You are on page 1of 36

2016 Global Industry 4.

0 Survey
What we mean by Industry 4.0 / Survey key findings / Blueprint for digital success

Industry 4.0: Building


the digital enterprise

2000+
respondents in 26 countries

US$493 bn
in digital revenue gains p.a.

US$421 bn
p.a. in cost and efficiency gains

US$907 bn
in annual digital investments

www.pwc.com/industry40
Contents

04 26

Introduction Blueprint for digital


06 What we mean by Industry 4.0 success
27 Map out your Industry 4.0 strategy

29 Create initial pilot projects


07
30 Define the capabilities you need

31 Become a data virtuoso


Executive summary 31 Transform into a digital enterprise
08 Key findings from our survey research 32 Actively plan an ecosystem approach
10 Blueprint for digital success

11 33 About the survey

34 Contacts and acknowledgements

Key findings from our survey


research
11 Industry 4.0 - from talk to action

13 Digitisation drives quantum leaps in performance

15 Deepen digital relationships with more empowered


customers

17 Focus on people and culture to drive transformation

18 Data analytics and digital trust are the foundation of


Industry 4.0

21 Robust, enterprise-wide data analytics capabilities


require significant change

22 Accelerating globalisation, but with distinct regional


flavours

24 Big investments with big impact: its time to commit

2 2016 Global Industry 4.0 Survey


Global Industry 4.0 Survey: Building the digital enterprise

PwCs 2016 Global Industry


4.0 Survey is the biggest
worldwide survey of its kind,
with over 2,000 participants
from nine major industrial
sectors and 26 countries. The
study explores the benefits
of digitising your companys Industry split of survey respondents
horizontal and vertical value
chains, as well as building Forest, paper & packaging 4 Aerospace, defence & security
% 2%
your digital product & service Metals 8%
portfolio. Based on the Industrial
21% manufacturing
findings and our experience Other 8%

working with first movers,


weve also crafted a blueprint
for success to help you secure Automotive 9 Industry
%
your companys position as split

a leading digital enterprise


in tomorrows complex Transportation 9
Engineering &
19% construction
%
industrial ecosystems. & logistics

Electronics 10%
11% Chemicals

Participating countries

Denmark
Canada Sweden India
Netherlands
Austria
USA China
UK Poland
Japan
Finland

Middle East

Singapore
Mexico
Portugal
South Africa
Italy
France
Brazil Germany
Australia
Switzerland

Spain

Building the digital enterprise 3


Introduction
Behind the scenes of the worlds leading industrial and
manufacturing companies, a profound digital transformation
is now underway.

Industrial leaders are digitising At the end of this transformation


essential functions within their internal process, successful industrial companies
vertical operations processes, as well will become true digital enterprises,
as with their horizontal partners along with physical products at the core,
the value chain. In addition, they are augmented by digital interfaces and
enhancing their product portfolio with data-based, innovative services. These
digital functionalities and introducing digital enterprises will work together
innovative, data-based services. The with customers and suppliers in
2,000+ companies that we surveyed are industrial digital ecosystems.
expecting to dramatically increase their
overall level of digitisation. While just These developments will fundamentally
33% rate their company as advanced change individual companies, as well
today, that number jumps to over 70% as transform market dynamics across
looking ahead to 2020. a whole range of industries. And thats
true in countries all around the world
While terms like the industrial internet in both the developed as well as the
or digital factory are also used to emerging markets. Heres whats driving
describe these changes, in this report change:
we use Industry 4.0 as a shorthand to
describe a journey industrial companies Annual digital revenue
are taking towards a complete value increases of 2.9% on average
chain transformation (see What we mean and a significant minority that
by Industry 4.0). expect total increases of more than
50% over five years. That adds up
to US$493 bn in increased annual
revenues for the next five years
across the industrial sectors we
surveyed.

Cost reductions of 3.6% p.a .


on average. Digital technologies
enable shorter operational lead
times, higher asset utilisation and
maximum product quality; all told,
our survey respondents expect to
save US$421 bn in costs each year
for the next five years.

4 Global Industry 4.o Survey


Incremental and revolutionary Focus on people and digital Digital trust is key
product & service innovation transformation With so much change in store, theres
To generate these additional The biggest challenge of industrial one area that companies cant afford to
revenues, companies will introduce leaders isnt technology - it is the ignore: digital trust. Digital ecosystems
new industrial products with digital people. While digital technologies are can only function efficiently if all
features and augment their existing rapidly becoming a commodity, success parties involved can trust in the security
portfolio. Digital services based on largely depends on an organisations of their data and communication,
data analytics, or even complete Digital IQ1, especially how well its as well as the protection of their
digital solutions serving a customer digital leaders like the CEO, CTO, or intellectual property. Protecting your
ecosystem, will drive breakthrough CIO define, lead, and communicate company and ensuring digital trust
revenue growth. the transformation. Its also dependent requires significant investment and
upon the digital qualifications of clear guidelines for data integrity and
A strong commitment to invest the employees who need to roll out security.
Industrial sectors are planning to digital processes and services. Radical
commit US$907 bn p.a. to Industry disruption isnt always comfortable The key findings we explore in the
4.0 around 5% of revenue p.a. for the people who make it happen, first half of this report confirm that no
A major focus of these investments so change management will also industrial company can afford to ignore
will be on digital technologies like be critical. And with data analytics the fundamental changes that Industry
sensors or connectivity devices, and becoming a core capability for every 4.0 will bring. The second half provides
on software and applications like industrial company, enhancing skills a pragmatic, step-by-step blueprint
manufacturing execution systems. and organisational structures will be for how industrial companies can
In addition, companies are investing critical. successfully build a digital enterprise.
in training employees and driving
required organisational change. 55% Please reach out to us for more details
of the investments expect a payback on our research or to discuss our
within two years. approaches. The digital transformation
is underway: now is the time for your
To keep up, youll need to transform company to act!
your business.

Dr. Reinhard Geissbauer Jesper Vedso Stefan Schrauf


Head of EMEA Industry 4.0 Global Industrial Products Head of PwC Strategy& Industry 4.0
Digital Operations Team Leadership Team Member Team for Germany
+49 170 939 1263 +45 3945 9144 +49 895 790 5317
reinhard.geissbauer@ jrv@pwc.dk stefan.schrauf@strategyand.de.pwc.com
strategyand.de.pwc.com

1 PwC, 2015 Global Digital IQ Survey, September 2015.

Building the digital enterprise 5


What we mean by 1) Digitisation and integration
of vertical and horizontal value
2) Digitisation of product and
service offerings
Industry 4.0 chains
Digitisation of products includes the
In this report, the term Industry Industry 4.0 digitises and integrates expansion of existing products, e.g. by
4.0 stands for the fourth industrial processes vertically across the adding smart sensors or communication
revolution. Other related terms include entire organisation, from product devices that can be used with data
the Industrial Internet or the Digital development and purchasing, through analytics tools, as well as the creation
Factory, although neither takes as manufacturing, logistics and service. of new digitised products which focus
complete a view. While Industry 3.0 All data about operations processes, on completely integrated solutions.
focused on the automation of single process efficiency and quality By integrating new methods of data
machines and processes, Industry 4.0 management, as well as operations collection and analysis, companies
focuses on the end-to-end digitisation planning are available real-time, are able to generate data on product
of all physical assets and integration supported by augmented reality and use and refine products to meet the
into digital ecosystems with value optimised in an integrated network. increasing needs of end-customers.
chain partners. Generating, analysing
and communicating data seamlessly Horizontal integration stretches beyond 3) Digital business models and
underpins the gains promised by the internal operations from suppliers customer access
Industry 4.0, which networks a wide to customers and all key value chain
range of new technologies to create partners. It includes technologies from Leading industrial companies also
value. track and trace devices to real-time expand their offering by providing
integrated planning with execution. disruptive digital solutions such
While the term Industry 4.0 is as complete, data-driven services
becoming increasingly familiar, we use and integrated platform solutions.
it in a specific way in this report. In our Disruptive digital business models are
view, Industry 4.0 is driven by: often focused on generating additional
digital revenues and optimising
customer interaction and access. Digital
products and services frequently look to
serve customers with complete solutions
in a distinct digital ecosystem.

Industry 4.0 framework and contributing digital technologies

Mobile devices
Cloud computing IoT platforms

cs as core
alyti ca
An pa
& n and bi
ta is a tio in te g l
Augmented it al and ho ra
Da

g
ity

i tic
D er ue chai on ri z ti Location detection
reality/wearables v val ns t technologies
on l
1.
of

a
pr o 2 . D i g d s erv

m er ac c ess
d uct a n

Industry
sto n e s s

Multilevel customer 4.0


cu l b u s i

interaction and Advanced human-machine


i t i s ic

customer profiling interfaces


at

it a

n ig
io

o e
of f
fe r 3 . D and
in g s m o d e l s
D

it y

ta l
bi
a

&
Big data analytics An a pa
a ly t c
and advanced ic s as c or e
algorithms
Authentication &
fraud detection
Smart sensors 3D printing

6 2016 Global Industry 4.0 Survey


Executive summary
PwCs 2016 Global Industry 4.0 Survey of industrial
companies is the biggest survey of its kind studying
Industry 4.0 to date.

