expect a payback on our research or to discuss our
within two years. approaches. The digital transformation
is underway: now is the time for your
To keep up, you’ll need to transform company to act!
your business.
Dr. Reinhard Geissbauer Jesper Vedso Stefan Schrauf
Head of EMEA Industry 4.0 Global Industrial Products Head of PwC Strategy& Industry 4.0
Digital Operations Team Leadership Team Member Team for Germany
+49 170 939 1263 +45 3945 9144 +49 895 790 5317
reinhard.geissbauer@ jrv@pwc.dk stefan.schrauf@strategyand.de.pwc.com
strategyand.de.pwc.com
1 PwC, 2015 Global Digital IQ Survey, September 2015.
Building the digital enterprise 5What we mean by 1) Digitisation and integration
of vertical and horizontal value
2) Digitisation of product and
service offerings
Industry 4.0 chains
Digitisation of products includes the
In this report, the term ‘Industry Industry 4.0 digitises and integrates expansion of existing products, e.g. by
4.0’ stands for the fourth industrial processes vertically across the adding smart sensors or communication
revolution. Other related terms include entire organisation, from product devices that can be used with data
the ‘Industrial Internet’ or the ‘Digital development and purchasing, through analytics tools, as well as the creation
Factory’, although neither takes as manufacturing, logistics and service. of new digitised products which focus
complete a view. While Industry 3.0 All data about operations processes, on completely integrated solutions.
focused on the automation of single process efficiency and quality By integrating new methods of data
machines and processes, Industry 4.0 management, as well as operations collection and analysis, companies
focuses on the end-to-end digitisation planning are available real-time, are able to generate data on product
of all physical assets and integration supported by augmented reality and use and refine products to meet the
into digital ecosystems with value optimised in an integrated network. increasing needs of end-customers.
chain partners. Generating, analysing
and communicating data seamlessly Horizontal integration stretches beyond 3) Digital business models and
underpins the gains promised by the internal operations from suppliers customer access
Industry 4.0, which networks a wide to customers and all key value chain
range of new technologies to create partners. It includes technologies from Leading industrial companies also
value. track and trace devices to real-time expand their offering by providing
integrated planning with execution. disruptive digital solutions such
While the term Industry 4.0 is as complete, data-driven services
becoming increasingly familiar, we use and integrated platform solutions.
it in a specific way in this report. In our Disruptive digital business models are
view, Industry 4.0 is driven by: often focused on generating additional
digital revenues and optimising
customer interaction and access. Digital
products and services frequently look to
serve customers with complete solutions
in a distinct digital ecosystem.
Industry 4.0 framework and contributing digital technologies
Mobile devices
Cloud computing IoT platforms
cs as core
alyti ca
An pa
& n and bi
ta is a tio in te g l
Augmented it al and ho ra
Da
g
ity
i tic
D er ue chai on ri z ti Location detection
reality/wearables v val ns t technologies
on l
1.
of
a
pr o 2 . D i g d s erv
m er ac c ess
d uct a n
Industry
sto n e s s
Multilevel customer 4.0
cu l b u s i
interaction and Advanced human-machine
i t i s ic
customer profiling interfaces
at
it a
n ig
io
o e
of f
fe r 3 . D and
in g s m o d e l s
D
it y
ta l
bi
a
&
Big data analytics An a pa
a ly t c
and advanced ic s as c or e
algorithms
Authentication &
fraud detection
Smart sensors 3D printing
6 2016 Global Industry 4.0 SurveyExecutive summary
PwC’s 2016 Global Industry 4.0 Survey of industrial
companies is the biggest survey of its kind studying
Industry 4.0 to date.
With over 2,000 participants from explores each finding in more detail.
companies in nine major industrial Based on the findings and our
sectors and 26 countries, it goes to experience working with some first
the heart of company thinking on the movers, we’ve also crafted a blueprint
progress towards transforming into a for implementation success. In the
digital enterprise. second half, we detail six steps to help
companies move from initial strategy
We’ve distilled the results of our all the way to taking a leading role in
research into eight distinct key tomorrow’s digital ecosystems.
findings. The first half of our report
Key findings from our survey research
From talk
to action
Big Digitisation
investments drives quantum
with big impacts: leaps in
it’s time performance
to commit
Industry 4.0
is accelerating Deepen digital
globalisation, but relationships with
with a distinctly more empowered
regional customers
flavour
Industry
4.0
Robust,
enterprise-wide Focus on
data analytics people and
capabilities require culture to drive
significant Data analytics transformation
change and digital
trust are the
foundation of
Industry 4.0
Building the digital enterprise 7and operational savings. Their plans even half of these expectations are met,
Key findings from for the next five years are even more
ambitious and far-reaching, with digital
Industry 4.0 will fundamentally reshape
the competitive landscape and bring
our survey research products and services paving the way fundamental change to established
for disruptive business models. industries.
