IDC FutureScape

IDC FutureScape: Worldwide Manufacturing 2019 Predictions

Simon Ellis Jeffrey Hojlo Neel Mandal Reid Paquin
Aly Pinder Kevin Prouty Maggie Slowik Lorenzo Veronesi

IDC FUTURESCAPE FIGURE

FIGURE 1

IDC FutureScape: Worldwide Manufacturing 2019 Top 10 Predictions

Note: Marker number refers only to the order the prediction appears in the document and does not indicate rank or importance,
unless otherwise noted in the Executive Summary.

Source: IDC, 2018

October 2018, IDC #EMEA43135818

EXECUTIVE SUMMARY

Key themes woven into our worldwide manufacturing top 10 predictions for 2019 include the focus on
digital transformation (DX), manufacturing business ecosystems, supply chain management, product
and service innovation, and smart manufacturing. These predictions span the manufacturing value
chain, as DX continues to be embraced by all parts of the business. This IDC study provides
manufacturers with the top 10 predictions and underlying drivers that we expect to impact
manufacturers' IT investments in 2019 and beyond. Technology leaders and their counterparts in the
line-of-business (LOB) operations can use this document to guide their IT strategic planning efforts.

Over the next few years, we believe some of the most notable changes in the industry will be:

1. Prediction 1: Pushed by the success of early adopters, over 40% of manufacturers will have
enterprisewide digital transformation initiatives in place by 2021.
2. Prediction 2: By 2022, 35% of manufacturing organizations will have created new ecosystems
by implementing AI- and blockchain-centric platforms, thus automating 50% of processes.
3. Prediction 3: By 2022, driven by rising customer expectations and competition from the
platform economy, 25% of manufacturers will be engaged in cross-industry collaboration,
resulting in a 10% revenue increase.
4. Prediction 4: By 2020, to increase speed, agility, efficiency, and innovation, 80% of
manufacturers will need to extensively restructure, placing data at the center of their
processes.
5. Prediction 5: By 2021, 60% of manufacturers will have empowered shop floor workers with
AR/VR, intelligent apps, and cobots, thus achieving productivity gains of up to 7% and more
attractive work environments.
6. Prediction 6: By 2024, over 60% of G2000 manufacturing organizations will rely on artificial
intelligence platforms to drive digital transformation across the supply chain, leading to
productivity gains of over 20%.
7. Prediction 7: By 2022, digital technologies will have enabled the automation of repetitive
operational tasks, leading to 50% less planner intervention and "touchless" sales and
operations planning.
8. Prediction 8: By 2024, 50% of manufacturers will network related product and asset digital
twins into digital twin ecosystems, for a systems-level view of their business and 5% reduction
in cost of quality.
9. Prediction 9: By 2021, 90% of manufacturers will leverage real-time equipment and asset
performance data to self-diagnose issues in advance and trigger a service intervention to
avoid unplanned downtime.
10. Prediction 10: By 2023, 50% of the spend on DX initiatives in manufacturing will come from
dedicated digital transformation budgets, instead of traditional IT or LOB budgets.
This IDC study provides manufacturers with our top 10 predictions for 2019.

According to Reid Paquin, research director, IT Priorities and Strategies, IDC Manufacturing Insights,
"The manufacturing industry continues to evolve. Digital transformation is a discussion that has
touched every part of the value chain. No matter if you work in design, the supply chain, operations, or
service, the adoption of digital capabilities to create business value has become critical to success.
Our predictions create a framework for IT and line-of-business executives to plan and execute
technology-related initiatives in the years ahead."

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IDC FUTURESCAPE PREDICTIONS

The manufacturing industry is changing faster than ever before. Digital technologies like cloud, mobile,
big data and analytics, and Internet of Things (IoT) have been drivers in the industry for years, and
companies of every size must embrace these tools. Manufacturers also have high expectations for the
business value of technologies that are in earlier stages of adoption, such as edge computing,
cognitive computing/artificial intelligence (AI), collaborative robots (cobots), autonomous vehicles, 3D
printing, augmented reality/virtual reality (AR/VR), and even blockchain. Digital transformation is truly
under way in most businesses, especially manufacturers — that are feeling the impact in all parts of the
organization. In the past, manufacturers have been laser focused on productivity improvements (how
can I do more with less); however, that is no longer the best measure of success. While efficiency
gains are an important objective, forward thinkers are looking to innovate, changing entire business
models, and moving into market adjacencies. This market disrupting shift allows for true differentiation
from peers and sets up these digitally transformed manufacturers for success in the near and long
terms. The results of this shift can be seen across the value chain, with DX initiatives such as the
thinking supply chain, connected products and services, and Industry 4.0/smart manufacturing.