With over 2,000 participants from explores each finding in more detail.
companies in nine major industrial Based on the findings and our
sectors and 26 countries, it goes to experience working with some first
the heart of company thinking on the movers, weve also crafted a blueprint
progress towards transforming into a for implementation success. In the
digital enterprise. second half, we detail six steps to help
companies move from initial strategy
Weve distilled the results of our all the way to taking a leading role in
research into eight distinct key tomorrows digital ecosystems.
findings. The first half of our report

Key findings from our survey research

From talk
to action

Big Digitisation
investments drives quantum
with big impacts: leaps in
its time performance
to commit

Industry 4.0
is accelerating Deepen digital
globalisation, but relationships with
with a distinctly more empowered
regional customers
flavour
Industry
4.0

Robust,
enterprise-wide Focus on
data analytics people and
capabilities require culture to drive
significant Data analytics transformation
change and digital
trust are the
foundation of
Industry 4.0

Building the digital enterprise 7


and operational savings. Their plans even half of these expectations are met,
Key findings from for the next five years are even more
ambitious and far-reaching, with digital
Industry 4.0 will fundamentally reshape
the competitive landscape and bring
our survey research products and services paving the way fundamental change to established
for disruptive business models. industries.

1) Industry 4.0 - from talk to 2) Digitisation drives quantum 3) Deepen digital relationships
action leaps in performance with more empowered customers

The buzz around Industry 4.0 has Companies that successfully implement Customers will be at the centre of the
moved from what some saw as PR Industry 4.0 no longer need to choose changes to value chains, products
hype in 2013 to investment and real between focusing on a better top or and services. Products, systems and
results today. Respondents expect to bottom line. They can improve both at services will be increasingly customised
significantly increase their portfolios the same time. Over the next five years, to customer needs, and many of our
of digital products and services; more the companies we surveyed expect to survey respondents say they plan to
than twice as many expect to be at an increase annual revenues by an average use data analytics to understand and
advanced level in this area by 2020 of 2.9% and reduce costs by an average meet them. First movers who are
compared to today. Similarly, almost of 3.6% p.a. First movers who combine able to establish successful industrial
three-quarters of companies expect to high investment levels with advanced platforms will have a significant
have highly digitised horizontal and digitisation are set to achieve even more advantage over competitors. Ultimately,
vertical value-chain processes in five dramatic gains. industrial companies will need to own
years. relationships with the end customers
All told, our survey respondents expect who drive demand or at least integrate
Investment plans are extremely to see US$421 bn in cost reductions with platforms that allow them to
ambitious, with first movers in and US$493 bn in increased annual access the end customers efficiently.
particular already making significant revenues p.a. for the next five years. If
Industry 4.0 investments and realising
both above-average digital revenues

8 2016 Global Industry 4.0 Survey


4) Focus on people and culture to 6) Robust, enterprise-wide data Chinas industrial companies stand
drive transformation analytics capabilities require out in all aspects of digitisation: they
significant change are expecting both above-average cost
Our survey respondents say that their reductions as well as increased digital
biggest implementation challenge isnt Industrial companies will need revenues through to 2020. China is one
the right technology, its a lack of digital to develop robust organisational of the countries that stands to gain the
culture and skills in their organisation. structures that support data analytics most from automating and digitising
This finding is also consistent with as an enterprise-level capability. labour-intensive manufacturing
our Digital IQ research, which for nine Half of the surveyed companies have processes and needs to find a solution
years has explored how organisations established dedicated data analytics to rising employee remuneration. In
across industries can derive value functions, either on a corporate level addition, Chinese companies are highly
from digital investments2. Digital IQ to bundle talent or on a business unit flexible and open to digital change.
emphasises that while investing in level to remain close to the operational
the right technologies is important, business. However, 38% of companies 8) Big investments with big
ultimately success or failure will depend currently rely on selective, ad-hoc impacts: its time to commit
not on specific sensors, algorithms capabilities of single employees; another
or analytics programmes, but on 9% have no significant capabilities at Industry 4.0 investments are already
a broader range of people-focused all. significant and our research suggests
factors. Industrial companies need to that global industrial products
develop a robust digital culture and to 7) Industry 4.0 is accelerating companies will invest US$907 bn per
make sure change is driven by clear globalisation, but with a distinctly year through to 2020. The major focus
leadership from the C-suite. Theyll regional flavour of this investment will be on digital
also need to attract, retain, and train technologies like sensors or connectivity
digital natives and other employees who Industry 4.0 will create digital networks devices, as well as on software and
are comfortable working in a dynamic and ecosystems that in many cases will applications like manufacturing
ecosystem environment. span the globe, but still retain distinct execution systems (MES). In addition,
regional footprints. Both developed companies are also investing in training
5) Data analytics and digital trust and developing markets stand to gain employees and driving organisational
are the foundation of Industry 4.0 dramatically. change. More than half of respondents
expect their Industry 4.0 investments to
Data fuels Industry 4.0 and successful Companies in Japan and Germany are yield a return within two years or less,
data analytics is the prerequisite for the furthest along in digitising internal given investment of around 5% p.a. of
successful implementation of digital operations and partnering across the their annual revenue.
enterprise applications. Its time to horizontal value chain. With high
move from a phase of discovery and investment in technology and employee
understanding what data is available training, they view their digital
and what it is worth to one of insights transformation primarily in terms of
and action. First movers are already gains in operational efficiency, cost
making the shift and using data reduction and quality assurance. Our
analytics to help drive decision-making. experience working with companies in
the US suggests that they are planning
As digital ecosystems expand, so does to invest more heavily in developing
the importance of establishing strong disruptive business models, as
levels of digital trust, backed up by companies move quickly to digitise their
transparency and non-repudiation product and service portfolios.
that provides proof of the integrity
and origin of ones own and third-
party data. Strong risk management
and data integrity systems can help
companies avoid breaches and manage
disruption to operations better the
#1 data security concern of our survey
respondents.

2 PwC, 2015 Global Digital IQ Survey, September 2015.

Building the digital enterprise 9


Blueprint for digital processes as well as for implementing
new technologies. Your success with
Remember that change doesnt stop
once youve implemented Industry 4.0.
success Industry 4.0 will depend on skills and Your company will need to re-invent its
knowledge. Your biggest constraints may capabilities at faster rates than in the
To move forward with Industry well be your ability to recruit the people past to stay ahead of the game.
4.0, digital capabilities are all- needed to put digitisation into place.
6) Actively plan an ecosystem
important. These take time and 4) Become a virtuoso in data approach
concentration; a step-by-step analytics
approach is important. But move Develop complete product and services
with deliberate speed, so that Consider how you can best organise solutions for your customers. Use
data analytics; cross-functional expert partnerships or align with platforms if
you dont lose the first-mover
teams are a good first step. Later these you cannot develop a complete offering
advantage to competitors. capabilities can be fully embedded in internally. You may find it difficult to
your functional organisation. share knowledge with other companies,
1) Map out your Industry 4.0 and you may prefer acquisition. But look
strategy Learn to get value out of data by for ways to bridge this gap perhaps
building direct links to decision-making with technical standards so that you
Evaluate your own digital maturity now and to intelligent systems design. Use can profit from being part of platforms
and set clear targets for the next five the data to improve products and their that you dont fully control.
years. Prioritise the measures that will use in the field to offer and build new
bring the most value to your business service offerings. Think big, but start Real breakthroughs in performance
and make sure these are aligned small, with proof of concept projects. happen when you actively understand
with your overall strategy. Make sure consumer behaviour and can
company leadership is ready and willing 5) Transform into a digital orchestrate your companys role within
to champion your approach. enterprise the future ecosystem of partners,
suppliers and customers.
2) Create initial pilot projects Capturing the full potential of Industry
4.0 often requires company-wide Dont buy the hype. Buy the reality.
Use them to establish proof of concept transformation. Look to set tone Industry 4.0 will be a huge boon to
and demonstrate business value. Target from the top, with clear leadership, companies that fully understand what
a confined scope, but highlight the commitment and vision from the C-suite it means for how they do business.
end-to-end concept of Industry 4.0. Not and financial stakeholders. Foster a Change of this nature will transcend
every project will succeed, but they digital culture: all your employees your companys boundaries and
will all help you to work in a cross- will need to think and act like digital probably the national boundaries of
functional and agile approach with natives, willing to experiment with new the countries where you do business.
customers and technology partner - the technologies and learn new ways of
new norm of the future. With evidence operating.
from early successes, you can also
gain buy-in from the organisation, and
secure funding for a larger rollout.
Design pragmatically to compensate Blueprint for digital success
for standards or infrastructure that
dont yet exist. Collaborate with digital
leaders outside your organisation, by
working with start-ups, universities,
or industry organisations to accelerate
your digital innovation.