1) Industry 4.0 - from talk to 2) Digitisation drives quantum 3) Deepen digital relationships
action leaps in performance with more empowered customers
The buzz around Industry 4.0 has Companies that successfully implement Customers will be at the centre of the
moved from what some saw as PR Industry 4.0 no longer need to choose changes to value chains, products
hype in 2013 to investment and real between focusing on a better top or and services. Products, systems and
results today. Respondents expect to bottom line. They can improve both at services will be increasingly customised
significantly increase their portfolios the same time. Over the next five years, to customer needs, and many of our
of digital products and services; more the companies we surveyed expect to survey respondents say they plan to
than twice as many expect to be at an increase annual revenues by an average use data analytics to understand and
advanced level in this area by 2020 of 2.9% and reduce costs by an average meet them. First movers who are
compared to today. Similarly, almost of 3.6% p.a. First movers who combine able to establish successful industrial
three-quarters of companies expect to high investment levels with advanced platforms will have a significant
have highly digitised horizontal and digitisation are set to achieve even more advantage over competitors. Ultimately,
vertical value-chain processes in five dramatic gains. industrial companies will need to own
years. relationships with the end customers
All told, our survey respondents expect who drive demand or at least integrate
Investment plans are extremely to see US$421 bn in cost reductions with platforms that allow them to
ambitious, with first movers in and US$493 bn in increased annual access the end customers efficiently.
particular already making significant revenues p.a. for the next five years. If
Industry 4.0 investments and realising
both above-average digital revenues
8 2016 Global Industry 4.0 Survey4) Focus on people and culture to 6) Robust, enterprise-wide data China’s industrial companies stand
drive transformation analytics capabilities require out in all aspects of digitisation: they
significant change are expecting both above-average cost
Our survey respondents say that their reductions as well as increased digital
biggest implementation challenge isn’t Industrial companies will need revenues through to 2020. China is one
the right technology, it’s a lack of digital to develop robust organisational of the countries that stands to gain the
culture and skills in their organisation. structures that support data analytics most from automating and digitising
This finding is also consistent with as an enterprise-level capability. labour-intensive manufacturing
our Digital IQ research, which for nine Half of the surveyed companies have processes and needs to find a solution
years has explored how organisations established dedicated data analytics to rising employee remuneration. In
across industries can derive value functions, either on a corporate level addition, Chinese companies are highly
from digital investments2. Digital IQ to bundle talent or on a business unit flexible and open to digital change.
emphasises that while investing in level to remain close to the operational
the right technologies is important, business. However, 38% of companies 8) Big investments with big
ultimately success or failure will depend currently rely on selective, ad-hoc impacts: it’s time to commit
not on specific sensors, algorithms capabilities of single employees; another
or analytics programmes, but on 9% have no significant capabilities at Industry 4.0 investments are already
a broader range of people-focused all. significant and our research suggests
factors. Industrial companies need to that global industrial products
develop a robust digital culture and to 7) Industry 4.0 is accelerating companies will invest US$907 bn per
make sure change is driven by clear globalisation, but with a distinctly year through to 2020. The major focus
leadership from the C-suite. They’ll regional flavour of this investment will be on digital
also need to attract, retain, and train technologies like sensors or connectivity
digital natives and other employees who Industry 4.0 will create digital networks devices, as well as on software and
are comfortable working in a dynamic and ecosystems that in many cases will applications like manufacturing
ecosystem environment. span the globe, but still retain distinct execution systems (MES). In addition,
regional footprints. Both developed companies are also investing in training
5) Data analytics and digital trust and developing markets stand to gain employees and driving organisational
are the foundation of Industry 4.0 dramatically. change. More than half of respondents
expect their Industry 4.0 investments to
Data fuels Industry 4.0 and successful Companies in Japan and Germany are yield a return within two years or less,
data analytics is the prerequisite for the furthest along in digitising internal given investment of around 5% p.a. of
successful implementation of digital operations and partnering across the their annual revenue.
enterprise applications. It’s time to horizontal value chain. With high
move from a phase of discovery and investment in technology and employee
understanding what data is available training, they view their digital
and what it is worth to one of insights transformation primarily in terms of
and action. ‘First movers’ are already gains in operational efficiency, cost
making the shift and using data reduction and quality assurance. Our
analytics to help drive decision-making. experience working with companies in
the US suggests that they are planning
As digital ecosystems expand, so does to invest more heavily in developing
the importance of establishing strong disruptive business models, as
levels of digital trust, backed up by companies move quickly to digitise their
transparency and non-repudiation product and service portfolios.
that provides proof of the integrity
and origin of one’s own and third-
party data. Strong risk management
and data integrity systems can help
companies avoid breaches and manage
disruption to operations better – the
#1 data security concern of our survey
respondents.
2 PwC, 2015 Global Digital IQ Survey, September 2015.
Building the digital enterprise 9Blueprint for digital processes as well as for implementing
new technologies. Your success with
Remember that change doesn’t stop
once you’ve implemented Industry 4.0.
success Industry 4.0 will depend on skills and Your company will need to re-invent its
knowledge. Your biggest constraints may capabilities at faster rates than in the
To move forward with Industry well be your ability to recruit the people past to stay ahead of the game.
4.0, digital capabilities are all- needed to put digitisation into place.
