The Internet of Things is being hailed as the next Industrial Revolution. Data is overtaking oil as the world’s most valuable resource, and manufacturers are racing to embrace digitalization. A third of all connected things are business and industrial devices, and 90% of manufacturers are currently designing or already offering IoT-driven products and services. These products will only continue on a path of total ubiquity in businesses as late adopters of new technology offer their own inevitable digitally enabled products and services. However, despite all of its promises of disruptive innovation, productivity improvements, and incremental revenue, most manufacturer’s digital transformation efforts are just getting started. Two-thirds of manufacturing companies have spent less than two years thinking about their digital strategy. This means that in most markets, it is still anyone’s game. Most companies have only scratched the surface of potentially disruptive innovation to their products, services, business models, and processes.

Manufacturers Are Playing Catch Up

Digitalization can be a catalyst for growth by creating compelling customer experiences, disruptive innovation, and productivity improvements. Knowledge-intensive industries like high tech, media, and financial institutions already have sophisticated digital capabilities. They have imported the digital experiences that employees practice in their personal lives to boardrooms, cube farms, and conference rooms. They digitalize work, transform transactions and business processes, and make digital investments in their people. Comparatively, the average manufacturer’s relative digitalization lags. Less than a quarter of manufacturers are both deploying IoT internally and offering IoT products and services to their customers. However, this gap is not because manufacturers do not recognize the benefits of digitalization. Nearly three-quarters rank digital transformation as a critically strategic imperative for their company’s long-term success.

Strategic Importance and Maturity of Manufacturer’s Digital Transformation

Source: MAPI and Spencer Stuart Digital Transformation in the Industrial Sector study.

IoT Transformation of Products, Services, and Operations

Source: MAPI and PwC Monetizing the Industrial Internet of Things study.

Business (Un)Readiness

Industrial companies are stereotypically engineering cultures that are data-driven and process-oriented, so why the lag to adopt new tools to solve problems? There are two issues at play. More than 60% of surveyed manufacturers admit their company is a late adopter of new technologies and prefer to wait until it has proven its value in the marketplace before making an investment. In addition, even when they are ready to take the plunge, their operational environment usually holds them back. Manufacturers are experiencing a number of common change management challenges as they digitalize their business. These challenges include business process and system readiness, technical and digital sophistication of the organization, internal culture, and budget constraints.

Obstacles to Digital Transformation in Manufacturing Companies

Source: MAPI and Spencer Stuart Digital Transformation in the Industrial Sector study.

Learning From Those Who Came Before Us

The digitalization of our offices, manufacturing plants, and design and service centers is inescapable. Even though a number of manufacturers are waiting for new technologies to prove themselves before investing, they are just delaying the inevitable. Just as computers forever changed the work environment, so too will big data, connected devices, and AI. Manufacturers who are ramping up their digital investments should keep in mind the suggestions from those who have gone before:

• Clearly communicate the strategy and opportunity in front of you, so your organization understands your direction.
• Identify doable, realistic entry points into the IoT products and services market.
• Create scalable IoT business models and promote the entrepreneurial culture to develop them
• Recognize when you are throwing good money at old and outdated platforms.
• Define a problem that needs solving and establish what data can solve it, instead of collecting data in search of a problem.
• Identify collaborative and innovative leaders who can help the organization adopt new behaviors and act with a sense of urgency.
• Don’t give up because the incorporation of digital, as a way of life, is imperative to competing in the future.