Summary of External Drivers

 Rising customer expectations: More convenience, customization, and control
 Sense, compute, actuate: Turning data into value
 Platforms, platforms, platforms: Industry competes for innovation at scale
 The race to innovate: Speed of change, delivery, and operations separates thrivers and
survivors
 Next chapter of DX: Technology-driven transformation altering business and society
 Legacy inertia: Retrofit the old into the DX world
 Emerging autonomy: Learning to live with AI

Predictions: Impact on Technology Buyers

Prediction 1: Pushed by the Success of Early Adopters, Over 40% of
Manufacturers Will Have Enterprisewide Digital Transformation Initiatives in
Place by 2021
Today, survival of the fittest is linked not to size or strength but to the ability to change — to move
quickly, adapt, seize opportunities, and be agile. In an attempt to go faster, many manufacturers
struggle under a legacy of silos and innovations stagnate with redundancy and inconsistency.
Capturing a piece of the digital transformation opportunity is at the center of business strategies today.
The impact is felt across all functional domains and will change how companies judge success and
source talent. Across all industries, this amounts to an opportunity for an annual economic value-add
of $18.5 trillion, or nearly 25% of global GDP. For the manufacturing industry, the opportunity is higher
than most, representing $4.5 trillion of the $18.5 trillion opportunity. Because the stakes are so high,
manufacturers have made concerted efforts to begin their digital transformation journeys.

In fact, last year global organizations spent $1.2 trillion on digital transformation, with discrete and
process manufacturers contributing almost 30% of this spending. Even though the investment for DX is
high (and the opportunity high), most manufacturers still approach it in a siloed manner, sticking to
pilots or proof of concepts (POCs). Currently, less than 15% of all manufacturers have DX initiatives in
production enterprisewide, which is the only way to truly transform. While most organizations are
attempting DX, only a small percentage are getting it right. Early attempts are met by subsequent
challenges of change management, budget, organizational silos, scale, and sustainability.

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However, manufacturing has always been driven by forward thinkers. Competition has never been
higher across the industry, and failing to adopt DX is not an option for manufacturers. That small
fraction of companies with DX across the enterprise will have a leg up on their peers. This success will
push the rest of the industry even further and also provide best practices that others can follow on their
own DX journeys. Manufacturers of every size and segment must adapt to new technologies, new
players, new ecosystems, and new ways of doing business.

Associated Drivers
 Next chapter of DX: Technology-driven transformation altering business and society
 Sense, compute, actuate: Turning data into value
 The race to innovate: Speed of change, delivery, and operations separates thrivers and
survivors
IT Impact
 DX will require substantial investment with respect to IT infrastructure, manpower, and support
services for operational sustenance.
 IT will need to shift away from siloed enterprise systems; DX is driven by platforms and
ecosystems.
 More of the DX workload will shift away from IT only, to more of a collaborative effort between
IT and the line of business.
Guidance
 Build a road map for your company's DX journey — what does transformation mean to your
business and what do you need to do to get there.
 Approach DX in a holistic manner — get all stakeholders involved from the start so that pilots
and POCs don't fail.
 Invest in a digital platform to serve as the foundation for your business' transformation.
Prediction 2: By 2022, 35% of Manufacturing Organizations Will Have Created
New Ecosystems by Implementing AI- and Blockchain-Centric Platforms, Thus
Automating 50% of Processes
Pure-play manufacturing are things of past. The massive adoption of digital is helping manufacturing
companies reimagine how they do business. Their business models are changing from solo
enterprises to ecosystems. Jack Ma, the executive chairman of Alibaba Group, recently quoted "New
Manufacturing" is the way of the future. Ma goes on, saying "New Manufacturing is the perfect blend
between manufacturing and service. A company's competitive strength won't lie in its manufacturing
capabilities, but rather measured by the company's underlying innovative thinking, customer
experience, and service capabilities." The manufacturing, tech, and service sectors will become more
interconnected, paving the way for creating a new platform out of traditional product economy.
Product-centric economy only produced a single revenue stream, while platforms — that connect
distinct groups of vendors and enable their direct interaction — can generate multiple revenue streams,
hence is more attractive. Platform models bring a paradigm shift — from single interaction to meet a
specific customer need to encouraging mass-market adoption to maximize the number of interactions.
This will be attracting many more users and vendors as multiplier effect. Technology developments
like open source, vendor-neutral platforms enable an ecosystem of plug-and-play components that
unifies the marketplace, and manufacturers can cash in on a massive opportunity to make innovative
products with new levels of personalization and efficiency.

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While platforms are still emerging in various forms and shapes, the early trends indicate the following
trends of four manufacturing platforms:

 Coordination/collaboration platform: Where participants offer complementary products and

services
 Information exchange platform: Allows technology-based integration of disparate systems
 Shared application platform: Developed to create a wide portfolio of assets to proliferate
sharing
 Marketplace/commerce platform: Facilitates customers and providers to find each other and
transact
Going by the recent stock market trend, in the near future, a large number of the aforementioned
platform companies will be the world's most valuable manufacturing companies by market
capitalization.