6) Actively plan an ecosystem
important. These take time and 4) Become a virtuoso in data approach
concentration; a step-by-step analytics
approach is important. But move Develop complete product and services
with deliberate speed, so that Consider how you can best organise solutions for your customers. Use
data analytics; cross-functional expert partnerships or align with platforms if
you don’t lose the first-mover
teams are a good first step. Later these you cannot develop a complete offering
advantage to competitors. capabilities can be fully embedded in internally. You may find it difficult to
your functional organisation. share knowledge with other companies,
1) Map out your Industry 4.0 and you may prefer acquisition. But look
strategy Learn to get value out of data by for ways to bridge this gap – perhaps
building direct links to decision-making with technical standards – so that you
Evaluate your own digital maturity now and to intelligent systems design. Use can profit from being part of platforms
and set clear targets for the next five the data to improve products and their that you don’t fully control.
years. Prioritise the measures that will use in the field to offer and build new
bring the most value to your business service offerings. Think big, but start Real breakthroughs in performance
and make sure these are aligned small, with ‘proof of concept’ projects. happen when you actively understand
with your overall strategy. Make sure consumer behaviour and can
company leadership is ready and willing 5) Transform into a digital orchestrate your company’s role within
to champion your approach. enterprise the future ecosystem of partners,
suppliers and customers.
2) Create initial pilot projects Capturing the full potential of Industry
4.0 often requires company-wide Don’t buy the hype. Buy the reality.
Use them to establish proof of concept transformation. Look to set “tone Industry 4.0 will be a huge boon to
and demonstrate business value. Target from the top”, with clear leadership, companies that fully understand what
a confined scope, but highlight the commitment and vision from the C-suite it means for how they do business.
end-to-end concept of Industry 4.0. Not and financial stakeholders. Foster a Change of this nature will transcend
every project will succeed, but they digital culture: all your employees your company’s boundaries – and
will all help you to work in a cross- will need to think and act like digital probably the national boundaries of
functional and agile approach with natives, willing to experiment with new the countries where you do business.
customers and technology partner - the technologies and learn new ways of
new norm of the future. With evidence operating.
from early successes, you can also
gain buy-in from the organisation, and
secure funding for a larger rollout.
Design pragmatically to compensate Blueprint for digital success
for standards or infrastructure that
don’t yet exist. Collaborate with digital
leaders outside your organisation, by
working with start-ups, universities,
or industry organisations to accelerate
your digital innovation.
3) Define the capabilities you need
Map out Create Define the Become a Transform Actively plan
your Industry initial pilot capabilities virtuoso in data into a digital an ecosystem
Building on the lessons learned in 4.0 strategy projects you need analytics enterprise approach
your pilots, map out in detail what
capabilities you need to achieve
your vision. Include how enablers
for Industry 4.0, like an agile IT 1 2 3 4 5 6
infrastructure, can fundamentally
improve all of your business processes. Blueprint for digital success
Remember to develop strategies for
attracting people and improving
10 2016 Global Industry 4.0 SurveyKey findings from our
survey research
Industry 4.0
has moved Figure 1: Respondents expect to more than double their level of
from talk to digitisation by 2020
action
+39% 72%
When PwC conducted its first
set of research on Industry 4.0 33%
in 2014 , it was on the radar for
many companies – but relatively
few were actually in the process
High level of High level of
of implementing it. That has digitisation today digitisation in 5 years
changed dramatically this year.
Vertical value-chain 41%
Industry 4.0 is no longer a ‘future trend’ integration 72%
– for many companies it is now at the
heart of their strategic and research Horizontal value-chain 34%
agenda. Companies are combining integration 65%
advanced connectivity and advanced
Digital business 29%
automation, cloud computing, sensors models, product and
service portfolio 64%
and 3D printing, connected capability,
computer-powered processes, intelligent 42%
Product development
algorithms and ‘internet of things’ (IoT) & engineering 71%
services to transform their businesses.
Customer access, 35%
sales channels &
Change is happening fastest in marketing 68%
areas close to the core business Today In five years
Shown: Percentage of companies surveyed reporting high degrees of digitisation and integration
Just over two-fifths of companies
report that they believe their product
development and engineering and Q: How would you classify the current level of digitisation and integration in the
following areas in your company? What levels of digitisation and integration are you
their vertical value chains are already expecting in the next five years?
benefiting from an advanced level
of digitisation and integration (see
Figure 1). Areas of focus include
digitising and connecting functions
Building the digital enterprise 11such as digital order processes, First movers are set to outpace
customised product development and their competitors
the automated transfer of product
data to connected planning and Some companies report advanced
manufacturing systems, and further on or very advanced current levels of
to integrated customer service. These digitisation and integration. There are
are also the areas that they anticipate also companies who rate themselves
will also be furthest advanced in five ahead of their main competitors when
years’ time. it comes to building digital operations
capabilities. And some companies have
Advanced digitisation and integration made early investments in Industry 4.0.
of the horizontal value chain, with
suppliers, customers and other value- There is also a select group of
chain partners, and digitisation of companies who score highly on all three
customer channels are progressing of these key dimensions. We identified
a little slower than with the vertical 71 companies (around 4% of the whole
value chain. Big advances are expected survey population) who are setting the
in five years’ time but these are areas fastest pace. We call these companies
that companies believe will be more “first movers,” and they’re already
challenging than those closer to their gaining a nearly insurmountable
core production activities. advantage over competitors, as we’ll
show throughout this report.