3) Define the capabilities you need


Map out Create Define the Become a Transform Actively plan
your Industry initial pilot capabilities virtuoso in data into a digital an ecosystem
Building on the lessons learned in 4.0 strategy projects you need analytics enterprise approach
your pilots, map out in detail what
capabilities you need to achieve
your vision. Include how enablers
for Industry 4.0, like an agile IT 1 2 3 4 5 6
infrastructure, can fundamentally
improve all of your business processes. Blueprint for digital success

Remember to develop strategies for


attracting people and improving

10 2016 Global Industry 4.0 Survey


Key findings from our
survey research
Industry 4.0
has moved Figure 1:  Respondents expect to more than double their level of
from talk to digitisation by 2020

action

+39% 72%
When PwC conducted its first
set of research on Industry 4.0 33%
in 2014 , it was on the radar for
many companies but relatively
few were actually in the process
High level of High level of
of implementing it. That has digitisation today digitisation in 5 years
changed dramatically this year.
Vertical value-chain 41%
Industry 4.0 is no longer a future trend integration 72%
for many companies it is now at the
heart of their strategic and research Horizontal value-chain 34%
agenda. Companies are combining integration 65%
advanced connectivity and advanced
Digital business 29%
automation, cloud computing, sensors models, product and
service portfolio 64%
and 3D printing, connected capability,
computer-powered processes, intelligent 42%
Product development
algorithms and internet of things (IoT) & engineering 71%
services to transform their businesses.
Customer access, 35%
sales channels &
Change is happening fastest in marketing 68%
areas close to the core business Today In five years

Shown: Percentage of companies surveyed reporting high degrees of digitisation and integration
Just over two-fifths of companies
report that they believe their product
development and engineering and Q: How would you classify the current level of digitisation and integration in the
following areas in your company? What levels of digitisation and integration are you
their vertical value chains are already expecting in the next five years?
benefiting from an advanced level
of digitisation and integration (see
Figure 1). Areas of focus include
digitising and connecting functions

Building the digital enterprise 11


such as digital order processes, First movers are set to outpace
customised product development and their competitors
the automated transfer of product
data to connected planning and Some companies report advanced
manufacturing systems, and further on or very advanced current levels of
to integrated customer service. These digitisation and integration. There are
are also the areas that they anticipate also companies who rate themselves
will also be furthest advanced in five ahead of their main competitors when
years time. it comes to building digital operations
capabilities. And some companies have
Advanced digitisation and integration made early investments in Industry 4.0.
of the horizontal value chain, with
suppliers, customers and other value- There is also a select group of
chain partners, and digitisation of companies who score highly on all three
customer channels are progressing of these key dimensions. We identified
a little slower than with the vertical 71 companies (around 4% of the whole
value chain. Big advances are expected survey population) who are setting the
in five years time but these are areas fastest pace. We call these companies
that companies believe will be more first movers, and theyre already
challenging than those closer to their gaining a nearly insurmountable
core production activities. advantage over competitors, as well
show throughout this report.

First movers expect to gain significant


benefits from their more advanced
digital capabilities and greater levels
of investment. They are far more likely
to be forecasting both revenue gains
of more than 30% and cost reduction
of more than 30% at the same time
(see Figure 2). Theyre more likely to
expect efficiency gains too. Put these
all together and you have an enormous
impact.

Figure 2: First movers are almost three times more successful in combining
high revenue increases with significant gains in cost reduction

10% 27%
All
Companies First
movers

196
% of companies achieving >30% increased revenue
and >30% reduced costs simultaneously by 2020
>30%
Revenue growth
<30%

<30% >30%
Cost reduction

Q: What cumulative benefits from digitisation do you expect in the next 5 years?
Lower costs, increased revenues.

12 2016 Global Industry 4.0 Survey


Digitisation System based, real-time end-to-end
planning and horizontal collaboration
drives is now possible using cloud-based
planning platforms. Companies that
quantum leaps use such systems to become better
in performance integrated with horizontal value chain
partners, including suppliers and key
Our survey respondents customers, can significantly improve
efficiencies and reduce inventories. In
anticipate significant gains from addition, the implementation of track-
the implementation of Industry and-trace devices on products will lead
4.0 initiatives. to better inventory performance and
reduced logistics cost.
On average, companies expect to
reduce operational costs by 3.6% p.a.,
while increasing efficiency by 4.1% Figure 3: Companies in every industry sector expect significant cost
annually. High levels of cost reduction reductions
are expected in every industry sector
we studied (see Figure 3). Some of Cost reduction Cost reduction
(in % p.a. until 2020) (in US$bn p.a. until 2020)
these cost savings can be achieved by
implementing smart manufacturing Aerospace, defence 3.7% 9
& security
initiatives. For example, companies
are moving to integrated planning & Automotive 3.9% 28
scheduling for manufacturing. Such
Chemicals 3.9% 49
systems combine data from within
the enterprise from sensors all the Electronics 3.7% 62
way through to ERP systems with
Engineering & construction 3.4% 78
information from horizontal value
chain partners, like inventory levels Forest, paper & packaging 4.2% 28
or changes in customer demand.
Industrial manufacturing 3.6% 52
Integrated shop floor planning improves
asset utilisation and product throughput Metals 3.2% 54
time. Another example is predictive
Transportation & logistics 3.2% 61
maintenance of key assets, which uses
predictive algorithms to optimise repair
Weighted Average 3.6% Total 421
and maintenance schedules and to
improve asset uptime.
Q: What cumulative benefits from digitisation do you expect in the next 5 years? Lower costs.

Building the digital enterprise 13


The new competitive landscape Improved customer insight from smart
Figure 4: R
 evenues from digitising data analytics also allows companies to
the product and service Efficiency gains of the magnitude better focus on additional high-margin
portfolio will grow
significantly in future uncovered by our survey have the business.
potential to change the competitive
landscape within a very short space of In the new industrial reality, most
time. If even half of the expectations companies (86%) expect to secure
outlined are realised, some companies simultaneous gains from both lower

47% 44%
may find themselves unable to compete. costs and added revenue in the next five
In an increasingly cost-competitive years.
Digitisation of the Introducing a market, no industrial company can
existing product new digital
portfolio product afford to lose out in operational And the impact is far-reaching for every
portfolio
efficiency against their market peers. industry we studied. At least a third
The next two to three years will be of companies in every sector expect to
crucial for companies looking to catch secure efficiency gains and cost savings

42%Other digital
38% Big data
up. of more than 20% and many anticipate
that these will be accompanied by
services to analytics services Significant revenue opportunities additional revenues of the same
external to external
customers customers ahead magnitude.

Survey participants expect additional


Note: Companies achieving 10% or more additional
digital revenues of 2.9% p.a. until
revenue in the following areas over the next 5 years.
Multiple answers possible 2020. To generate these additional
revenues, companies will introduce new
Q: Which of the following new digital products industrial products with digital features
or services do you plan to introduce and and augment their existing portfolio
expect will generate more than 10% of your (see Figure 4). Digital services based on
future revenue over the next 5 years?
data analytics, or even complete digital
solutions serving a customer ecosystem,
will drive breakthrough revenue
growth.

In addition, real-time data availability


will enable companies to manufacture
personalised products and customise
solutions. These customised products
usually generate significantly higher
margins than mass-manufactured
offerings.

How Industry 4.0 is delivering revenue, cost and efficiency gains

Additional revenue from: Lower cost and greater efficiency from:

Digitising products and services within the existing portfolio Real-time inline quality control based on Big Data Analytics

New digital products, services and solutions Modular, flexible and customer-tailored production concepts

Real-time visibility into process and product variance, augmented reality


Offering big data and analytics as a service.
and optimisation by data analytics

Predictive maintenance on key assets using predictive algorithms to


Personalised products and mass customisation.
optimise repair and maintenance schedules and improve asset uptime

Capturing high-margin business through improved customer insight from Vertical integration from sensors through MES to real-time production
data analytics planning for better machine utilisation and faster throughput times

Horizontal integration, as well as track-and-trace of products for better


Increasing market share of core products
inventory performance and reduced logistics

Digitisation and automation of processes for a smarter use of human


resources and higher operations speed
System based, real-time end-to-end planning and horizontal collaboration
using cloud based planning platforms for execution optimisation

Increased scale from increased market share of core products

14 2016 Global Industry 4.0 Survey


Deepen digital Deepening customer relationships
through co-creation and
Using data to enhance customer
service and responsiveness
relationships customisation
Nearly three-quarters of companies
with more Digital integration with the customer (72%) expect that the use of data
empowered and new technological opportunities analytics will substantially improve
to move production closer to the customer relationships and customer
customers customer, for example with 3D printing, intelligence along the product life cycle
will enable greater individualisation (see Figure 5). Greater integration
As Industry 4.0 develops, the and customisation of products. Most of data between manufacturers
traditional model of products companies we spoke to are expecting and customers can open up new
to strengthen their digital offering to collaboration opportunities. Clever
pushed out to the market will
customers, either by digitising existing use of pooled data, for example, can
fade and customer pull, with products or by developing new digital allow manufacturers in B2B markets
customers intimately involved in products. The opportunity is there not to help customers in value-chain
a more collaborative relationship only to greatly increase the ability to planning, driving efficiencies within
with manufacturers, will be much respond flexibly and more rapidly to the customers operations as well as
customer demands but also to anticipate vice versa. Many companies have such
more the norm. Industry 4.0 will
demands, helping the customer move collaborative opportunities in sight.
greatly enrich the opportunities ahead in a range of predictive ways. Over a third (38%) of companies in our
to retain and grow the customer survey said they plan to offer their big
relationship but it will also make data services to external companies.
the fight for the customer more
intense.