Associated Drivers
 Rising customer expectations: More convenience, customization, and control
 Next chapter of DX: Technology-driven transformation altering business and society
 Platforms, platforms, platforms: Industry competes for innovation at scale
IT Impact
 The backbone of ecosystem organizations are digital technologies like big data, blockchain,
IoT, and automation. IT needs to realign the traditional IT skill set and reequip to match the
"solution approach" of the ecosystem and ensure seamless service to the players.
 Because of multiple participants, security and control will be of paramount importance, and
balancing it with easy and timely access to data will be the key task for IT.
 IT will face new project management challenges with multiple stakeholders' management and
multiparty expectation management skill.
Guidance
 Identify the relevant digital technologies (one or more) for the nature of specific ecosystems
and use cases that your organizations have participated and then align the IT resource and
investment to build an AI and blockchain platform.
 Do detailed due diligence for access to data and tool for all ecosystem participants and
introduce layers of access — control mechanism to balance the accessibility and security.
 Adjust to the new paradigm shift in project and expectation management in terms of
organizational structure, organizational dynamics, decisioning process and even measuring
project success or failure.
Prediction 3: By 2022, Driven by Rising Customer Expectations and
Competition from the Platform Economy, 25% of Manufacturers Will Be
Engaged in Cross-Industry Collaboration, Resulting in a 10% Revenue Increase
Manufacturers have unanimously accepted the fact that their customers don't see them any more as a
mere supplier of a piece of product but as the potential source of an end-to-end solution. Product
functionality as service without the hassles of owning and maintaining is going to be the new market
for the manufacturers. Moreover, they want personalized services with a competitive price tag. This
presents a great opportunity for manufacturers to expand their existing market and serve new
customers or complementary needs of the existing customers. Let's take the case of an automotive

©2018 IDC #EMEA43135818 5

manufacturer capable of producing a technically superior car. However, to maximize the overall driving
experience and ownership, it must look into multiple other complementary products or services
features like: in-car entertainment, passenger's engagement (gaming), easy maintenance, parking and
so forth, requiring a syndication approach. It must reevaluate the role of existing vendors and partners
and then play along with external entities or contractors. A recent case in point is automotive players
providing car's trunk as storage/locker facility for delivering consignment from Amazon Retail. Enabled
through smart locks and a cloud-connected camera, this cross-industry coloration proves how
customer needs can be met by extending the core industry definition. We at IDC observe healthy
trends of collaborative growth with the natural adjacent industry (e.g., retail-CPG company's referral) or
even with disconnected sectors (e.g., automotive and delivery services). Profit margin per transaction
may be lower when selling through ecosystems, but access to a wider consumer base will generate
more demand than it otherwise would compensate that. Growth outside the box also comes with
greater role in innovation, production, and distribution — improving efficiencies and optimizing product
and service levels from start to finish. There might be a temporary sense of a loss of business control;
in the midterm to long term, cross-industry collaboration-based ecosystem will be a winning play.

Associated Drivers
 Platforms, platforms, platforms: Industry competes for innovation at scale
 Rising customer expectations: More convenience, customization, and control
IT Impact
 The onus of supporting and even opening new business models is on IT. IT needs to be more
sophisticated with a wide variety of digital technologies — it's adoption, proliferation, and real-
life application.
 IT requires new approaches to managing technology: integrating multiple loose ends of all
ecosystem participants with open architecture as well as tight security.
 IT will be playing a bigger role than just an enabler. It will be placed on the high table of
discussing data-driven business models.
Guidance
 Scan the business landscape to identify partners for complementary data-driven offerings
through collaboration. Reevaluate old-economy KPI and assign responsibility and reward to
create a data-driven business model.
 Embrace "give up control to gain revenue" mindset to reap the rich payoffs of a well-conceived
and well-executed ecosystem strategy.
 Rejig the "support" mindset to a "line" mindset and onboard or train people who can conceive
and discuss business model with business.
Prediction 4: By 2020, to Increase Speed, Agility, Efficiency, and Innovation,
80% of Manufacturers Will Need to Extensively Restructure, Placing Data at
the Center of Their Processes
The first of the three principles that IDC defines for smart manufacturing is geared upon factories of the
future being "data hungry." In practice, this means that data will be at the center and permeating every
key process step. The input phase, where materials and components are sourced to the factory; the
manufacturing process itself; and the output phase, when the final products are released.

In detail:

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  In the input, raw material and components are now coming with embedded information about
their genealogy and suppliers, as well as the assembly instructions.
 The process itself will be more and more defined and supported by a continuous interplay and
information handover between workers, machines, and business applications. Therefore,
every step in a modern manufacturing plant can potentially be digitized and made visible in
real time.
 In the output phase, the final product is also data centric. Many factories will be dedicated to
produce connected and smart products, which will feed back and report their status to the
plant while in operation, to "request" a spare part to be produced for a maintenance job or to
report a quality issue that can be potentially addressed on the actual product via a rework in
the factory or — on the product line — via a process fine-tuning.
Technologies such as IoT, cloud, pervasive mobility, AR tools, and blockchain are all contributing or
will contribute to this vision. But most importantly, it is the vision of companies that see manufacturing
plants as a technology-driven enabler to business success. For the first time in history, manufacturers
realize the fact that their plants are capable of generating much more data than the current process
can possibly benefit from. Mastering their factory floor processes will enable them to become
proactively disruptive in their market segments, not only by delivering fantastic high-quality products
but also by leveraging transformative business models that entail demand-driven manufacturing, agile
production processes, lot size one, and mass customization. But to do so, they will have to reconsider
their factory vision, to the point of turning it upside down, in a data-centric Copernican Revolution.