‘First movers’ expect to gain significant
benefits from their more advanced
digital capabilities and greater levels
of investment. They are far more likely
to be forecasting both revenue gains
of more than 30% and cost reduction
of more than 30% at the same time
(see Figure 2). They’re more likely to
expect efficiency gains too. Put these
all together and you have an enormous
impact.
Figure 2: First movers are almost three times more successful in combining
high revenue increases with significant gains in cost reduction
10% 27%
All
Companies First
movers
196
% of companies achieving >30% increased revenue
and >30% reduced costs simultaneously by 2020
>30%
Revenue growthDigitisation System based, real-time end-to-end
planning and horizontal collaboration
drives is now possible using cloud-based
planning platforms. Companies that
quantum leaps use such systems to become better
in performance integrated with horizontal value chain
partners, including suppliers and key
Our survey respondents customers, can significantly improve
efficiencies and reduce inventories. In
anticipate significant gains from addition, the implementation of track-
the implementation of Industry and-trace devices on products will lead
4.0 initiatives. to better inventory performance and
reduced logistics cost.
On average, companies expect to
reduce operational costs by 3.6% p.a.,
while increasing efficiency by 4.1% Figure 3: Companies in every industry sector expect significant cost
annually. High levels of cost reduction reductions
are expected in every industry sector
we studied (see Figure 3). Some of Cost reduction Cost reduction
(in % p.a. until 2020) (in US$bn p.a. until 2020)
these cost savings can be achieved by
implementing smart manufacturing Aerospace, defence 3.7% 9
& security
initiatives. For example, companies
are moving to integrated planning & Automotive 3.9% 28
scheduling for manufacturing. Such
Chemicals 3.9% 49
systems combine data from within
the enterprise – from sensors all the Electronics 3.7% 62
way through to ERP systems – with
Engineering & construction 3.4% 78
information from horizontal value
chain partners, like inventory levels Forest, paper & packaging 4.2% 28
or changes in customer demand.
Industrial manufacturing 3.6% 52
Integrated shop floor planning improves
asset utilisation and product throughput Metals 3.2% 54
time. Another example is predictive
Transportation & logistics 3.2% 61
maintenance of key assets, which uses
predictive algorithms to optimise repair
Weighted Average 3.6% Total 421
and maintenance schedules and to
improve asset uptime.
Q: What cumulative benefits from digitisation do you expect in the next 5 years? Lower costs.
Building the digital enterprise 13The new competitive landscape Improved customer insight from smart
Figure 4: R
evenues from digitising data analytics also allows companies to
the product and service Efficiency gains of the magnitude better focus on additional high-margin
portfolio will grow
significantly in future uncovered by our survey have the business.
potential to change the competitive
landscape within a very short space of In the new industrial reality, most
time. If even half of the expectations companies (86%) expect to secure
outlined are realised, some companies simultaneous gains from both lower
47% 44%
may find themselves unable to compete. costs and added revenue in the next five
In an increasingly cost-competitive years.
Digitisation of the Introducing a market, no industrial company can
existing product new digital
portfolio product afford to lose out in operational And the impact is far-reaching for every
portfolio
efficiency against their market peers. industry we studied. At least a third
The next two to three years will be of companies in every sector expect to
crucial for companies looking to catch secure efficiency gains and cost savings
42%Other digital
38% Big data
up. of more than 20% and many anticipate
that these will be accompanied by
services to analytics services Significant revenue opportunities additional revenues of the same
external to external
customers customers ahead magnitude.
Survey participants expect additional
Note: Companies achieving 10% or more additional
digital revenues of 2.9% p.a. until
revenue in the following areas over the next 5 years.
Multiple answers possible 2020. To generate these additional
revenues, companies will introduce new
Q: Which of the following new digital products industrial products with digital features
or services do you plan to introduce and and augment their existing portfolio
expect will generate more than 10% of your (see Figure 4). Digital services based on
future revenue over the next 5 years?
data analytics, or even complete digital
solutions serving a customer ecosystem,
will drive breakthrough revenue
growth.
In addition, real-time data availability
will enable companies to manufacture
personalised products and customise
solutions. These customised products
usually generate significantly higher
margins than mass-manufactured
offerings.
How Industry 4.0 is delivering revenue, cost and efficiency gains
Additional revenue from: Lower cost and greater efficiency from:
Digitising products and services within the existing portfolio Real-time inline quality control based on Big Data Analytics
New digital products, services and solutions Modular, flexible and customer-tailored production concepts
Real-time visibility into process and product variance, augmented reality
Offering big data and analytics as a service.
and optimisation by data analytics
Predictive maintenance on key assets using predictive algorithms to
Personalised products and mass customisation.