Figure 5: Industry 4.0 is helping How industrial companies are getting closer to
industrial companies customers
optimise customer
relationships

Basing Innovation in
product/service customer service
development
cs as core
alyti cap
&
An ab on customer
ta tion and inte il
isa g
git ical and horiz rati specifications
Da

i
ity

D ert e cha on
v valu ins t
on l
1.
of

a
m od . D i d cus

e offerings
2
e ls a n

se i o n o f
g it a to

r vic
d tis a t
lb m

72%
si
n Di
u

gi

er e s s 3. t an
acc c
ta pro du
ess
Customising
Da

it y

l
& bi
An pa
alyt ca products all the way
ic s a s c ore Using data
analytics to down to a lot size
meet customer of 1
requirements and
improve operational
performance
Q: In which areas will your company use data
analytics in five years? Improving customer
relationship and customer intelligence along
the product life cycle.

Driving customer-
centric marketing
and channel access
Building a
customer-focused
supply chain

Building the digital enterprise 15


Developing a platform approach Other industrial companies are also
to stay close to customers moving from simply augmenting
Key types of platforms their products with digital features to
Integrated solutions or value- more comprehensive digital offerings.
added services are characterised These can range from complete digital
Product Lifecycle Management by significantly higher customer solutions to becoming a platform
(PLM) systems: connect market benefits and will revolutionise existing integrator.
intelligence with product product portfolios and performance
development and operations, all relationships. Foremost among these An effective platform must, by
the way to smart services both is a platform approach. A platform is a definition, bring the customer close to
within a manufacturing company nexus of exchange and interoperable operations. Industrial companies that
as well as with key value-chain technology, which allows a wide range share these platforms will also have
partners. of vendors and customers to interact access to customer data, which will be
seamlessly. The most successful first analysed to better forecast their needs,
Manufacturing Execution movers of the software and internet improve products and develop new
Systems (MES): connect the industries all cemented their positions ones. Whoever owns the platform thus
data input and transfer between with powerful and distinctive owns the customer, owns access to the
the equipment of multiple platforms. customer, and ends up aggregating
vendors, as well as facilitating the work of a lot of other enterprises.
communication between First movers on Industry 4.0 will seek a Ultimately this can lead to providing a
multiple software and systems similar advantage. GE and Siemens, for full digital ecosystem.
applications, extending from a example, are already rushing to solidify
companys Enterprise Resource themselves as platform providers. Each
Planning (ERP) all the way to has developed a cloud-based system
shopfloor quality applications. for connecting machines and devices
from a variety of companies, facilitating
transactions, operations and logistics,
and collecting and analysing data.

Industrial companies are moving towards greater digital value creation, from augmented
products to serving digital ecosystems

a tion
Value cre
Integrated Digital
Data Analytics, Ecosystem Provider
Content & Platform
Complete Solution/ Integrator
Service Provider Integration of
Augmented Digital third-party partner
Product Player Focus on data
or competitor
analytics and
Focus on digital products and
data-based services;
products and control systems in a
Focus on products data-based services, access to customers
complete customer
with digital features which provide a via a dedicated
ecosystem
like sensors or complete solution for (online) platform
communication the customer
devices

Core product

Asset intensity Data intensity

16 2016 Global Industry 4.0 Survey


Focus on Skills issues loom large for data
analytics too
69% say increasing
people and in-house data
culture to drive Lack of skills or competencies in the analytics technology
companys workforce is also the biggest
transformation challenge survey respondents see and skill levels is
when it comes to making use of data the top route to
Industry 4.0 has massive analytics. Its not surprising, then, that
over two-thirds (69%) cite increasing
boost data analytics
implications for the nature of how in-house data analytics technology capabilities
a company chooses to organise and skill levels as the single biggest
itself and its delivery model. improvement route to boost data
analytics capabilities. Some companies
Companies will need to make sure also say external partnerships have a
staff understand how the company is role to play, through the provision of
changing and how they can be a part of technology or training, and a minority
it. From our interviews with industrial of companies (18%) expect to use M&A
companies, the biggest challenges to acquire outside companies.
centre around internal issues such
as culture, organisation, leadership
and skills rather than external issues
such as whether the right standards,
infrastructure and intellectual property Figure 6: L
 ack of digital culture and training is the biggest
protection are in place or whether challenge facing companies
concerns about data security or privacy
concerns can be overcome.

The absence of a digital culture and the


right training was identified as a top An
alyti
cs as core
cap
& ab
challenge by more companies than any ta
git
ion and i
isat and h ntegra
l o
il
Da

Di ertica e cha rizon ti


ity

v valu ins t
other (see Figure 6). That was equally
on l
1.
of

a
m od . D i d cus

e offerings

true for companies rating themselves


2
e ls a n

se i o n o f

50%
as advanced. And it held true across
g it a to

r vic
d tis a t
lb m

si
industries and regions as well. n Di
u

gi

er e s s 3. t an
acc c
ta ess pro du
Da

it y

l
& bi
An pa
alyt ca
ic s a s c ore

Lack of digital culture and training


Lack of digital culture and training 50%

Lack of a clear digital operations vision and


support / leadership from top management 40%

Unclear economic benefit and digital investments 38%

High financial investment requirements 36%


Unresolved questions around data security and data
25%
privacy in connection with the use of external data
Insufficient talent 25%

Lack of digital standards, norms and certification 21%

Slow expansion of basic infrastructure technologies 18%

Business partners are not able to


collaborate around digital solutions 16%

Concerns around loss of control over your


companys intellectual property 14%

Note: Included as one of three possible responses

Q: Where are the biggest challenges or inhibitors for building digital operations
capabilities in your company?

Building the digital enterprise 17


Data analytics
and digital
trust are the
foundation of
Industry 4.0
Data lies at the heart of the fourth
industrial revolution, but the Figure 7: D
 ata and analytics are becoming increasingly important to
decision-making.
massively growing information
flow brings little value without
the right analytics techniques.
The rapidly growing number

+33% 83%
of sensors, embedded systems
and connected devices as well
as the increasing horizontal
50%
and vertical networking of
value chains result in a huge
continuous data flow. High importance
today
High importance
in 5 years

Data is coming from multiple sources,


Aerospace, defence
in different formats, and there is a need & security 39% 82%
to combine internal data with data from
Automotive 49% 84%
outside sources. Expert and effective
data analytics is essential to using Chemicals 60% 88%
data to create value. And with so many
Electronics 66% 89%
points of entry, companies need to take
a rigorous, proactive approach to data Engineering & construction 40% 72%
security and related issues and work to
Forest, paper & packaging 55% 83%
build digital trust.
Industrial manufacturing 54% 88%
Advanced companies use data to
drive decision-making Metals 49% 83%

Transportation & logistics 50% 90%


While most of our respondents (83%)
expect data to have a significant impact Other 43% 83%
on their decision-making in five years,
only about half are currently using data
Today In five years
to drive decisions (see Figure 7). Our
research suggests that companies who
Shown: Summarised percentages of companies surveyed reporting high levels of significance
are already ahead on their digitisation
and integration journey are also much
more likely to be putting data analytics Q: What significance does the gathering, analysis and utilisation of data for decision-
making have for your company?
to work. Among those with advanced
levels of digitisation and integration,
nearly three-quarters (73%) say that
data and analytics play a significant
role in their decision-making, compared
to just 38% of those who have low levels
of digitisation and integration.

18 2016 Global Industry 4.0 Survey


Its important to remember that data There are other uses for data analytics
analytics provides tools for decision- that far fewer companies have on their
making, rather than a complete radar screen. These include better
replacement for sound judgement service and maintenance of companies
on the part of management. In other own assets and products owned by
research weve explored the art and customers, and better cooperation
science of decision-making, and and decision-making with partner
found that data analytics will play an companies. These open up possibilities
increasingly central role in the future for new service offering and ways of
but it wont fully replace other factors, working, so companies may want to
particularly when it comes to major start paying more attention.
strategic decisions3.
To succeed, companies will need to
Companies need to expand their use data in predictive, forward-looking
use of big data ways that make sense of market
developments and customer behaviour
Many companies already use data to improve products and develop new
analytics to analyse and report on products and services.
processes (see Figure 8). Our survey
respondents say their companies are
focusing most on using data analytics
to control and improve their overall
business planning and manufacturing
operations, followed closely by efforts
to get closer to their customers, both
today and in five years. Around three-
quarters of companies are deploying or
plan to deploy data analytics in these
areas. But these approaches are just the
beginning.