Associated Drivers
 Next chapter of DX: Technology-driven transformation altering business and society
 The race to innovate: Speed of change, delivery, and operations separates thrivers and
survivors
 Sense, compute, actuate: Turning data into value
IT Impact
 "Data first" will gradually become the design principle of new plants and the guideline driving
brownfield improvements. This will require IT leaders to step up and be involved in the plant
design steps.
 Ensuring data flows across the plant will be as essential as process execution optimization,
and this will create pressure on IT.
Guidance
 Consider the plant as a living organism, whose capabilities augment as IT evolves.
 Look for IT-savvy factory leaders to assemble a solid core of capabilities to drive innovation.
Prediction 5: By 2021, 60% of Manufacturers Will Have Empowered Shop Floor
Workers with AR/VR, Intelligent Apps, and Cobots, Thus Achieving Productivity
Gains of up to 7% and More Attractive Work Environments
In today's economies, it is not possible to consider factory workers to be a commodity resource. IDC's
vision of the factory of the future is centered on the capability of decision makers to provide the
necessary levels of flexibility and agility to the processes through their decision-making capability. This
is creating competition among manufacturers to attract the best talent. At the same time, the
advancements in automation technology are making the concept of "lights-out factories" a distinct
possibility.

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The solution to this apparent dichotomy is to make workers more productive in doing more and more
complex activities by augmenting workers' capabilities with technology. IDC sees three main factors of
augmentation for the worker:

 Augmenting the brain (i.e., the information management capability). First and foremost, this
approach enables the setup of interactive and data-powered workstations, which ensure
processes are carried on properly and quality issues are prevented in real time. For example,
digital "poka-yoke" systems enable the collection of production and labor performance KPI and
efficient quality audit.
 Augmenting the senses. In this context, wearables play a key role — think wristband or
eyewear that has processing capability. There are many circumstances where hands-free
operation of devices is essential, especially in equipment maintenance. Also, the ability to
deliver augmented reality will be valuable, in particular to support assembly procedures and
training. AR technologies do not depend on eyewear, however. There are examples where the
work instruction can be projected on the floor or on the workbench. Wearable devices also
work as a communication tool, for remote "over the shoulder" assistance (eyewear), or simple
messaging (wristbands and smart watches).
 Augmenting the physical capabilities. We see the proliferation of machines (e.g., cobots,
AGVs, and mobile robots) that have the capability to work alongside human workers to support
them in the execution of specific tasks. Such tasks may require a particular level of dexterity,
strength, endurance, or simply are too repetitive and monotonous to be executed consistently
by a human being. Furthermore, there are technologies (mostly deployed in logistics use
cases at this point) that create an exoskeleton that the users can leverage to augment their
own physical strength and endurance capabilities.
Associated Drivers
 Next chapter of DX: Technology-driven transformation altering business and society
 Emerging autonomy: Learning to live with AI
 Platforms, platforms, platforms: Industry competes for innovation at scale
IT Impact
 IT will be demanded to push a constant stream of innovation as these technologies obsolesce
fast.
 From "man versus machine" to "man with machine," deployments will raise attention from
media and press. This will increase the pressure on IT to deliver.
 The nature of skills required for shop floor workers will be radically transformed, with people
that are comfortable with data-driven decision making being at the forefront. What does this
mean to IT?
Guidance
 Plan big but start small. Leverage the low-hanging fruit to secure consensus around bolder
initiatives.
 Evaluate the tradeoffs between establishing long-term partnership with key technology and
hardware providers or shopping on the market for the best alternatives.
 Pay attention to the user feedback and establish review council to assess deployment impact.

©2018 IDC #EMEA43135818 8

Prediction 6: By 2024, Over 60% of G2000 Manufacturing Organizations Will
Rely on Artificial Intelligence Platforms to Drive Digital Transformation Across
the Supply Chain, Leading to Productivity Gains of Over 20%
The past few years saw a massive increase in the globalization drives that have led to increased
complexity across the complete supply chain networks. The number of digital transformation drives
has increased exponentially in the past few years as substantiated by the following: According to IDC's
customer insights, digital transformation spend in 2017 in the manufacturing sector amounted to $316
billion and is expected to grow at a CAGR of 18.8% for 2017–2021.

The growth of 3rd Platform technologies such as mobility, cloud, and analytics will continue to have a
strong bearing on the way data generated would be monitored and consumed. In addition, the data
analysis that is done will lead to further insights that can help organizations realize the untapped value
in the existing supply chains. Bringing in automation along with critical data points will enhance the
decision-making ability and bring in an element of cognition in the operational supply chain platforms
and bring us one step closer to the thinking supply chain.

Further, this unstructured data will also aid in bringing context to business problems, making the
solutions comprehensive, which can positively impact productivity across the value chain. Currently,
organizations are looking to apply machine learning algorithms to automate tasks such as supplier
selection, logistics route optimization, and inventory management that has resulted in significant
savings and seamless data streams effectively increasing the overall efficiency and productivity.

Associated Drivers
 Next chapter of DX: Technology-driven transformation altering business and society
 Sense, compute, actuate: Turning data into value
 Emerging autonomy: Learning to live with AI
IT Impact
 Artificial intelligence would require substantial investment with respect to IT infrastructure, man
power, and support services for operational sustenance.
 Real-time data capture will be core to the success of AI-driven platforms, and to enable this,
remote connectivity options will be critical.
 IT security will be a major aspect that ultimately determines the confidence with which
organizations would be ready to share and exchange data.
Guidance
 Sell the idea of automation and AI internally to ensure that the workforce understands the
implications — not as technology instead of people but as technology with people.
 Integrate the enterprise systems so that insights from various AI platforms can be integrated
for operational execution.
 Redefine the underlying processes for ensuring that the data and insights that are generated
are seamlessly integrated with the enterprise systems. DX drives are more than technology
rollouts.