optimise repair and maintenance schedules and improve asset uptime
Capturing high-margin business through improved customer insight from Vertical integration from sensors through MES to real-time production
data analytics planning for better machine utilisation and faster throughput times
Horizontal integration, as well as track-and-trace of products for better
Increasing market share of core products
inventory performance and reduced logistics
Digitisation and automation of processes for a smarter use of human
resources and higher operations speed
System based, real-time end-to-end planning and horizontal collaboration
using cloud based planning platforms for execution optimisation
Increased scale from increased market share of core products
14 2016 Global Industry 4.0 SurveyDeepen digital Deepening customer relationships
through co-creation and
Using data to enhance customer
service and responsiveness
relationships customisation
Nearly three-quarters of companies
with more Digital integration with the customer (72%) expect that the use of data
empowered and new technological opportunities analytics will substantially improve
to move production closer to the customer relationships and customer
customers customer, for example with 3D printing, intelligence along the product life cycle
will enable greater individualisation (see Figure 5). Greater integration
As Industry 4.0 develops, the and customisation of products. Most of data between manufacturers
traditional model of products companies we spoke to are expecting and customers can open up new
to strengthen their digital offering to collaboration opportunities. Clever
pushed out to the market will
customers, either by digitising existing use of pooled data, for example, can
fade and ‘customer pull’, with products or by developing new digital allow manufacturers in B2B markets
customers intimately involved in products. The opportunity is there not to help customers in value-chain
a more collaborative relationship only to greatly increase the ability to planning, driving efficiencies within
with manufacturers, will be much respond flexibly and more rapidly to the customer’s operations as well as
customer demands but also to anticipate vice versa. Many companies have such
more the norm. Industry 4.0 will
demands, helping the customer move collaborative opportunities in sight.
greatly enrich the opportunities ahead in a range of predictive ways. Over a third (38%) of companies in our
to retain and grow the customer survey said they plan to offer their big
relationship but it will also make data services to external companies.
the fight for the customer more
intense.
Figure 5: Industry 4.0 is helping How industrial companies are getting closer to
industrial companies customers
optimise customer
relationships
Basing Innovation in
product/service customer service
development
cs as core
alyti cap
&
An ab on customer
ta tion and inte il
isa g
git ical and horiz rati specifications
Da
i
ity
D ert e cha on
v valu ins t
on l
1.
of
a
m od . D i d cus
e offerings
2
e ls a n
se i o n o f
g it a to
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72%
si
n Di
u
gi
er e s s 3. t an
acc c
ta pro du
ess
Customising
Da
it y
l
& bi
An pa
alyt ca products all the way
ic s a s c ore Using data
analytics to down to a lot size
meet customer of 1
requirements and
improve operational
performance
Q: In which areas will your company use data
analytics in five years? Improving customer
relationship and customer intelligence along
the product life cycle.
Driving customer-
centric marketing
and channel access
Building a
customer-focused
supply chain
Building the digital enterprise 15Developing a platform approach Other industrial companies are also
to stay close to customers moving from simply augmenting
Key types of platforms their products with digital features to
Integrated solutions or value- more comprehensive digital offerings.
added services are characterised These can range from complete digital
Product Lifecycle Management by significantly higher customer solutions to becoming a platform
(PLM) systems: connect market benefits and will revolutionise existing integrator.
intelligence with product product portfolios and performance
development and operations, all relationships. Foremost among these An effective platform must, by
the way to smart services – both is a platform approach. A platform is a definition, bring the customer close to
within a manufacturing company nexus of exchange and interoperable operations. Industrial companies that
as well as with key value-chain technology, which allows a wide range share these platforms will also have
partners. of vendors and customers to interact access to customer data, which will be
seamlessly. The most successful first analysed to better forecast their needs,
Manufacturing Execution movers of the software and internet improve products and develop new
Systems (MES): connect the industries all cemented their positions ones. Whoever owns the platform thus
data input and transfer between with powerful and distinctive owns the customer, owns access to the
the equipment of multiple platforms. customer, and ends up aggregating
vendors, as well as facilitating the work of a lot of other enterprises.
communication between First movers on Industry 4.0 will seek a Ultimately this can lead to providing a
multiple software and systems similar advantage. GE and Siemens, for full digital ecosystem.
applications, extending from a example, are already rushing to solidify
company’s Enterprise Resource themselves as platform providers. Each
Planning (ERP) all the way to has developed a cloud-based system
shopfloor quality applications. for connecting machines and devices
from a variety of companies, facilitating
transactions, operations and logistics,
and collecting and analysing data.
Industrial companies are moving towards greater digital value creation, from augmented
products to serving digital ecosystems
a tion
Value cre
Integrated Digital
Data Analytics, Ecosystem Provider
Content & Platform
Complete Solution/ Integrator
Service Provider Integration of
Augmented Digital third-party partner
Product Player Focus on data
or competitor
analytics and
Focus on digital products and
data-based services;
products and control systems in a
Focus on products data-based services, access to customers
complete customer
with digital features which provide a via a dedicated
ecosystem
like sensors or complete solution for (online) platform
communication the customer
devices
Core product
Asset intensity Data intensity
16 2016 Global Industry 4.0 SurveyFocus on Skills issues loom large for data
analytics too
69% say increasing
people and in-house data
culture to drive Lack of skills or competencies in the analytics technology
company’s workforce is also the biggest
transformation challenge survey respondents see and skill levels is
when it comes to making use of data the top route to
Industry 4.0 has massive analytics. It’s not surprising, then, that
over two-thirds (69%) cite increasing
boost data analytics
implications for the nature of how in-house data analytics technology capabilities
a company chooses to organise and skill levels as the single biggest
itself and its delivery model. improvement route to boost data
analytics capabilities. Some companies
Companies will need to make sure also say external partnerships have a
staff understand how the company is role to play, through the provision of
changing and how they can be a part of technology or training, and a minority
it. From our interviews with industrial of companies (18%) expect to use M&A
companies, the biggest challenges to acquire outside companies.
centre around internal issues such
as culture, organisation, leadership
and skills rather than external issues
such as whether the right standards,
infrastructure and intellectual property Figure 6: L
ack of digital culture and training is the biggest
protection are in place or whether challenge facing companies
concerns about data security or privacy
concerns can be overcome.
