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Are we there yet? A pause to evaluate how the industry is faring in the digital journey

Is digitalization living up to manufacturers’ expectations?

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Digitalisation, Modernising IT systems, Digital strategies, 3D printing, Internet of Things, McKinsey 2018 survey

Hitting the highway is a summer tradition for many. And, just as construction detours, kitschy roadside diners, and backseat sibling squabbles are inevitable parts of the rite, so is the familiar road trip refrain: “Are we there yet?”

Some manufacturing executives may have that same thought as they reflect on their companies’ winding and sometimes bumpy journey to digitalisation. It can seem like a long haul, with more obstacles than expected. In the years since this buzz phrase first entered our vocabulary, some C-level executives may be weary of the digitalisation drive and the continuous pressure to modernise and transform. The fast pace of change can be exhausting — and expensive. When will it end?

Not anytime soon, trends indicate. Innovation is just heating up. Artificial intelligence (AI) and machine learning (ML), for example, are in early stages of deployment and, as research and development continue, the pressure to adopt AI strategies will only intensify.

Some Early-stage Results Point to Encouraging Gains

TechTarget reports that digital transformation is a major undertaking for several companies, with many optimistic about transforming their operations and processes. “More than two-thirds of respondents in our IT Priorities Survey indicated that their companies were active in some phase of transformation. Nearly half -- 46% -- have formal projects underway,” the report says.

TechTarget goes on to report that the two most often cited drivers of digital transformation are focused on internal processes, with 47% indicating that streamlining operations and improving internal efficiency as the objective, and 46% saying improving employee performance and productivity is the driving force.

Manufacturers have a wide range of solutions they can deploy to transform their go-to-market strategies, as well internal processes, from 3D printing to Internet of Things (IoT) and AI. This vast and varied landscape is part of the challenge, though. How do companies decide where to start? Where to turn? When to invest with bold confidence and when to take cautious small steps? These questions aren’t easy.

However, an objective review of the digital journey, so far, reveals many inspiring success stories and achievements. Several technologies point to exponential growth in the future, as technologies gather acceptance, momentum, and trigger widespread adoption. Digital commerce is one such industry, making up only .3% of retail sales in 1998. Growth was slow, in the beginning, taking 10 years to reach 3.6%. Today’s growth rate, though, indicates a much steeper upward curve, and it is projected that ecommerce may reach 22.5% of retail sales by 2024.

Where are the Challenges?

As would be expected in any complex transition, there are some disappointments. Some technologies have not reached full potential, and the maturity cycle is still evolving. Several industries have transitioned from experimentation and proof-of-concept stages to practical use-cases and standardization of best practices. Still, there’s no single roadmap. Every organisation has a different view of what modern technology can do for them — and a different timetable.

A McKinsey 2018 survey indicated that transformation results were disappointing to some IT professionals. Fewer than one-third of survey participants said their transformations succeeded at improving their company’s performance and sustaining those gains. Delving further into the responses, though, uncovers some common obstacles — all of which can be rectified. For example, the companies that fell short of their expectations acknowledged their original goals were too vague, ambitious, and lacked a clear strategy.

At the same time, the companies reporting success took a holistic, broad view, deploying as many as 10 or more solutions at once. “The organisations with successful transformations are likelier than others to use more sophisticated technologies, such as artificial intelligence, the Internet of Things, and advanced neural machine-learning techniques,” McKinsey reported.

So, digitalisation isn’t going to wind down anytime soon. But, digital strategies will continue to evolve.  Some companies will still be slow to get on board, too. As innovation multiplies exponentially, some experts predict there will be a greater chasm between the aggressive innovators and the resistant laggards. Those that are mired in indecision, held back by fear of risk or restricted by lack of available capital, are likely to fall further behind.

What Industries Lead the Way?

As each company’s vision of a digital strategy is distinct, making industry-wide conclusions is difficult. One company may opt to focus on automation and robotics, while another chooses to focus on product innovation and ecommerce. So, how can analysts compare progress among companies to identify the ones that are truly best-in-class?

Different industries may place different emphasis on digital technologies, as well. Investment levels vary greatly across industries. Here are some estimates for expected spending in 2019 from IDC’s Worldwide Semiannual Digital Transformative Spending Guide:

-The healthcare industry will invest $4 Billion in remote health monitoring.

-The retail industry will invest 8.48 Billion in omnichannel order orchestration and fulfillment.

-Discrete manufacturing will invest $37 Billion in autonomic operations, $33.2 Billion in robotics, and $23.9 in root-cause analytics.

This spending emphasis among discrete manufacturers, compared to other industries, indicates a level of confident optimism.

Final Take-away

Judging where we are in the digitalisation process is a challenge. No two destinations are the same; no two routes are the same. Comparing results among different industries and technologies succeeds only in drawing attention to the many differences. As companies are trying to differentiate themselves, it is logical to see this vast array of strategies, solutions, and use-cases. Hundreds of surveys attempt to quantify results and provide some ballpark estimates of when Return on Investment (ROI) might be achieved. Benchmark studies, too, try to help set standards and set realistic expectations among the manufacturers that are planning projects. But, each approach has its benefits. Major results are on the horizon. So, the main conclusion that we can draw now is that jumping in and modernising IT systems is essential. Doing something will at least get the organisation thinking, experimenting, and experiencing early successes. This will inspire further efforts and a more confident journey.

The article is written by Ranga Pothula, MD India Sub-continent & SVP Global delivery services, Infor.

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