Figure 8: Are companies underestimating the scope of data analytics?

Optimisation of overall business 56% 22% 78%


planning and controlling
Better manufacturing / 59% 16% 75%
operations planning
Improvement of customer relationship and 51% 21% 72%
customer intelligence along the product life cycle
More efficient asset utilisation 52% 19% 71%
of operational efficiency
Development of new or optimisation 44% 25% 69%
of existing products /services
Increase of sales revenue 46% 22% 68%

Optimisation of transport and 48% 19% 67%


logistics costs / efficiency
Improved product or process quality 47% 18% 65%

Efficient maintenance / service of own 38% 23% 61%


assets or customer products
Better cooperation and decision-making 36% 20% 56%
with partner companies

Status quo Growth potential in 5 years

Q: In which areas are you using big data analytics today? In which additional areas will your
company use data analytics in five years?

3 PwC, Global Data & Analytics Survey 2014: Big Decisions

Building the digital enterprise 19


Building digital trust should be a
top priority
Also important will be working together
with ecosystem partners; with possible
Digital trust is a
points of attack spread out throughout complicated issue,
Digital ecosystems and broad use of the ecosystem, responsibility needs to but its based
data also raises important issues around be shared broadly.
cybersecurity. More touchpoints where on three pillars:
data is collected and exchanged also Digital trust is a complicated issue, but transparency,
means more potential points of entry its based on three pillars: transparency,
for an attacker. Our survey respondents legitimacy and effectiveness. In other
legitimacy and
flagged a wide range of concerns research, we look at ten issues which effectiveness.
around data security, with operational centre around the ethics and control of
interruption from cybersecurity data access and use, interaction through
breaches at the top of their list (see the internet, digital risk resilience and
Figure 9). Other issues like liability value-creation in the digital age4. The
risks, unauthorised access to data and emergent and interconnected nature
damage to company reputation are on of these issues and the regulatory
the radar too. response to them highlight the
challenges organisations face. Industrial
Theres some good new though. Many companies will need to stay focused to
of our survey respondents are confident meet them.
that theyve made strong progress here
just 25% rate unresolved questions
around data security and data privacy
as one of the top 3 challenges that are
slowing down their Industry 4.0 efforts. Figure 9: Operational disruption is the top data security concern
To make sure that stays on track, many
companies will need to make building
and maintaining digital trust a priority. Operational disruption due to
54%
cybersecurity breaches
For example, as companies move Liability risks through data loss 40%
towards operating increasingly in
Unauthorised data extraction/modification
ecosystems, it will be important to within company-internal data flow
40%
integrate a whole range of technical Damage to company reputation and loss of
domains into the system. These include 39%
trust due to data loss
managing organisational functions and Misuse of data during exchange of
37%
transactions, controlling automation information with partners

assets and supporting the creation and Loss of intellectual property 35%
delivery of products and services, in
Violation of regulations and laws on
some cases focused towards end-users. 30%
data security or data privacy
Making security an integral part of all
Endangerment of operators or users 10%
systems and processes can help deter
attacks and speed up response time if
they do happen. Third-party assurance Note: Included as one of three possible responses
is also an important way to confirm that
systems are robust and strengthen the
trust of ecosystem participants in your Q: What are the main concerns in terms of data security?
platforms integrity.

4 Norbert Schwieters, PwC, "Ten digital trust challenges," 4 December, 2015

20 2016 Global Industry 4.0 Survey


To reach excellence in data analytics,
Robust, industrial companies will need access
to a wide variety of skill sets, including
enterprise- those of data scientists and algorithm
architects. They will also need process
wide expertise, advanced algorithms and
data analytics workflow integration for decision
support. In some situations outsourcing
capabilities require can help supplement internal
significant change capabilities or bridge temporary gaps.

The companies we surveyed


understand that its critical to
have data analytics capabilities Figure 10: Most companies dont yet have mature data analytics
in order to successfully drive capabilities
digital transformation. But
theres still a long way to go
before these reach the level of 52% &
An
alyti
cs as core
cap
ab
sophistication needed to really Medium
ta atio n and inte il
is g
drive Industry 4.0 applications. Da igit ical and horiz rati

ity
D ert o
v value chains nt

on l
1.
of

a
Only 18% of survey respondents rate
m od . D i d cus

e offerings
the maturity of their data analytics
22%
2
e ls a n

capabilities as advanced (see Figure 10),


18%

se i o n o f
and more than half say that the lack
8%
Poor
g it a to

of skills and competencies in their Advanced

r vic
d tis a t
lb m

companys workforce is a key challenge si Outsourced


n Di
u

gi
to external
Advanced
to making full use of data analytics. er e s s 3. t a n partners
acc c
ta ess pro du
Da

it y
il
Moving beyond ad-hoc approaches &
An p ab
alyt ca
ic s a s c ore
Ad-hoc approaches to the organisation
and governance of data analytics may Q: How mature are the data analytics capabilities in your company?
be part of whats holding companies
back. Almost half lack a structured
approach to data analytics organisation
and governance (Figure 11). Thirty- Figure 11: Nearly half of companies still need to develop a robust organisation
eight percent of respondents say their that supports data analytics excellence
companies rely on the selective, ad-hoc
data analytics capabilities of individual
employees, while another nine percent
have no significant data analytics
capabilities at all. 14% ta
&
An
it
alyti

isatio
cs as core

n a
nd
al a ho
nd inte
g
ca

ra
pa
bi
l
35%
Da

g
ity

Dedicated department Data analytics is


In contrast, just over a third have for data analysis serving Di ertic ue chai rizon ti embedded within
v val ns t
on l

many functions accross specific functions


1.

embedded data analytics into specific


of

the company
a
m o 2 . D i g c u st

e o ff e ri n g s

functions, giving themselves the


d e ls a n d

flexibility and proximity to business


se i o n of

knowledge to fully utilise the


potential of data analytics. Another
9% 5%
it al o

rvic
d ti s a t

14% of companies have a dedicated No significant


Data analysis services
bu

s ig
are outsourced and

38%
department for data analysis serving m in e
i

data analysis D performed by


capabilities er s s . n
3 t a external service
many functions across the company. acc c
ess pro d u providers
D

it y

ta l
First movers are much more likely to Selective, ad-hoc bi
a

& data analysis a


An capabilities of p
have pursued these two options 43% alyt ca
s as c ore
icsingle
have embedded their data analytics employees
in specific functions and 24% have a
Note: Answers shown are rounded
dedicated department.
Q: How are data analysis capabilities organised in your company?

Building the digital enterprise 21


Accelerating Our survey results show similarities
between leading companies around the
globalisation, globe, but they also differ considerably
by region.
but with
distinct regional Conventional wisdom suggests that
developed economies could be the
flavours winners, in the short term at least, from
Industry 4.0, as they are driving digital
As the fourth industrial operations improvements to secure
revolution binds companies significant efficiency gains. So are
emerging economies losing out? Our
and countries ever more tightly
survey results indicate that emerging
togetherthrough worldwide nations probably have the most to gain,
supply chains and data as Industry 4.0 takes hold around the
networksit will increasingly globe. They can leverage digitisation to
promote globalisation. gain efficiency in their horizontal value
chain, efficiently working within a
Many industrial leaders operate global manufacturing network to supply
worldwide facilities, so successful key components, products and systems.
Industry 4.0 implementation is not In addition, rising personnel costs and
limited to specific countries or regions. high potential to digitise processes will
At the same time, many applications lead to above-average efficiency gains
will link closely to local companies, in emerging economies.
as customised products often require
regional manufacturing capabilities.

Figure 12: Big gains are anticipated by industrial products companies in all regions

Additional revenue Lower costs Efficiency gains


Regions

Americas 37% 39% 50%

Asia Pacific 39% 57% 68%

Europe, Middle East & Africa 32% 41% 55%

Territories

Brazil 41% 32% 41%

China 51% 59% 72%

India 43% 46% 62%

Germany 30% 42% 62%

Japan 22% 65% 67%

United States 37% 37% 51%

Global all 35% 43% 56%

Shown: % of survey respondents in each region expecting gains of over 20% in the next five years

Q: What cumulative benefits from digitisation do you expect in the next 5 years?

