Taking the Digital Leap in Industrial Manufacturing | KPMG | CA
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Taking the digital leap in Industrial Manufacturing

Taking the digital leap in Industrial Manufacturing

Industry 4.0 (i4.0) is here; and along with it, technologies that enable companies to work faster, smarter, and with data-driven strategies. It's an era of big data and bold moves, and one which promises opportunity for those who embrace the new digital of their trade.

It's an especially opportune time for those in the Industrial Markets (IM) sectors, wherein those who can unlock the potential of i4.0 technologies stand to gain a strategic edge. And certainly, while a large portion of IM companies have adopted a number of modern innovations (e.g., machine learning, automation, and robotics), there remains room for an even stronger focus on "Big Data" and data analytics (DA) in regards to how they view and manage their products.

Trusting in numbers

Attitudes towards digital transformation are optimistic across all industries. In fact, according to KPMG in Canada's 2018 Canadian CEO Outlook Survey, virtually all respondents across industries (96 percent) say they have "seen the light" when it comes to leveraging disruptive tools and DA to their advantage.

Players in the IM space share that optimism but contend with unique challenges that make it more difficult to adopt DA capabilities at the same rate as their counterparts in other industries. For smaller players, the challenge boils down to lacking the internal skills and capacity to embed DA capabilities effectively; while for others, it's a hesitancy towards significant IT investments due to uncertainties in the IM space fueled by potential NAFTA amendments, tax changes, trade disputes, and other geopolitical factors.

The nature of the industry itself can also be an obstacle for DA investment. M&A activity is as strong in the IM sectors as it is for a majority of Canadian companies which, according to the same KPMG 2018 Canada CEO Outlook, are pursuing growth through either the acquisition of tech-savvy firms or collaboration with those who can bring disruptive solutions to the partnership.

Yet while M&A is a viable strategy for growth, it can leave larger organizations in the IM sectors to contend with a network of disparate systems and IT strategies. This makes it more complex (if not more costly) to standardize the way in which data is collected, stored, and utilized.

Lastly, there is the matter of trust. Many in the IM space have relied on gut instinct and more traditional means of decision-making for decades, so the idea of abandoning these time-honoured strategies for unfamiliar systems and processes isn't an easy sell. It's worth mentioning, though, that 76 percent of Canadian CEOs in the aforementioned KPMG study admit to feeling as though they have overlooked insights provided by data analysis models because they were contrary to their own experience or intuition (versus 67 percent of CEOs globally). Which is to say, complex times call for more than gut instincts.

Embracing i4.0

It's true that adopting the likes of predictive analytics, data modeling, and customer segmentation can be a challenge in these unique sectors of the economy. It's also true that there are benefits to adopting DA and other i4.0 practices to grow organically.

Here's where KPMG in Canada has collaborated with leaders in the IM sectors to identify what data they possess, where it "lives" within their organization, and how it can be wielded to inform everything from production floor performance to talent acquisition, market forecasting, and business strategies.

The extent to which companies embrace data analytics and i4.0 will vary based on numerous factors (e.g., market, capacity, customer segments, etc.). Overall, however, that journey includes common considerations for numerous business elements, including:

  • Strategy: How are you addressing innovation and disruption in your sector both now and over the next 10 years?
  • Supply chain: How is your organization collaborating with supply chain partners on smart products and/or services? How effectively are you communicating with those partners to respond to rapidly changing customer preferences?
  • Governance / Culture: What i4.0 technologies / approaches are you currently adopting? How are you encouraging i4.0 initiatives and experimentation across your enterprise?
  • Talent: How prepared is your organization to address and support a workforce of the future given the advances in i4.0? What are you doing to attract the workforce required to leverage D&A?
  • ROI: What is your criteria when deciding which i4.0 technologies to invest in? How confident are you that you are getting returns on your investments?
  • Cyber security: How confident are you in your ability to protect data both within your organization and among your connected factories and supply chains? Are you operating within legal, regulatory, and ethical requirements for data management and protection?

Trusting the numbers

IM players have much to gain from adopting more robust DA capabilities. And while assembling the tools, talent, and capacity to do so can be a challenge, the payoff is sustainable growth a clearer blueprint for success.

Growing Pains

IM leaders aren't entirely alone in their transformational challenges. According to KPMG in Canada's 2018 Canadian CEO Outlook report, more than a quarter (26 percent) of Canadian executives admit they have struggled to run parallel processes to transform the digital and non-digital aspects of their business and a small (yet significant) portion believe the lead times to achieve significant progress on such transformation often seems overwhelming.

Growing from within

There are benefits to using the lessons of i4.0 to grow organically. And indeed, 30 percent of Canadian CEOs in our 2018 CEO Outlook Survey say they are relying on organic growth, while 76 percent of respondents to the same survey "disagree" with the sentiment that growing organically at the expense of fostering third-party partnerships will impede their growth prospects.