The absence of a digital culture and the
right training was identified as a top An
alyti
cs as core
cap
& ab
challenge by more companies than any ta
git
ion and i
isat and h ntegra
l o
il
Da
Di ertica e cha rizon ti
ity
v valu ins t
other (see Figure 6). That was equally
on l
1.
of
a
m od . D i d cus
e offerings
true for companies rating themselves
2
e ls a n
se i o n o f
50%
as advanced. And it held true across
g it a to
r vic
d tis a t
lb m
si
industries and regions as well. n Di
u
gi
er e s s 3. t an
acc c
ta ess pro du
Da
it y
l
& bi
An pa
alyt ca
ic s a s c ore
Lack of digital culture and training
Lack of digital culture and training 50%
Lack of a clear digital operations vision and
support / leadership from top management 40%
Unclear economic benefit and digital investments 38%
High financial investment requirements 36%
Unresolved questions around data security and data
25%
privacy in connection with the use of external data
Insufficient talent 25%
Lack of digital standards, norms and certification 21%
Slow expansion of basic infrastructure technologies 18%
Business partners are not able to
collaborate around digital solutions 16%
Concerns around loss of control over your
company’s intellectual property 14%
Note: Included as one of three possible responses
Q: Where are the biggest challenges or inhibitors for building digital operations
capabilities in your company?
Building the digital enterprise 17Data analytics
and digital
trust are the
foundation of
Industry 4.0
Data lies at the heart of the fourth
industrial revolution, but the Figure 7: D
ata and analytics are becoming increasingly important to
decision-making.
massively growing information
flow brings little value without
the right analytics techniques.
The rapidly growing number
+33% 83%
of sensors, embedded systems
and connected devices as well
as the increasing horizontal
50%
and vertical networking of
value chains result in a huge
continuous data flow. High importance
today
High importance
in 5 years
Data is coming from multiple sources,
Aerospace, defence
in different formats, and there is a need & security 39% 82%
to combine internal data with data from
Automotive 49% 84%
outside sources. Expert and effective
data analytics is essential to using Chemicals 60% 88%
data to create value. And with so many
Electronics 66% 89%
points of entry, companies need to take
a rigorous, proactive approach to data Engineering & construction 40% 72%
security and related issues and work to
Forest, paper & packaging 55% 83%
build digital trust.
Industrial manufacturing 54% 88%
Advanced companies use data to
drive decision-making Metals 49% 83%
Transportation & logistics 50% 90%
While most of our respondents (83%)
expect data to have a significant impact Other 43% 83%
on their decision-making in five years,
only about half are currently using data
Today In five years
to drive decisions (see Figure 7). Our
research suggests that companies who
Shown: Summarised percentages of companies surveyed reporting high levels of significance
are already ahead on their digitisation
and integration journey are also much
more likely to be putting data analytics Q: What significance does the gathering, analysis and utilisation of data for decision-
making have for your company?
to work. Among those with advanced
levels of digitisation and integration,
nearly three-quarters (73%) say that
data and analytics play a significant
role in their decision-making, compared
to just 38% of those who have low levels
of digitisation and integration.
18 2016 Global Industry 4.0 SurveyIt’s important to remember that data There are other uses for data analytics
analytics provides tools for decision- that far fewer companies have on their
making, rather than a complete radar screen. These include better
replacement for sound judgement service and maintenance of companies’
on the part of management. In other own assets and products owned by
research we’ve explored the “art and customers, and better cooperation
science” of decision-making, and and decision-making with partner
found that data analytics will play an companies. These open up possibilities
increasingly central role in the future for new service offering and ways of
–but it won’t fully replace other factors, working, so companies may want to
particularly when it comes to major start paying more attention.
strategic decisions3.
To succeed, companies will need to
Companies need to expand their use data in predictive, forward-looking
use of big data ways that make sense of market
developments and customer behaviour
Many companies already use data to improve products and develop new
analytics to analyse and report on products and services.
processes (see Figure 8). Our survey
respondents say their companies are
focusing most on using data analytics
to control and improve their overall
business planning and manufacturing
operations, followed closely by efforts
to get closer to their customers, both
today and in five years. Around three-
quarters of companies are deploying or
plan to deploy data analytics in these
areas. But these approaches are just the
beginning.
Figure 8: Are companies underestimating the scope of data analytics?