22 2016 Global Industry 4.0 Survey


Regional and country contrasts of the countries that stands to gain the Looking five years ahead, expectations
most from automating and digitising of the level of digital integration are
Companies in Japan and Germany labour-intensive manufacturing broadly comparable in all three regions
are the furthest along in digitising processes and needs to find a solution (EMEA, the Americas and Asia Pacific).
internal operations and partnering to rising employee compensation. In A large majority of companies expect
across the horizontal value chain. With addition, Chinese companies are highly to have advanced digitisation and
high investments in technology and flexible and open to digital change, and integration capabilities, with Japan
employee training, they view their the Chinese workforce is embracing and Germany reaching digitisation
digital transformation primarily in digital technologies. levels above 80%. American, French
terms of gains in operational efficiency, and Swedish companies show similarly
cost reduction and quality assurance. A strong Asia Pacific push with high levels of optimism. Although Asia
other regions coming up fast Pacific companies report the highest
Our experience working with and digitisation and integration levels
interviewing executives in the Industrial products companies in today, it is companies in the Americas,
US suggests that companies there all regions are pressing hard on the followed by those in EMEA, that expect
are planning more investment in Industry 4.0 accelerator and expect to to have the largest gains in digitisation
developing disruptive business models, secure significant benefits. But it is levels by 2020.
as companies move more quickly to companies in the Asia Pacific region
digitise their product and service that are making the strongest running.
portfolio. Their focus is more on digital They report making significant digital
revenue growth, rather than efficiency investments and they have already
gains. moved further forward in terms of
current digitisation and integration.
Chinas industrial companies stand Two-fifths (36%) believe they are at
out in all aspects of digitisation: they an advanced level now, compared
are expecting both above-average cost to a third (32%) of companies in the
reductions as well as increased digital Americas and 30% of EMEA companies
revenues through to 2020. China is one (see Figure 13).

Figure 13: Companies all over the world are expecting to dramatically increase digitisation over the
next five years

32% +42% 74%


Level of digitisation today Level of digitisation in five years
Americas

36% +31% 67%


Level of digitisation today Level of digitisation in five years
Asia Pacific

30% +41% 71%


Level of digitisation today Level of digitisation in five years
Europe, Middle East & Africa

Q: How would you classify the current level of digitisation and integration in the following areas in your company? What levels of
digitisation and integration are you expecting in the next five years?

Building the digital enterprise 23


Within the next five
Big years, advanced
investments implementation of
with big Industry 4.0 will
impact: its time to become a qualifier
commit to compete and
is also likely to be
The nine industries we surveyed seen by investors
plan to invest US$907 bn
p.a. globally in Industry 4.0
as a qualifier for
applications over the next five funding.
years. Thats a staggering sum,
but the benefits are even more
impressive.

Survey respondents anticipate


that those investments will lead to
US$493 bn in additional revenues
annually, in addition to strong gains
in efficiency and reductions in cost.
Investment levels will be highest in
the electronics sector (see Figure 14). Figure 14: Companies in every industry sector are planning substantial
investments
A major focus of this investment
will be on digital technologies like
sensors or connectivity devices, as Industry 4.0 investment Industry 4.0 investment
(in % p.a. until 2020) (in US$bn p.a. until 2020)
well as on software and applications
like manufacturing execution Aerospace, defence
5% 15
& security
systems (MES). Companies are also
investing significantly in training their Automotive 5% 65
employees, hiring new specialists and
Chemicals 5% 45
driving organisational change.
Electronics 7% 243

Engineering & construction 5% 195

Forest, paper & packaging 4% 15

Industrial manufacturing 5% 177

Metals 4% 55

Transportation & logistics 5% 97

Weighted Average 5% Total 756 907

Q: How high are your companys current and future investment in digital operations solutions?
(investment as a percentage of annual revenue)

24 2016 Global Industry 4.0 Survey


Catching up is getting increasingly It simply wont be possible for Rapid returns on investment
difficult companies to achieve advanced
digitisation without making a step- Most companies believe they will see
Theres no time to waste when it change in investment, given the a return on investment (ROI) within
comes to increasing investment continued rapid progress anticipated by two years or less (see Figure 16) for
levels. First movers expect to see truly companies who are already leading. The their Industry 4.0 projects. Just over a
game-changing improvements in cost investment required to catch up is likely third of companies anticipate a longer
structures, operational efficiency, and to be too costly, and faster-moving timescale of three to five years, but
revenues and are therefore stepping companies will have a significant very few think that it will take any
up their investment levels. Other advantage when it comes to positioning longer than five years for Industry 4.0
companies are doing so as well; in fact, their offerings as a platform of choice investments to pay for themselves.
20% of companies plan to invest more within digital ecosystems. Perhaps most
than 10% of annual revenues in the importantly, companies who try to jump
next five years (see Figure 15). in too late will find that their internal
cultures have lagged behind.
Looking ahead, many of those who
havent invested significantly in the past Within the next five years, advanced Figure 16: Most companies expect
two years plan to step up investment in implementation of Industry 4.0 will Industry 4.0 investments
the coming five years. Thats one way to pay back
become a qualifier to compete and is within two years
to close the gap. But just over a third also likely to be seen by investors as
of companies still expect to keep their a qualifier for funding. Companies
future investment relatively low. Some who have not kept up will not only Within two years
of these companies may be waiting find themselves struggling to maintain
Two to five years
for the perfect technology. Thats market share but are also likely to face
short-sighted. As weve already shown, higher capital funding costs. More than five years
the biggest challenge companies face 8%
isnt buying the right technology, its
transforming their organisation and
Expected ROI on
culture. This requires long-term change
Industry 4.0 investment
programmes.

37%
Figure 15: Companies that do not strategically invest will lose competitive 55%
advantage

Q: What return on investment period (ROI) do


you expect from your digital investments?

22% 21% 20%


15% 13%
10%
Median
5% p.a.

0-1% p.a. 2-3% p.a. 4-5% p.a. 6-9% p.a. 10% p.a. More than
10% p.a.

Investment levels over the next 5 years

Shown: Investments in % of annual revenues

Q: How high are your companys current and future investment in digital operations solutions?
(investment as a % percentage of annual revenue)

Building the digital enterprise 25


Blueprint for digital
success
To move forward with Industry Based on hundreds of
4.0, acquiring and rolling out transformation projects with
digital capabilities across your leading industrial companies,
company are all-important. This we have defined six practical
process takes time, so in order steps your company needs to take
to gain or retain first-mover to lead tomorrows competitive
advantage over your competitors, digital landscape.
you will need top management
commitment and significant
implementation investments.

Blueprint for digital success

Map out Create Define the Become a Transform Actively plan


your Industry initial pilot capabilities virtuoso in data into a digital an ecosystem
4.0 strategy projects you need analytics enterprise approach

1 2 3 4 5 6

26 2016 Global Industry 4.0 Survey


Map out your
Industry 4.0
strategy
Your Industry 4.0 strategy will
shape every further step you take
on the path towards becoming
a fully digital enterprise, so its
important to take the time to
clearly define your vision.
As you start to think about where
Evaluate your own digital
you want to go in the future, take
maturity now and set clear targets
the time to consider what you could
for the next five years
gain by collaborating with customers,
Many industrial capabilities have suppliers, technology partners and
already begun digitising their business, even competitors, without limiting your
but often the process has started vision based on current constraints.
in organisational silos, rather than Move your focus beyond technical
through a holistic approach. Take the details and consider what impact new
time to evaluate your maturity level applications could have on your value
in all areas of Industry 4.0 so that you chain and your relationships with,
understand what strengths you can and access to, your customers. Your
already build on, and which systems/ roadmap will need to consider future
processes you may need to integrate changes in customer behaviour and
into future solutions. Our maturity how your relationship with them will
model is one tool that can help speed change.
up this process (see PwC maturity
Moving from the current to the future
model on next page). Our Digital IQ
desired state will need precise steps
Benchmark 5 is another tool that you can
use to assess how well positioned you
and a clear prioritisation. Companies Questions to ask as
are for digital success.
that become a digital champion embark you develop your
on a journey that starts small but ends
ultimately in a transformation of the digital strategy:
core business.

How mature are my current


capabilities?

What could I gain by better


collaboration with customers,
suppliers, technology partners
and even competitors?

How is customer behaviour


changing and how does my
relationship to customers need
to change in response?

5 PwC Digital IQ Benchmark

Building the digital enterprise 27


Make sure you engage champions
throughout your business

Building up capabilities, adapting


processes and IT and driving the
cultural shift needed will take years.
Its critical to provide clear leadership
from your top management, but
equally important is convincing the
top stakeholders who will need to roll
up their sleeves and implement the
desired changes. One way to line up
champions throughout the organisation
is to educate stakeholders from the
outset, for example through technology
roadshows and visits to innovation
hubs.