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Prediction 7: By 2022, Digital Technologies Will Have Enabled the Automation
of Repetitive Operational Tasks, Leading to 50% Less Planner Intervention and
"Touchless" Sales and Operations Planning
Supply chain planning has tended, historically, to be a high-touch, intellectually intense activity within
the supply chain. It was not too many years ago that Ph.Ds. in forecasting were commonplace in the
supply chain. But a lot has changed. Modern supply chain planning systems now provide much of the
algorithmic knowledge, and deep expertise has largely given way to broad business knowledge and
strategic expertise. This is particularly true with the sales and operations planning (S&OP) process,
which, when provided with the proper data and equipped with workflow and decision-support
capabilities, can function as an automated entity for most of its required effort. Indeed, as new data
sources become available, and practical, from nontraditional sources like social media tools and IoT
(sensors), best-in-class S&OP tools will integrate these in real time with traditional ERP-based data —
and they will do it across the entire enterprise in real time. Indeed, technologies like IoT and machine
learning enable automation of repetitive/operational tasks, which leads to less planner intervention or
even "touchless planning."

Partly this will be about a use case that drives efficiency, but it also reduces latency and enhances
supply chain planning "intelligence." In other words, it enables a level of supply chain planning and
S&OP performance heretofore unachievable. At IDC, we argue that the supply chain is key to
supporting new business models, and planning is key to supporting the supply chain — the evolution to
an automated, touchless S&OP is a key part of the future of the supply chain.

Associated Drivers
 Next chapter of DX: Technology-driven transformation altering business and society
 Sense, compute, actuate: Turning data into value
 Emerging autonomy: Learning to live with AI
IT Impact
 IT will need to both support a diverse, enterprisewide network of planning "entities" to enable a
truly collaborative consensus planning process and identify the optimal integration points for
new data sources.
 Moving to a digital supply chain planning suite should be part of the IT road map.
 IT will be most effective by aligning multifunctional perspectives and goals under one project
umbrella.
Guidance
 Integrated planning (and execution) is not just a nice to have; it is a must-have.
 Digital business planning must encompass the entire value chain and should not be just within
a company's four walls.
 Stop planning in silos within your company (demand planning, supply planning, inventory
planning); include multitiered suppliers.

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Prediction 8: By 2024, 50% of Manufacturers Will Network Related Product and
Asset Digital Twins into Digital Twin Ecosystems, for a Systems-Level View of
Their Business and 5% Reduction in Cost of Quality
Digital twins, or virtual representations of products and assets, can be used to manage multiple
aspects of a manufacturing business, including highly complex, customized products and connected
assets, such as manufacturing plants or facilities and the assets within them. Data and processes from
multitier supply chains, service plans and execution, and the operating environment perpetually feed
digital twins to ensure the most up-to-date view of the past, current, and future performance and
condition of products, assets, facilities, and plants.

Digital twins are being used in fixed asset-intensive industries like oil and gas and utilities to operate
individual assets and model asset performance within the collective asset of the plant. These are the
early stages of digital twin ecosystems, where assets are continually monitored and optimized.
Engineering-oriented companies like automotive and aerospace, as well as technology-oriented
companies like high tech and semiconductor, will be next to move to this approach as the velocity at
which they need to respond to demand and manufacture products is increasing exponentially. In this
scenario, as demand shifts or ramps up and customer needs and requirements change, manufacturing
assets and processes need to be flexible.

These fixed assets in a plant or facility, as well as mobile assets such as automotive or heavy
equipment fleets, also need to be modeled and validated quickly and accurately so that time-to-market
goals are met. For automotive and heavy equipment companies with vehicles that someday soon will
be autonomous, the multiple digital twins of each vehicle can be used to monitor and optimize
performance and ensure functional safety within their environment — city, town, mine, or construction
site. This is the next stage of digital twin maturity — brought to life through simulation and Internet of
Things — where multiple digital twins of assets and their relationship can be viewed through
ecosystems of digital twins.

Associated Drivers
 Sense, compute, actuate: Turning data into value
 Platforms, platforms, platforms: Industry competes for innovation at scale
 Emerging autonomy: Learning to live with AI
IT Impact
 There will be a need to manage the influx of data from connected products and assets, as well
as ongoing embedded application development within those products.
 Simulation, application development software tools, and digital twins ensure fidelity of the
product or asset model along the related life cycle — from early stage ideation to cross-team
and value chain collaboration. Low-code development platforms that enable business users to
develop applications to access data can complement this approach.
 Security protocols, authentication, and threat detection technologies should be updated to
secure the data and models your team shares through digital twins, whether internally,
externally with partners, or at the edge in the connected product/asset itself.
Guidance
 Manage related networks of asset and product digital twins in your facilities, plants, and
ecosystem of products by leveraging related data and innovation accelerators like IoT and

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 cognitive analytics to optimize quality and customer experience. Taking this approach,
according to our research, leads to faster monetization.
 Apply digital twins using a scale of complexity need, where they can support simple
collaboration and communication internally and externally, up to operation of networks of
digital twins.
 Make security technology and policy upgrade a priority.
Prediction 9: By 2021, 90% of Manufacturers Will Leverage Real-Time
Equipment and Asset Performance Data to Self-Diagnose Issues in Advance and
Trigger a Service Intervention to Avoid Unplanned Downtime
Customers expect faster, better service. And this enhanced service experience needs to come at the
right cost and be at a high level of quality. This level of service is not easy to deliver and can't be
executed within a vacuum or silo with manufacturers working alone. More and more customers are
willing to play a role in their own service experience if they are properly educated, trained, and
incented, and as importantly, the issue is resolved correctly. Not every service issue requires a service
technician to be sent out within a four- to eight-hour window. In IDC Manufacturing Insights' IoT
Survey, 41.9% of manufacturers stated that they used analytics and connected asset data to deliver
preventative and predictive maintenance and service.

