Many industrial companies are not yet investing to harness digital technologies and could lose market share if they fail to adopt these technologies, according to new research from Accenture.
As part of the Accenture Technology Vision 2017 report, Accenture surveyed 102 automotive executives and 562 industrial-equipment executives around the world. Even though two-thirds of those respondents said they are experiencing digital disruption, half of the automotive companies and 60 percent of the industrial equipment companies acknowledged that they are not yet comprehensively investing in this area as part of their overall business strategy.
This limited investment comes at a vital time for these organizations. Although the overwhelming majority (94 percent) of industrial companies surveyed accept that digital technologies and the Industrial Internet of things (IIoT) will radically change the way they need to operate if they are to succeed, they admit to a lack of capabilities in areas that are increasingly reliant on digital technologies, such as products-as-a-service and product lifecycle management.
Of the automotive manufacturing and supply companies and industrial-equipment companies surveyed, the vast majority – 95 percent – believe it is either critical or important to evolve business models to support a product-as-a-service strategy. However, only 10 percent of the automotive companies and 18 percent of the industrial equipment (IE) companies believe they are well prepared for this evolution.
The potential impact on an organization’s bottom line from failing to invest in digital technologies is highlighted in Accenture’s Innovation-Driven Growth research. This shows that leading businesses focus on more than creating a better product or service. Instead, they innovate to deliver differentiated customer experiences that can lead to an annualized revenue lift of 3 to 7 percent. This innovation is being driven by the adoption and application of digital technologies.
Leaders in this research were identified as the top 20 percent of all companies as defined by their industry-specific financial performance along with their advanced innovation approaches and capabilities. Among the automotive companies examined, those identified as “leaders” had $1 billion more in revenues and higher operating income growth than non-leader companies did; among the industrial product companies examined, the “leaders” also had higher operating income growth and revenue that was $560 million higher, on average, than that of the non-leaders.
Speaking at Hannover Messe, Eric Schaeffer, senior managing director and head of Accenture’s Industrial practice, said, “Industrial manufacturing companies need a comprehensive view of value creation: one that uses the power of smart services as the backbone of the end-to-end digital value chain. The prize for taking such a comprehensive view is significantly more satisfied customers – along with significantly higher revenues and operating margins.”
The industrial companies surveyed for the Technology Vision 2017 see artificial intelligence (AI) as the new era of computing, which is moving from a mobile-first to an AI-first approach. They expect AI to revolutionize the way in which they gather information from, and interact with, their customers. They also see AI as a key enabler for smart products, with 54 percent of automotive companies, and 37 percent of IE companies, expecting to see a significant change as a result of AI.
Automotive companies surveyed expect their top areas for AI investment over the next three years to be in deep learning and video analytics, while IE companies expect their top areas for AI investment to be in robotic process automation and computer vision.
While the research revealed AI to be a key technology essential to business success in today’s digital economy, many of the industrial companies cited a range of challenges that could slow AI’s adoption. For the auto industry respondents, there is widespread concern that users prefer interactions with humans and a fear over the use of AI technologies. For IE companies, the biggest perceived challenge is the integration or compatibility between AI and current IT infrastructure. IE executives also are concerned that users trust human interaction, but the same executives also see a lack of expertise as a barrier to embedding AI into the business.
“Artificial intelligence is moving beyond a back-end tool for the enterprise and taking on more-sophisticated roles within technology interfaces,” Schaeffer said. “While one of the biggest beneficiaries of AI is autonomous vehicles that use computer vision, AI is making every interface both simple and smart and setting a high bar for how future interactions will work. It will act as the face of a company’s digital brand and a key differentiator – and has already become a core competency demanding C-level investment and strategy.”
Accenture believes industrial companies risk a significant loss of market share and revenues if they fail to adopt and embrace technologies like AI to build new products and services – and now is the time for executives to get themselves and their organizations started on experimenting with AI and learning from these experiences.
“If the labor market’s shortage of analytical talent is any guide, executives can ill afford to ‘wait and see’ if they and their managers are equipped to work with AI and capable of acquiring the essential skills and work approaches,” Schaeffer said.
For additional information or to view “Technology Vision 2017” click on the link https://goo.gl/aS8Wbt.
Accenture’s Technology Vision is developed annually by the Accenture Labs. For the 2017 report, the research process included gathering input from the Technology Vision External Advisory Board, a group comprising more than two dozen experienced individuals from the public and private sectors, academia, venture capital firms and entrepreneurial companies. In addition, the Technology Vision team conducted interviews with technology luminaries and industry experts, as well as with nearly 100 Accenture business leaders.
In parallel, Accenture Research conducted a global online survey of more than 5,400 business and IT executives across 31 countries and 16 industries to capture insights into the adoption of emerging technologies. The survey helped identify the key issues and priorities for technology adoption and investment. Respondents were mostly C-level executives and directors, with some functional and line-of-business leads, at companies with annual revenues of at least US$500 million, with the majority of companies having annual revenues greater than US$6 billion.
For the Innovation Driven Growth research, Accenture analyzed the innovation practices and value performance of 351 businesses from the Global2000 across eight industries (automotive, industrial equipment, consumer goods, medical technology, enterprise technology, consumer technology, communications technology and software) and nine geographies – Canada, China, France, Germany, Italy Japan, South Korea, the United Kingdom and the United States. Interviews were carried out with Chief Technology Officers, Division Presidents and Division Vice Presidents of engineering and innovation, or their equivalent. The results confirm a clear, empirical correlation between distinct innovation capabilities and company growth. Leaders benefited from a 3.5-7.0 percent annualized revenue lift and a corresponding operating income growth compared to their industry peers.