Close to a third of manufacturers are yet to derive value from servitisation -- a conscious and explicit strategy of competing by providing a portfolio of integrated products and services -- according to a survey by global enterprise application company IFS.
More than 150 manufacturers participated in the survey, including those in the US, Canada, Britain, Sweden, Germany, France, China, Japan, Australia, Norway, Denmark, the Netherlands, Spain, Poland, the Middle East and India.
Commissioned by IFS, the Digital Change Survey was conducted by Raconteur, which interviewed 750 decision-makers in 16 countries in the oil and gas, aviation, construction and contracting, manufacturing and service industries.
The findings showed that the industry is using a wide range of digital technologies to drive commercial growth as servitisation efforts take hold. However, skills shortages, aversion to change and reluctance to collaborate externally remain key challenges.
The strategic shift from manufacturing products towards creating new services through servitisation is a key factor behind the imperative for digital transformation.
More than two thirds of respondents said servitisation was either "well-established and is already paying dividends" or "in progress and is receiving appropriate executive attention and support". But almost one in three manufacturing companies have yet to derive value from the strategy.
"The servitisation of the manufacturing sector is being driven partly by competitive pressures, but also from customers who are demanding more and wanting everything faster," said Antony Bourne, vice-president for global industry solutions at IFS.
"The manufacturers that have not yet adopted a service-centric business model are missing out on revenue streams and new ways to develop their offerings. Manufacturers must compress time to market, taking an idea through from design to a saleable item as quickly as possible. New digital technologies can help with this," he added.
Unlike players in other industries, who see digital change primarily as a way to increase efficiency, manufacturers see it as a key to unlocking commercial growth.
Close to 37% of respondents said "accelerating innovation" was a driver for change -- more than in any other industry. Competitive differentiation (32%) was also a top-five factor. In fact, these two can be seen as almost comparable with the more common organisational drivers of "internal process efficiencies" (40%) and "cost savings" (33%).
The manufacturing sector is taking full advantage of a range of new technologies to accelerate growth. About 83% of respondents identified themselves as "enabled", "exploratory" or "enhanced" and not a single one in the "nascent" stages.
North American firms lead, with 55% identifying themselves as "enhanced" or "optimised"; much higher than respondents in Europe, the Middle East and Africa (29%) and Asia-Pacific (21%).
But only 84% of manufacturers said funding was "adequate" or "advantageous", the lowest of any sector, while 12% described funding as "excessive", an anomaly in any other industry. This suggests that a large percentage of manufacturing firms are not able to allocate their budget effectively, and are not getting value for money, said IFS.
There are a myriad cultural challenges holding back digital transformation efforts, especially openness and willingness to share with external third parties.
Almost a third (31%) of respondents said they wanted to increase collaboration, identifying "aftermarket/estimating", "supply chain" and "sales/bid management" as key areas. More than half identified a very strong level of internal integration and cross-departmental work. External collaboration seems to be the area where there is room for improvement.
Servitisation offers new job opportunities for manufacturing employees currently focused on production-only tasks. But nearly a quarter (23%) of respondents claimed that a lack of skills and talent present a barrier to change, with AI/robotics and business intelligence the two most mentioned areas.
There is still a lot that manufacturers can do to better communicate the fact that servitisation and the proliferation of machines in the workplace can create new jobs: currently 49% of workers cite aversion to change as the biggest barrier to digital transformation.
Nevertheless, 71% of respondents are taking proactive steps to improve their existing talent, while 29% are also looking to hire externally.
Big data and analytics are identified as the number one digital technology for investment by respondents. But just 26% are actually harnessing data-driven insights successfully to deliver faster time to innovation.
Most manufacturing firms have not figured out how to derive value from their data. In fact, 58% said they were only "beginning to utilise data-driven insights, which is starting to have a positive impact on time to innovation, but it is not yet a competitive advantage".
But there are signs that manufacturers are embracing automation. Over half of respondents (55%) have transitioned to smart manufacturing, with another 26% expecting to do so within two years.
The report reveals that manufacturers see third parties playing key roles in digital organisation and operations, performance analytics and reporting, and digital strategy.