Artificial intelligence and machine learning enable manufacturers to go well beyond just proactive
service to sense issues before failure occurs or even as product performance displays the slightest
signs of degradation. In the age of the IoT, no longer is capturing data the challenge, it's all about what
you do with the information being gathered every millisecond. The opportunity to leverage real-time AI
and machine learning to not only identify anomalies but also trigger a service call or event provides a
leap into the future of service excellence, which couldn't be imagined without this level of insight.

Associated Drivers
 Rising customer expectations: More convenience, customization, and control
 Sense, compute, actuate: Turning data into value
 The race to innovate: Speed of change, delivery, and operations separates thrivers and
survivors
IT Impact
 Data from asset performance management systems and service technology that is not
integrated will fail to ensure service events can be triggered predictively.
 Silos of data ensure the front-line service team doesn't get access to product and asset data
while in the field.
 Data from the product to service enables better asset utilization, faster issue diagnosis, and
shorter time to repair and resolution.
Guidance
 Provide partners, the field team, and suppliers with asset performance data to ensure they can
address any issues predictively to ensure issues can be resolved without a service call.
 Equip the field team with access to data across technology systems to empower them with
real-time data and intelligence.
 Form cross-functional teams of product engineers and designers, production, marketing and
sales, and field service engineers to innovate self-diagnosis and self-healing products to
further provide enhanced customer value.

©2018 IDC #EMEA43135818 12

Prediction 10: By 2023, 50% of the Spend on DX Initiatives in Manufacturing
Will Come from Dedicated Digital Transformation Budgets, Instead of
Traditional IT or LOB Budgets
In the past few years, we have witnessed the evolution of digital transformation and the disruptions
and opportunities it poses for business and society. The pressure to invest in DX for business
outcomes and advancing maturity is tremendous and only increasing. This is particularly true for
manufacturing organizations, as they account for roughly 30% of the total spend on DX. Manufacturers
must either become adept at digital transformation or struggle to survive.

One of the most commonly asked questions from companies that are looking to start their own DX
initiatives is "How will we pay for it?" Funding initiatives within manufacturing is no small feat,
especially for something like digital transformation, as there are so many groups that need to be
involved to succeed. There are three main areas where budget comes from that is spent on technology
and services to support digital transformation initiatives. The first two areas are ones that come as no
surprise: IT organizations and line of business/functional organizations. However, the third area is one
that has been growing in recent years with the rise of DX, a digital transformation budget. These are
new teams dedicated solely to the transformation efforts within a manufacturer, with some companies
going so far as to name chief digital officers (CDOs).

Also, there are many ways manufacturers are looking to find the funding for their DX initiatives —
through built-up cash reserves, making dividend reductions, directly from capital budgets, or cost-
cutting efforts. However, there is one more way, digitally determined organizations are also more likely
to use the new sources of revenue that they will be generating from DX — essentially having DX pay for
itself. The stakes are high when it comes to digital transformation in manufacturing. While most
organizations are attempting DX, only a small percentage are getting it right. Making sure that you
actually have the budget to undertake these initiatives is something all companies must answer,
forming a digital business unit will be an important first step in getting that question answered.

Associated Drivers
 Next chapter of DX: Technology-driven transformation altering business and society
 The race to innovate: Speed of change, delivery, and operations separates thrivers and
survivors.
 Sense, compute, actuate: Turning data into value
IT Impact
 DX will require substantial investment with respect to IT infrastructure, manpower, and support
services for operational sustenance.
 Some budget that has traditionally been allocated to IT will shift to newly created digital
business units.
 The manufacturing infrastructure will need to be assessed to ensure that it can support a
digital enterprise.
Guidance
 Start with smaller incremental improvements that itself funds the next step in your
transformation journey such as new product introductions and x-as-a-service models.
 Form a dedicated business unit for digital transformation with its own budget to drive success
on these initiatives — DX requires the right structure and culture.

©2018 IDC #EMEA43135818 13

  Hire a chief digital officer to align the digital transformation road map with the business road
map and ensure that digital projects are integrated across the organization.