Optimisation of overall business 56% 22% 78%
planning and controlling
Better manufacturing / 59% 16% 75%
operations planning
Improvement of customer relationship and 51% 21% 72%
customer intelligence along the product life cycle
More efficient asset utilisation 52% 19% 71%
of operational efficiency
Development of new or optimisation 44% 25% 69%
of existing products /services
Increase of sales revenue 46% 22% 68%
Optimisation of transport and 48% 19% 67%
logistics costs / efficiency
Improved product or process quality 47% 18% 65%
Efficient maintenance / service of own 38% 23% 61%
assets or customer products
Better cooperation and decision-making 36% 20% 56%
with partner companies
Status quo Growth potential in 5 years
Q: In which areas are you using big data analytics today? In which additional areas will your
company use data analytics in five years?
3 PwC, Global Data & Analytics Survey 2014: Big Decisions™
Building the digital enterprise 19Building digital trust should be a
top priority
Also important will be working together
with ecosystem partners; with possible
Digital trust is a
points of attack spread out throughout complicated issue,
Digital ecosystems and broad use of the ecosystem, responsibility needs to but it’s based
data also raises important issues around be shared broadly.
cybersecurity. More touchpoints where on three pillars:
data is collected and exchanged also Digital trust is a complicated issue, but transparency,
means more potential points of entry it’s based on three pillars: transparency,
for an attacker. Our survey respondents legitimacy and effectiveness. In other
legitimacy and
flagged a wide range of concerns research, we look at ten issues which effectiveness.
around data security, with operational centre around the ethics and control of
interruption from cybersecurity data access and use, interaction through
breaches at the top of their list (see the internet, digital risk resilience and
Figure 9). Other issues like liability value-creation in the digital age4. The
risks, unauthorised access to data and emergent and interconnected nature
damage to company reputation are on of these issues – and the regulatory
the radar too. response to them – highlight the
challenges organisations face. Industrial
There’s some good new though. Many companies will need to stay focused to
of our survey respondents are confident meet them.
that they’ve made strong progress here
– just 25% rate unresolved questions
around data security and data privacy
as one of the top 3 challenges that are
slowing down their Industry 4.0 efforts. Figure 9: Operational disruption is the top data security concern
To make sure that stays on track, many
companies will need to make building
and maintaining digital trust a priority. Operational disruption due to
54%
cybersecurity breaches
For example, as companies move Liability risks through data loss 40%
towards operating increasingly in
Unauthorised data extraction/modification
ecosystems, it will be important to within company-internal data flow
40%
integrate a whole range of technical Damage to company reputation and loss of
domains into the system. These include 39%
trust due to data loss
managing organisational functions and Misuse of data during exchange of
37%
transactions, controlling automation information with partners
assets and supporting the creation and Loss of intellectual property 35%
delivery of products and services, in
Violation of regulations and laws on
some cases focused towards end-users. 30%
data security or data privacy
Making security an integral part of all
Endangerment of operators or users 10%
systems and processes can help deter
attacks and speed up response time if
they do happen. Third-party assurance Note: Included as one of three possible responses
is also an important way to confirm that
systems are robust and strengthen the
trust of ecosystem participants in your Q: What are the main concerns in terms of data security?
platform’s integrity.
4 Norbert Schwieters, PwC, "Ten digital trust challenges," 4 December, 2015
20 2016 Global Industry 4.0 SurveyTo reach excellence in data analytics,
Robust, industrial companies will need access
to a wide variety of skill sets, including
enterprise- those of data scientists and algorithm
architects. They will also need process
wide expertise, advanced algorithms and
data analytics workflow integration for decision
support. In some situations outsourcing
capabilities require can help supplement internal
significant change capabilities or bridge temporary gaps.
The companies we surveyed
understand that it’s critical to
have data analytics capabilities Figure 10: Most companies don’t yet have mature data analytics
in order to successfully drive capabilities
digital transformation. But
there’s still a long way to go
before these reach the level of 52% &
An
alyti
cs as core
cap
ab
sophistication needed to really Medium
ta atio n and inte il
is g
drive Industry 4.0 applications. Da igit ical and horiz rati
ity
D ert o
v value chains nt
on l
1.
of
a
Only 18% of survey respondents rate
m od . D i d cus
e offerings
the maturity of their data analytics
22%
2
e ls a n
capabilities as advanced (see Figure 10),
18%
se i o n o f
and more than half say that the lack
8%
Poor
g it a to
of skills and competencies in their Advanced
r vic
d tis a t
lb m
company’s workforce is a key challenge si Outsourced
n Di
u
gi
to external
Advanced
to making full use of data analytics. er e s s 3. t a n partners
acc c
ta ess pro du
Da
it y
il
Moving beyond ad-hoc approaches &
An p ab
alyt ca
ic s a s c ore
Ad-hoc approaches to the organisation
and governance of data analytics may Q: How mature are the data analytics capabilities in your company?
be part of what’s holding companies
back. Almost half lack a structured
approach to data analytics organisation
and governance (Figure 11). Thirty- Figure 11: Nearly half of companies still need to develop a robust organisation
eight percent of respondents say their that supports data analytics excellence
companies rely on the selective, ad-hoc
data analytics capabilities of individual
employees, while another nine percent
have no significant data analytics
capabilities at all. 14% ta
&
An
it
alyti
isatio
cs as core
n a
nd
al a ho
nd inte
g
ca
ra
pa
bi
l
35%
Da
g
ity
Dedicated department Data analytics is
In contrast, just over a third have for data analysis serving Di ertic ue chai rizon ti embedded within
v val ns t
on l
many functions accross specific functions
1.