PwC maturity model - Industry 4.0 capabilities develop across seven dimensions and four stages

Digital Vertical Horizontal Digital


1 2 3 4
novice integrator collaborator champion

Digital business First digital solutions and Digital product and service Integrated customer solutions Development of new
models and isolated applications portfolio with software, across supply chain disruptive business models
customer access network (M2M) and data as boundaries, collaboration with with innovative product and
key differentiator external partners service portfolio, lot size 1

Digitisation Online presence is Multi-channel distribution with Individualised customer Integrated Customer Journey
of product separated from offline integrated use of online and approach and interaction Management across all digital
and service channels, product focus offline channels; data together with value-chain marketing and sales channels
offerings instead of customer focus analytics deployed, e. g. for partners. Shared, integrated with customer empathy and
personalisation interfaces. CRM

Digitisation Digitised and automated sub Vertical digitisation and Horizontal integration of Fully digitised, integrated
and integration processes. Partial standardised and harmonised processes and data flows with partner ecosystem with
of vertical and integration including internal processes and data customers and external self-optimised, virtualised
horizontal production or with internal flows within the company; partners, intensive data use processes, focus on core
value chains and external partners. limited integration with through full integration across competency; decentralised
Standard processes for external partners the network. autonomy. Near real-time
collaboration partly in place access to extended set of
operative information

Data & Analytical capabilities mainly Analytical capabilities Central BI system Central use of predictive
Analytics as based on semi-manual data supported by central business consolidating all relevant analytics for real-time
core capability extracts; Selected intelligence (BI) system internal and external optimisation and automated
monitoring and data Isolated, not standardised information sources, some event handling with intelligent
processing, no event decision support systems predictive analytics database and self-learning
management Specific decision support and algorithm enabling impact
event management systems analysis and decision support

Agile IT Fragmented IT architecture Homogeneous IT architecture Common IT architectures in Single data lake with external
architecture in-house. in-house. Connection partner network. data integration functionalities
between different data cubes Interconnected single data and flexible organisation.
developing. lake with high-performance Partner service bus, secure
architecture data exchange

Compliance, Traditional structures, Digital challenges recognised Legal risk consistently Optimising the value-chain
security, legal digitisation not in focus but not comprehensively addressed with collaboration network for compliance,
& tax addressed partners, security, legal and tax

Organisation, Functional focus in silos Cross-functional collaboration Collaboration across company Collaboration as a key value
employees and but not structured and boundaries, culture and driver
digital culture consistently performed encouragement of sharing

28 2016 Global Industry 4.0 Survey


Create Its important to pick the right projects.
We recommend targeting a confined
Data analytics is often done as part
of a pilot or as a standalone pilot for
initial pilot scope, but highlighting the end-to-end companies looking to identify and
concept of Industry 4.0. Possible options prioritise data analytics use cases.
projects include vertical integration within one
or two manufacturing sites including Often pilot teams will need to design
With so much riding on the digital engineering and real-time data pragmatically to compensate for
outcome of Industry 4.0 projects, integrated manufacturing planning. standards or infrastructure that dont
companies will need to work hard Horizontal integration with selected yet exist. While pilots may already
key suppliers is another option, e.g. by bring business benefits, their most
to overcome initial challenges.
installing track-and-trace devices on important purpose is to generate insight
It can be difficult to secure your shipments, helps to create end to into how your company can work across
funding and stakeholder buy-in, end visibility. Or you could consider functions or ecosystems and what
as the economic benefit case of installing sensors and actuators on changes you may need to make in IT,
digitisation is not always easy critical manufacturing equipment security, tools, and process and people
and using data analytics to explore capabilities.
to calculate. And initially teams
predictive maintenance solutions. The
will only be able to provide very diagram below provides an overview of You may want to consider collaborating
limited proof of concept and possible areas for pilots. with digital leaders outside your
demonstration of technologies. organisation, by working with start-ups,
Setting up cross-functional teams has universities, or industry organisations
Pilots can help address these issues. proven to be a solid strategy. These to accelerate your digital innovation.
Not every project will succeed, but they teams should be fully dedicated to
will all help you learn the approach that the project with the freedom to think
works for your company. With evidence outside existing company boundaries
from early successes, you can also and point the company in new strategic
gain buy-in from the organisation, and directions regarding technology, way of
secure funding for a larger rollout. working and ecosystems. Enablers like
IT and human resources play a major
role and should be embedded in the
cross-functional pilot teams.

Industry 4.0 pilot opportunities exist along the full vertical and horizontal operational value chains

New digital Vertical Smart Digital


Digital Horizontal Digital
business operations Integration maintenance sales &
engineering workplace
models integration & service marketing

Integrated E2E
Digital hardware E2E product Planning and Digital customer
optimisation and lifecycle real-time E-finance/ relationship
uptime guarantee Predictive controlling mgmt.
mgmt. execution
Digital maintenance
collaboration in
Digital manufacturing coordination control

R&D
Logistics visibility Omni-channel
Pay-per-use Digital commerce
model factory Digital HR
Prescriptive
Supply Chain Self-service
analytics Integrated digital portals
Machine engineering
Total platform automation
management Digital sourcing Internal Dynamic pricing
knowledge
Digital sharing
modelling, MES Smart
mockup & Warehousing and Personalised
Big data simulation Logistics sales & marketing
analytics & Augmented services
performance reality solutions
management Advanced
Smart spare parts Agile IT
asset mgmt.
management E-payments

Building the digital enterprise 29


Define the Focusing on people Implementing new technologies

capabilities Develop strategies for attracting people Not surprisingly, new technologies will
with the right digital skills. Your success be core to Industry 4.0 pilots. One of
you need with Industry 4.0 will depend on skills the most important will be to develop
and knowledge. Your biggest constraints an agile IT function that can respond
Building on the lessons learned in may well be your ability to recruit new flexibly to business demand. By
your pilots, map out in detail your employees or train existing ones who focusing on creating working solutions
enterprise architecture and what can put digitisation into place. You need and responding to new requirements in
to introduce new roles in your company, an agile approach, an agile IT function
capabilities you need. Include
like data scientists, user interface helps you continuously improve
how enablers for Industry 4.0, designers, or digital innovation services.
like an agile IT infrastructure, managers. And youll probably need to
can fundamentally improve all of update existing job profiles to take into The other core technology capability
your business processes. account new digital skills. is likely to be internet of things (IoT)
management to monitor, control and
The most successful approaches look Improving processes orchestrate large amounts of diverse
at which capabilities are needed to devices and provide central IoT services.
enable new digital business models or One of the most important changes This includes providing functionalities
internal digitisation. To implement a is to focus on an end-to-end process (via software upgrades), communication
new capability, youll need to consider perspective. That will foster new standards and connectivity and to
four strategic dimensions: organisation, collaboration models. Strong user ensure an appropriate level of security.
people, process and technology. interfaces are very important to meet
growing expectations and enable
Fine-tuning your organisation consistent user experiences across
different channels.
New organisational structures could
include: There are also a number of changes
needed to build digital trust. These
Incubators to protect and grow include processes to prepare data
a new business idea which wont security approaches, access rights
be influenced by the legacy control and setup standards in
organisation managing sensitive customer data,
and compliance processes. Youll need
Pods or Centres of Excellence to to establish information assurance Make sure to keep
enable temporarily self-organised
teams without any formal hierarchy
compliance to oversee and evaluate
security requirements. Your goal should
a strong focus on
to solve problems or develop ideas in be to ensure information security and building digital
an interdisciplinary team setup trust in a collaborative environment by trust. Your goal
providing an end-to-end management
Ideation Labs to provide an of risks, threats and security issues. should be to ensure
inspiring, creative, and hierarchy- information
free working atmosphere where a
trial-and-error culture is feasible
security and trust
in a collaborative
environment by
providing an end-to-
end management of
risks, threats and
security issues.

30 2016 Global Industry 4.0 Survey


Become Companies will need to improve master
data management - defining, cleaning up
a data and maintaining data. A first step should
be the identification of functional use
virtuoso cases for early deployment. Youll need
to build your own data pool, based on
Identifying and gathering the real-time cross-functional and externally
right data, deploying it for the connected data, as well as develop a
right purposes and effectively suite of analytics tools, connected to
analysing it will be critical to existing and new data sources. To get
value out of that data, youll also need
make the right Industry 4.0 build direct links to decision-making and
decisions. to intelligent systems design.