ADVICE FOR TECHNOLOGY BUYERS

Throughout this document, we've detailed guidance specific to each of the 10 predictions; in addition,
we recommend that manufacturers take the following approaches to ensure they are maximizing the
value they derive from both current and future technology investments:

 Talent, talent, talent. There is a major skills gap within manufacturing that will not get better
anytime soon without action. Make sure you have a process in place to capture the knowledge
of your more senior employees and provide your employees with ways to collaborate and
learn together. Talent can be your most valuable resource; make sure that you are constantly
cultivating it across the organization.
 Review your foundation. Most manufacturing plants are lucky if they can connect to half of
their assets on the floor. Digital transformation requires you to be ready for increasing levels of
digitally enabled products and processes. This isn't just about your applications, datacenters,
and networks; it's also about core enterprise architecture and infrastructure decisions, such as
IT/OT integration and security.
 Create a single source of the truth. Data within your enterprise and from connected products,
supply chains, and assets will increasingly be the starting point for new initiatives.
 No "technology for technology's" sake. Make sure that you are solving business problems or
seizing on the opportunities that digital transformation can bring. Work with technology
partners and focus your efforts on how technology helps solve existing business problems or
in anticipation of future ones.
 Invest in the short and long terms. Look for technologies that provide efficiency/effectiveness
today yet enable future capabilities that support your company's digital transformation road
map. Investing in an IoT platform for example can drive immediate process improvements but
also set you up to capitalize on new products/services in the future.
 Implement a partner ecosystem. No company can transform by itself; develop a network of
partners (small and large) to accelerate your IT capabilities and serve the line of business.
There are external resources and expertise dedicated to the enablement of DX. These
partners can help you move quickly and effectively, which is essential in today's global
marketplace.

EXTERNAL DRIVERS: DETAIL

Rising Customer Expectations: More Convenience, Customization,

and Control
 Description: As disruptive organizations leverage breakthroughs in cloud, mobile, social, and
AI to deliver personalized, rewarding, and immediate experiences, customers have more
choices than ever. New devices and interfaces, wearables, AR/VR, home automation,
information, and connectivity are combining to instill a belief that people can have what they
want — when, where, and how they want it — and, at the same time, be in control of the data
and their experience. Yet AI-based consumer reputational scoring may be at odds. Emerging
economies are bringing hundreds of millions of new customers that businesses are competing
to win. Enterprises live and die by Net Promotor Scores, apps, network integration, and more.

©2018 IDC #EMEA43135818 14

  Context: With new customer expectations being set by thriving companies that disrupted
markets, the previously accepted levels of customer service are no longer good enough. New
platforms and business, operational, and organizational models are required to meet
consumer expectations. Customers now expect real-time support with answers to complex
questions ready at the click of a button. More people are willing to share personal data in
exchange for better service, but they also want more control around their personal data.

Sense, Compute, Actuate: Turning Data into Value

 Description: Today, data and intelligence represent a unique opportunity for creating
unimaginable value. IoT, mobile devices, and big data — combined with historical data,
systems of record, and global information — continually sense an environment and put it into
new contexts. Combined with AI and machine learning, organizations are spreading
intelligence from the edge to the core to turn data into value. However, it is harder than it
appears. Winners are differentiated by the ways they leverage data to deliver meaningful,
value-added predictions and actions for personalized life efficiency and convenience,
improving industrial processes, health care, experiential engagement, data monetization, or
any enterprise decision making.
 Context: By 2020, in over half of G2000 firms, revenue growth from information-based
products and services will be twice the growth rate of the balance of the product/service
portfolio. Data as a service (DaaS) presents an expanding market for both providers and
consumers. The volume, velocity, and variety of data and the large and diverse data sets
create new challenges but, when combined with AI technologies and exponential computing
power, create ever-greater opportunities. Any application, process, service, or organization
that isn't part, or all, of the new "sense, compute, and actuate" paradigm is missing the boat
with digital transformation.

Platforms, Platforms, Platforms: Industry Competes for Innovation

at Scale
 Description: Understanding and building a "DX platform" that can sustain, advance, and scale
business and operations may be the most important decisions leaders make for the next 10
years. The platform is the new battleground for innovation, developers, and marketplaces as
the industry rushes to enable its customers with a range of platforms. Leaders must discover
what their own platform should look like, how they compete in the platform business economy,
and what platform vendors they choose. Megaplatforms compete to own infrastructure and
development environments. Application-centric platforms look for the network effect to expand
their reach. Industry-specific platforms harness multiplied innovation to build niche
ecosystems. Every business must incorporate these new options into its own DX-platform.
 Context: Today, we are in a platform economy — one in which tools, capabilities, and
frameworks based upon the power of information, cognitive computing, and ubiquitous access
will frame and channel our economic, business, and social lives. Companies and industries
must shift to compete in their own sectors — but also in the new, larger platform business
economy. The DX platform concept expands from microservices, technology stacks, and
software bundles to PaaS and entirely new digital business- and industry-specific platforms,
ecosystems, and operating models. It lies at the heart of digital transformation strategy,
providing the architecture that drives and accelerates every digital initiative.

©2018 IDC #EMEA43135818 15

The Race to Innovate: Speed of Change, Delivery, and Operations
Separates Thrivers and Survivors
 Description: Today, survival of the fittest is linked not to size or strength but to the ability to
change — to move quickly, adapt, seize opportunities, and be agile. The best-performing
organizations — armed with digital-native culture, tools, and processes — are speeding away
from the rest, creating a bifurcated and unequal landscape where a few firms exhibit high
productivity and profits. The new imperative is to keep pace with business change while
increasing the speed of business operations, the speed at which changes are delivered, and
the speed and scale of innovation. In an attempt to go faster, many organizations struggle
under a legacy of silos and innovations stagnate with redundancy and inconsistency. "At
scale" innovation eludes all but the elite few while the distance between thrivers and survivors
grows. Some organizations adapt to new models and ecosystems and move from automation
to autonomy; others struggle with the basics and fall behind.
 Context: Over the past 50 years, the average life span of a company on the S&P 500 has
shrunk from around 60 years to closer to 18 years. The rate of change is accelerating
dramatically. Time to decide and act requires near-frictionless, fact-based decision-making
processes. To thrive, organizations need to be innovating simultaneously on multiple levels
(industry change, delivery, operations) at a speed they are not used to. Digital capabilities
provide modular plug-and-play technology, business, and industry platforms, allowing
businesses to quickly adapt and compete in digital transformation.

