Unlocking the digital dividend in industrial manufacturing

UK manufacturers know there’s untapped value potential from digital technology - from sharpening productivity and accelerating decarbonisation to getting closer to consumers and opening up new service-based revenue streams.

But progress is slow. Only one in eight manufacturers are making digital tech central to their strategy over the next 12 months, according to the Make UK and PwC Executive Survey.

Cloud technologies have become the launchpad for driving operational transformation and commercial reinvention in a fast, flexible and scalable way. But only 14% of the manufacturers taking part in PwC’s Cloud Business Survey 2023 have fully implemented and scaled the cloud across their business.

Slow progress on digital transformation isn't just a missed opportunity, it’s also a question of survival. Nearly half (46%) of the manufacturing leaders taking part in our 27^th Annual CEO Survey believe their company will not be viable in ten years’ time if it continues on its current path^[1].

When we speak to business leaders, many of those reluctant to embrace digital transformation put it down to previously disappointing returns on investment (RoI). Underlying issues include competing operational priorities, difficulties securing buy-in around the organisation and a lack of skills in their workforce.

The way forward

So how can your business overcome these barriers and boost digital RoI in a practical and pragmatic way? Drawing on our wide-ranging work with manufacturers, five priorities stand out:

Accelerate cloud modernisation

Stepping up the pace of cloud migration holds the key to accelerating digital transformation and realising the potential. The cloud enables you to collect, collate and analyse data from across your organisation and its value chain. It also provides a plug-and-play entry point for new capabilities such as generative artificial intelligence (GenAI).

When asked about the value delivered by cloud modernisation for PwC’s Cloud Business Survey 2023, EMEA manufacturers reported enhanced customer service and increased productivity as their two biggest benefits. As our Cloud Business Survey further underlines, ‘cloud-powered’ organisations report fewer barriers to realising value and are doing so at a rate twice that of companies running outdated systems and processes.

Without a fit-for-purpose cloud and data strategy your business risks being left behind, slow to respond to changing consumer demands and unable to grasp the benefits of new kinds of technology that depend on the cloud.

Where businesses cannot adopt cloud technologies fast enough, they will increasingly look to partner or even acquire. PwC’s latest Value Creation Report found that seven in ten senior executives will use transactions to achieve technology-related goals, suggesting that deals will become an integral part of businesses’ cloud transformation strategies.

Leaders take ownership of strategy and change

It’s important for your board to lead from the front by tracking tech developments, gauging how these can be harnessed within your organisation and judging where to prioritise investment in support of your overall strategy. Your leaders can also send a clear message to the business about the importance of embracing new technologies and ways of working.

In practice, the best way to make transformation manageable is by moving forward on a use-case-by-use-case basis. Typical targets include clearing supply chain bottlenecks or enhancing customer engagement and understanding. Once you’ve trialled and demonstrated the tangible value, you can scale up and replicate these developments in other parts of your organisation.

Get source data right from the start

As ever, poor data in means poor data out. Streamlining data sourcing into a single version of the truth that would allow you to make more informed and confident decisions. You can also augment conventional analysis and projections with a new generation of analytical tools capable of extracting information and insights from texts, emails and other unstructured data.

Make upskilling count

Tech modernisation doesn’t mean fewer people. Rather it means different skills, a shift in mindset and new ways of working as part of a human-led, tech-powered transformation.

Tech teams need the most support. The shift in mindset centres on moving from a role that often centres on keeping legacy tech running to being a driver of innovation and competitive reinvention.

For the workforce as a whole, the key priorities are workforce communication and engagement. It’s also important to channel the tech skills they’ve developed from using smartphones and other personal devices into their day-to-day work. Why carry on using a white board, for example, when there are much smarter and more collaborative data- and digital-enabled ways to gather and develop ideas?

It may be difficult to secure the technology and expertise you need to keep pace with digital advances. Technology alliance and managed service options can provide access to both, while allowing you to develop your capabilities and applications over time. You can also partner with other companies in your sector in line with the ‘co-opetition’ model familiar within industries such as aerospace.

Bolster security and trust

Cyber risks and vulnerabilities will inevitably increase as data proliferates and customer, supply chain and other stakeholder interactions become ever more digitised. More than 40% of participants in the Make UK and PwC Executive Survey plan to strengthen cyber security to support increased digital investment.

Cyber security can’t be left to tech teams to deal with on their own. By fostering organisation-wide responsibility for managing the risks, it’s possible to protect your business and its stakeholders without stifling digital efficiency, insight and innovation.

Reaping the rewards

In our work with manufacturers, we’ve seen how businesses can reap the dividends of these modernised capabilities through developments such as the creation of a new generation of smart factories. In a recent example, a raw earth material producer cut waste and energy using real-time data from a newly installed network of Internet of Things (IoT) sensors. The company will save £5 million a year on its energy bill once the sensors are deployed across all plants and further benefit from enhancing operational efficiencies. The sensors have also improved the quality, reliability and actionability of the company's emissions measurement and reporting.

In turn, tech advances have helped an electric car engine manufacturer to design and develop a dynamic production system capable of responding autonomously to changing events and variants. Innovations include a self-optimising algorithm to control and steer manufacturing operations based on live data from the shop floor. The efficiency gains include more flexible sequencing, improved use of resources and minimised throughput times.

The benefits of a single version of the truth can be seen in a motor racing vehicle manufacturing plant, which had been hampered by its fragmented IT landscape. The installation of a cloud-based data lake has helped to strengthen both interoperability and data visibility. The resulting improvements in the quality and reliability of shop floor production data are set to generate more than £1 million in savings, a big benefit for a team that is bound by a manufacturing cost cap.

Help is at hand

If you would like to know more about accelerating digital transformation in your business - or how to harness the innovative potential of emerging developments such as Gen AI - we can help.