Defining and developing an effective A key decision facing companies is the


data analytics strategy will require a choice of data analytics platform, with
focus on: the ideal being one single integrated
solution. Existing ERP systems do not
Predictive analytics and forecasting have full capabilities to handle the
more sophisticated data trends, analytic
Prescriptive analytics methods and algorithms that need to
be used to provide the more advanced
Business-driven decision-making business intelligence and foresight that
will be needed in the Industry 4.0 era.
Automated feedback to the
A more sophisticated approach would
organisation and connectivity to
be to invest in a data integration layer
employees
that is linked to the ERP systems and use
tailored analytics tools by use case.
Consider how you can best organise
data analytics; cross-functional expert
teams are a good first step. Later these
capabilities can be fully embedded
as a standalone function in your
organisation. Transform company boundaries and outward to
partners and customers. Companies
into a digital that remain constrained by functional
silos are unlikely to achieve the
enterprise integration that is so central to Industry
4.0.
Lack of digital skills and
transformation culture top the Cultivating a digital environment can
list of the challenges identified only happen with committed leadership.
Some organisations task the CIO with
by survey respondents. We
leading the digital transformation,
have already highlighted how while others appoint a CDO or other
important strong data analytics executive to lead the effort. Some
capabilities are, but Industry 4.0 companies establish a digital council
calls for other technical skills as that actively manages the development
of digital enhancements, products, and
well.
services from the idea stage through to
Many industrial companies will need to the rollout in operating units. A digital
develop digital skill sets around creative council can support cross-functional
digital strategy design, technology teams in proactively managing a digital
architecture and design, user pipeline.
experience design, or rapid prototyping
Digital transformation will only happen
capabilities.
if top management places Industry 4.0
Without the right digital culture, the squarely at the centre of the C-suite
best talent will not want to stay. But agenda and makes it a top priority.
what does a true digital mindset look
like? Its highly collaborative, crossing

Building the digital enterprise 31


Actively plan Real breakthroughs in performance
happen when you actively understand
an ecosystem consumer behaviour and can
orchestrate your companys role within
approach the future ecosystem of partners,
suppliers and customers.
Industry 4.0 needs to extend
far wider than horizontal and As the value of an ecosystem is driven
vertical integration within by the number of involved partners
and the intensity of their relationships,
your own organisation. First
the biggest challenge is to set the right
movers achieve breakthrough incentives and find suitable benefit
performance by going a step sharing models that compensate
further to understand consumer everyone fairly for his contribution.
needs and use digital technologies The most basic business model in an
ecosystem is a marketplace, which
to create and deliver value to
brings together multiple sellers
the customer in an integrated, and buyers capturing value from
innovative solution. commissions on the transaction value.

Fundamentally this is about developing You may find it difficult to share


complete product and services solutions knowledge with other companies, and
for your customers. Companies you may prefer acquisitions. But look
can evolve their market offering for ways to bridge this gap perhaps
across four layers moving from a with technical standards so that you
traditional, physical core product to a can profit from being part of digital
comprehensive digital ecosystem play. ecosystems, even if you dont fully
In the earlier stages, use partnerships control the entire value chain.
or align with platforms if you cannot
develop a complete offering internally.

Moving from a product-oriented to a platform-focused approach

tal Ecosystem
Digi Digital Ecosystem: With interfaces to suppliers,
partners & customers the product is
embedded in an ecosystem for co-creation
tal Service and additional/ new value capture
Digi
Digital Service: Digitally enabled services which,
in combination with a physical product, can
provide an end-to-end solution to a broader
Augment
gital at customer need
io
Di
Digital Augmentation: Digital customer
n

Core interfaces, visualisation, touchpoints and


Product channels augment the experience and allow a
variety of interaction models
Physical Digital
Core Product: Two possible options at the core

Digital: Data andIT define the products value


proposition and generate standalone
revenues
Physical: Traditional base offering, which can
be digitised by adding digital layers
around it

32 2016 Global Industry 4.0 Survey


About the survey
The PwC Global Industry 4.0
Survey is based on research
conducted between November
2015 and January 2016 with
over 2,000 senior executives from Industry split of surveyed companies
industrial products companies in
26 countries across Europe, the
Americas, Asia Pacific, Middle Forest, paper & packaging 4
2%
Aerospace, defence & security
%
East and Africa. Metals 8%
Industrial
21% manufacturing
The majority of participants were
Chief Digital Officers or other senior Other 8%

executives with top-level responsibility


in their company for Industry 4.0
strategy and activity.
Automotive 9
%
Industry
Results were weighted by country GDP split
to provide a balanced view in global
totals.
Engineering &
Transportation 9 19% construction
& logistics %

Electronics 10%
11% Chemicals

Revenue split of surveyed companies

Greater than Between 100


5,000 21% and 200
18%

Company
Revenue
Split
17% Between 200
and 500
Between 1,000
31%
and 5,000

13% Between 500


and 1,000
in millions of euros

Building the digital enterprise 33


Contacts and
acknowledgements

Authors of the Study Editorial Board

Dr. Reinhard Geissbauer Michael Bruns


Head of EMEA Industry 4.0
Digital Operations Team Steve Eddy
+49 170 939 1263 Derk Fischer
Reinhard.geissbauer@strategyand.de.pwc.com Ralf Hombach

Jesper Vedso Bjorn Johansson


Global IP Industry 4.0 Champion Kumar Krishnamurthy
+45 3945 9144 Elizabeth Montgomery
jrv@pwc.dk
Achim Reimann
Stefan Schrauf Costas Vassiliadis
Head of PwC Strategy& Industry 4.0 Team for
Ruud Wetzels
Germany
+49 895 790 5317
stefan.schrauf@strategyand.de.pwc.com Data analysis

Project Management Morten Grunwald


Oliver Krieg
Usha Bahl-Schneider
Marc Mnch
Stefanie Zuberer
Jens Wunderlin

PwC thanks all the participants who took time to participate in the survey

This is the second edition of our Industry 4.0 survey, and the first truly global survey.
We would also like to take this opportunity to thank the Industry 4.0 survey project team
and PwC colleagues around the world who have helped make this report possible.

34 2016 Global Industry 4.0 Survey


Industry 4.0 Contacts

Australia
Matthew Benwell India Singapore
+61 407 045 947 Bimal Tanna Whee Teck Ong
matthew.benwell@au.pwc.com +91 22 6669 1555 +65 6236 3388
bimal.tanna@in.pwc.com whee.teck.ong@sg.pwc.com
Andreas Wasita
+61 433 998 421 Sudipta Ghosh South Africa
andreas.wasita@pwc.com +91 22 6669 1311 Pieter Theron
sudipta.ghosh@in.pwc.com +27 11 287 0501
Austria pieter.l.theron@za.pwc.com
Alexander Soukup Italy
+43 1 501 88 2973 Gabriele Caragnano Tielman Botha
alexander.soukup@at.pwc.com Milan +27 11 287 0638
+39 02 6672 0445 tielman.botha@za.pwc.com
Jrg Busch
gabriele.caragnano@it.pwc.com Spain
+43 1 501 88 1105
joerg.busch@at.pwc.com Japan Charles Kirby Isasi
Masahiro Ozaki +34 944 288 800
Brazil charles.kirby.isasi@es.pwc.com
+81 3 5251 2844
Sergio Alexandre
masahiro.ozaki@strategyand.jp.pwc.com Sweden
+55 11 3674 2000
sergio.alexandre@pwc.com Naohide Nomura Stefan Hedvall
+81 3 5251 2844 +46 10 212 9661
Ronaldo Valino stefan.hedvall@se.pwc.com
naohide.nomura@jp.pwc.com
+55 21 3232 6139
ronaldo.valino@pwc.com Luxembourg Switzerland
Gilles Vanderweyen Roger Mller
Canada +41 58 792 16 37
+352 49 48 48 2156
Matthew Wetmore roger.mueller@ch.pwc.com
gilles.vanderweyen@lu.pwc.com
+1 403 509 7483
matthew.b.wetmore@pwc.com Mexico UK
Arturo Martinez Bjrn Johansson
China London
Mexico City
Grace Tang +44 7900 163265
+52 55 5263 8516
+86 10 6533 2999 bjorn.johansson@strategyand.uk.pwc.
arturo.martinez@mx.pwc.com
grace.tang@cn.pwc.com com
Middle East
Denmark US
Dr. Anil Khurana
Jesper Vedso Robert McCutcheon
+971 4 304 3652
+45 3945 9144 +1 412 355 2935
anil.khurana@ae.pwc.com
jesper.vedso@dk.pwc.com robert.w.mccutcheon@pwc.com
Netherlands
Finland Kumar Krishnamurthy
Michel Mulders
Antti Niku +1 248 390 0940
+31 8 8792 3165
+358 9 2280 1512 kumar.krishnamurthy@pwc.com
michel.mulders@nl.pwc.com
antti.niku@fi.pwc.com
Poland
Kimmo Nieminen
Mariusz Dziurdzia
+358 40 5780 377
+48 7 1366 1217
kimmo.nieminen@fi.pwc.com
mariusz.dziurdzia@pl.pwc.com
France
Maciej Korzeniowski
Benoit Romac
+48 2 2746 6106
+33 1 44 34 30 83
maciej.korzeniowski@pl.pwc.com
benoit.romac@strategyand.fr.pwc.
com Portugal
Antonio Correia
Germany
+351 22543 3248
Dr. Reinhard Geissbauer
antonio.correia@pt.pwc.com
+49 89 5790 6138
reinhard.geissbauer@strategyand. Joao Rui Baptista
de.pwc.com +351 21359 9344
joao.rui.baptista@pt.pwc.com
Stefan Schrauf
+49 89 5790 5317
stefan.schrauf@strategyand.de.
pwc.com
www.pwc.com/industry40

At PwC, our purpose is to build trust in society and solve important problems. Were a network of firms in 157 countries with more than 208,000 people who are
committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the
information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or
completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents
do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining from acting, in reliance on the
information contained in this publication or for any decision based on it.
2016 PwC. All rights reserved. PwC refers to the PwC network and/or one of more of its member firms, each of which is a separate legal entity.
Please see www.pwc.com/structure for further details.