Next Chapter of DX: Technology-Driven Transformation Altering Business

and Society
 Description: Digital transformation, the continuous process by which enterprises adapt to or
drive disruptive changes in their operations, customers, and markets, has entered the next
chapter — multiplied innovation. Now, competition is driven by platforms and ecosystems, and
innovation feeds off of itself. Ubiquitous changes affect business in markets, customer
expectations, and operational efficiencies, while society sees improvements in daily life. But
many businesses are implementing DX without success, and some will fail entirely. Societal
impacts include disturbed trust, jobs, alliances, and new inequities. Companies that achieve
multiplied innovation can thrive in the next chapter of DX.
 Context: In the past few years, we have witnessed the evolution of DX and the disruptions and
opportunities it poses for business and society. Organizations of every size and in every
industry must adapt to new technologies, new players, new ecosystems, and new ways of
doing business. IDC predicts that by 2021, at least 50% of global GDP will be digitized, with
growth in every industry driven by digitally enhanced offerings, operations, and relationship.
While most organizations are attempting DX, only a small percentage are getting it right. Early
attempts are met by subsequent challenges of change management, budget, talent, platform,
scale, and sustainability.

Legacy Inertia: Retrofit the Old into the DX World

 Description: Technology has been enabling business for decades, and refreshing deployed
systems has always been problematic. While new technologies are transforming some
aspects of the business, legacy systems are holding others back, limiting innovation,
opportunity, and engagement. Every company in every sector is faced with balancing
traditional and next-generation systems and technologies: transformation at scale demands
the replacement of outdated systems. Mergers and acquisitions challenge industry leaders as
they struggle to incorporate acquired technologies. Many organizations are retrofitting the
traditional systems and technologies to meet the new requirements while trying to create the
flexible and adaptable DX platform of the future.

©2018 IDC #EMEA43135818 16

  Context: DX is becoming a competitive requirement and the source of a massive wave of new
investments in digitizing business operations, communications, and services. Many
organizations are facing the challenges of simplifying the current technology environment.
Legacy systems and processes and change management issues often derail DX initiatives.
Organizations should evaluate systems against business, financial, technology, and
operations measures and create a road map for modernization.

Emerging Autonomy: Learning to Live with AI

 Description: AI is actively impacting experiential engagement, business and manufacturing
processes, strategies, and more — autonomously creating a significant portion of new
innovations. Many future applications will be developed by AI without human supervision.
Beyond that, augmented humanity — the fusion of digital technologies and humans — for
improved mobility, sensing, and cognition will start to become routine. Unfortunately, the
"ethics of AI" have yet to catch up with the technology, leaving potential for bad AI as well as
good. Bias in AI models is just beginning to get attention. Regulations are even farther behind.
There will be a long period of augmentation before autonomy takes over. Unfortunately,
society is unprepared; however, there is still time to adapt. As AI is changing the way people
live, work, and play, learning to live with AI is essential.
 Context: Intelligent applications based on artificial intelligence and continual deep learning are
the next wave of technology transforming how consumers and enterprises work, learn, and
play. By 2027, 10%+ of applications will be developed by AI without human supervision.
Automated customer service agents, increased public safety, preventative maintenance,
reduction of fraud, and improved healthcare diagnosis are just the tip of the iceberg driving
spend today. IDC forecasts AI solutions will continue to see significant corporate investment
over the next several years, achieving a compound annual growth rate (CAGR) of 46.2%
through 2021, when revenue will be more than $52 billion.

LEARN MORE

Related Research
 Critical External Drivers Shaping Global IT and Business Planning, 2019 (IDC #US44330818,
October 2018)
 IDC FutureScape: Worldwide Manufacturing 2018 Predictions (IDC #US42126117, October
2017)
 Worldwide Manufacturing IT Spending Guide, Version 2, 2015–2020 (IDC #US42969715,
August 2017)
 IDC Innovators: Analytic Applications for Manufacturing, 2017 (IDC #US42382717, July 2017)
 IDC PlanScape: Digitally Enabled Thinking Supply Chain (IDC #US42843015, July 2017)
 Smart Manufacturing as a Strategic Priority Across Value Chains (IDC #EMEA42809117, July
2017)
 Manufacturers in the United States Achieve Benefits in Productivity and Quality Through
Robotics (IDC #US42751917, June 2017)
 IDC Manufacturing Insights' 2017 Product and Service Innovation Survey Results (IDC
#US42727717, June 2017)
 Enterprise Applications, i-ERP, and the Manufacturing Industry (IDC #US41838416, April
2017)

©2018 IDC #EMEA43135818 17

About IDC
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