embedded data analytics into specific
of
the company
a
m o 2 . D i g c u st
e o ff e ri n g s
functions, giving themselves the
d e ls a n d
flexibility and proximity to business
se i o n of
knowledge to fully utilise the
potential of data analytics. Another
9% 5%
it al o
rvic
d ti s a t
14% of companies have a dedicated No significant
Data analysis services
bu
s ig
are outsourced and
38%
department for data analysis serving m in e
i
data analysis D performed by
capabilities er s s . n
3 t a external service
many functions across the company. acc c
ess pro d u providers
D
it y
ta l
First movers are much more likely to Selective, ad-hoc bi
a
& data analysis a
An capabilities of p
have pursued these two options – 43% alyt ca
s as c ore
icsingle
have embedded their data analytics employees
in specific functions and 24% have a
Note: Answers shown are rounded
dedicated department.
Q: How are data analysis capabilities organised in your company?
Building the digital enterprise 21Accelerating Our survey results show similarities
between leading companies around the
globalisation, globe, but they also differ considerably
by region.
but with
distinct regional Conventional wisdom suggests that
developed economies could be the
flavours winners, in the short term at least, from
Industry 4.0, as they are driving digital
As the fourth industrial operations improvements to secure
revolution binds companies significant efficiency gains. So are
emerging economies losing out? Our
and countries ever more tightly
survey results indicate that emerging
together—through worldwide nations probably have the most to gain,
supply chains and data as Industry 4.0 takes hold around the
networks—it will increasingly globe. They can leverage digitisation to
promote globalisation. gain efficiency in their horizontal value
chain, efficiently working within a
Many industrial leaders operate global manufacturing network to supply
worldwide facilities, so successful key components, products and systems.
Industry 4.0 implementation is not In addition, rising personnel costs and
limited to specific countries or regions. high potential to digitise processes will
At the same time, many applications lead to above-average efficiency gains
will link closely to local companies, in emerging economies.
as customised products often require
regional manufacturing capabilities.
Figure 12: Big gains are anticipated by industrial products companies in all regions
Additional revenue Lower costs Efficiency gains
Regions
Americas 37% 39% 50%
Asia Pacific 39% 57% 68%
Europe, Middle East & Africa 32% 41% 55%
Territories
Brazil 41% 32% 41%
China 51% 59% 72%
India 43% 46% 62%
Germany 30% 42% 62%
Japan 22% 65% 67%
United States 37% 37% 51%
Global all 35% 43% 56%
Shown: % of survey respondents in each region expecting gains of over 20% in the next five years
Q: What cumulative benefits from digitisation do you expect in the next 5 years?
22 2016 Global Industry 4.0 SurveyRegional and country contrasts of the countries that stands to gain the Looking five years ahead, expectations
most from automating and digitising of the level of digital integration are
Companies in Japan and Germany labour-intensive manufacturing broadly comparable in all three regions
are the furthest along in digitising processes and needs to find a solution (EMEA, the Americas and Asia Pacific).
internal operations and partnering to rising employee compensation. In A large majority of companies expect
across the horizontal value chain. With addition, Chinese companies are highly to have advanced digitisation and
high investments in technology and flexible and open to digital change, and integration capabilities, with Japan
employee training, they view their the Chinese workforce is embracing and Germany reaching digitisation
digital transformation primarily in digital technologies. levels above 80%. American, French
terms of gains in operational efficiency, and Swedish companies show similarly
cost reduction and quality assurance. A strong Asia Pacific push with high levels of optimism. Although Asia
other regions coming up fast Pacific companies report the highest
Our experience working with and digitisation and integration levels
interviewing executives in the Industrial products companies in today, it is companies in the Americas,
US suggests that companies there all regions are pressing hard on the followed by those in EMEA, that expect
are planning more investment in Industry 4.0 accelerator and expect to to have the largest gains in digitisation
developing disruptive business models, secure significant benefits. But it is levels by 2020.
as companies move more quickly to companies in the Asia Pacific region
digitise their product and service that are making the strongest running.
portfolio. Their focus is more on digital They report making significant digital
revenue growth, rather than efficiency investments and they have already
gains. moved further forward in terms of
current digitisation and integration.
China’s industrial companies stand Two-fifths (36%) believe they are at
out in all aspects of digitisation: they an advanced level now, compared
are expecting both above-average cost to a third (32%) of companies in the
reductions as well as increased digital Americas and 30% of EMEA companies
revenues through to 2020. China is one (see Figure 13).
Figure 13: Companies all over the world are expecting to dramatically increase digitisation over the
next five years
32% +42% 74%
Level of digitisation today Level of digitisation in five years
Americas
36% +31% 67%
Level of digitisation today Level of digitisation in five years
Asia Pacific
30% +41% 71%
Level of digitisation today Level of digitisation in five years
Europe, Middle East & Africa
Q: How would you classify the current level of digitisation and integration in the following areas in your company? What levels of
digitisation and integration are you expecting in the next five years?
Building the digital enterprise 23You can also read
