Why the Industrial Sector Must Focus on Innovative Digital Solutions 🚜
Digital technology trends and innovations have become more significant than ever. What are digital innovations? These include smart automobiles, controlled thermostats, and locks, which are expected to nearly double in usage in the coming years. A multitude of innovative digital solutions, services, and business models arise as new data sources develop and organisations can produce and act on insights in real-time. Some executives in the industrial sector have already taken advantage of these breakthroughs and are reaping the benefits. Nevertheless, success in the industry as a whole is scarce.
The majority of organisations in the sector had been operating digital transformation pilots for one to two years, others are running them for even longer. Firms have been attempting to innovate faster, get much closer to customers, and achieve a revolution in operational efficiency. But after exhausting the potential of conventional drivers such as capital productivity initiatives, operational cost reduction, footprint optimisation, and so on, they need new strategies to improve their margins. The question is, how?
In this article, we will emphasise the significance of innovative digital solutions in the industrial sector. We show how much revenue growth technologies can provide. Then we go over the various areas that firms must focus on in order to capture value. Following that are the operational prerequisites for a successful transformation. Finally, we present a step-by-step procedure for getting started.
At Taylor Wells, we believe that a thorough approach is a key to successful transformation. We argue that managers must first identify their goals, then connect them to sources of value, decide which digital solutions will help them, and commit to working harder to achieve desired outcomes. By the end, you will know how to execute a successful digital transformation that will surely bring more value to your business.
Innovative Digital Solutions Will Unlock Value Across the Industrial Sector
Recent studies suggest that a successful digital transformation across the whole industrial sector would result in a total return to shareholders of $0.8 trillion to $2 trillion, or a 9-22% increase. The figure comes from two sources:
- An approximate $0.3 trillion to $0.9 trillion increase in revenue (an improvement of 3-10%)
- About $0.3 trillion to $0.7 trillion increase in margin expansion due to operational efficiencies (an improvement of 4-9%)
A variety of factors contribute to this revenue growth. What exactly are these?
What are the Business Elements that Digital and Technology Service Innovations bring?
There are 5 business aspects companies can maximise their solutions:
1. Product and service development
Innovative digital solutions require not only excellent data and technology but also a great knowledge of how to apply them to unlock new sources of value. For example, if you own an industrial company, you can conduct a thorough analysis of the needs and pain points of your customers. This means getting to know not only the customer but also the customer’s customer. It may also involve venturing outside the confines of your usual business.
Manufacturers of heating, ventilation, and air conditioning (HVAC) systems, are expanding beyond selling. They are now analysing data from motion, temperature, and energy sensors using technology. As a result, they can keep track of and control the temperature in corporate offices and factories, which helps them maximise their budget.
2. Manufacturing and distribution methods
Automated production and data interchange bring up a wide range of possibilities for lowering costs, increasing output, and supporting new manufacturing techniques. For instance, machine learning and robots are being used to help companies become more cost-effective, adaptable, and responsive to their customers’ needs.
Take, for example, automated vehicles used for transport in distribution centres, such as Amazon’s Kiva robots. The technology can select and pack goods in fulfilment centres. Evidently, automation through digital solutions may cut storage, picking, and sorting costs by 10- 30%. This is huge when you consider that these can account for up to 40% of a distribution centre’s expenses.
3. Selling platforms
Learn how your customers buy, then work through each customer’s decision journey. Consider e-commerce, micro-segmentation, customer-experience technologies, as well as analytics that informs pricing. This will help you determine which solutions and channels will be best for the sales process and how to redesign your selling platform. Efficient platforms raise profitability by increasing productivity, margins, and client loyalty.
4. Aftermarket offers
According to a study of 30 industries, the average EBIT margin for aftermarket services was 25%, compared to 10% for new equipment. Consequently, aftermarket services such as repairs, maintenance, and digital services, are the new focus of many industrial enterprises.
The aftermarket is now in a position to undergo a revolution. Manufacturers may leverage innovative solutions like predictive maintenance to engage end consumers, learn more about how they use equipment, and gain from services. In the long run, technology reduces costs and increases productivity.
5. Systems for business operations
Robotic process automation (RPA) can drastically cut general and administrative costs by automating manual procedures. Consolidating data across ERPs, automating financial reporting and invoice production, and employing advanced analytics to improve management can also minimise expenses.
In relation to business operations, you should also think about whether or not your company has the essential specifications.
Guidelines for Using Innovative Digital Solutions in Your Business
Here are 3 prerequisites to use in prioritising initiatives and allocating your resources:
1. A solid company foundation
- Data strategy – identifying the information needed to gain insights for your primary use cases. For example, a manufacturer wishing to minimise error for its equipment must combine maintenance and usage data from those who utilise the equipment. This data, along with the collaboration with OEMs and component manufacturers, is vital.
- Cybersecurity – increasingly, crucial as firms link devices and generate complex data structures. However, while 75% of polled professionals said Internet of Things (IoT) security was important or extremely important, only 16% believed their firm was well-equipped. Firms must build resilience by prioritising assets and risks, enhancing controls and procedures, and instituting effective governance.
- Data analytics – generates ideas to capture value. For example, if you’re using analytics-driven dynamic deal scoring to boost profits, your sales and customer services teams will need a quoting tool that shows them the optimal rates, and leaders will need a performance management system that tracks overall sales team progress.
- Cloud infrastructure – creating adaptable conditions and reliable application programming interfaces. Autonomous driving, for example, is more appropriate for a device, whereas monitoring consumption patterns by collecting data from interrelated products can be carried out in the cloud. The choice is heavily affected by the rate of real-time processing required.
2. A versatile organisation
- Adaptable operational model – establish small, agile teams and precise procedures that foster fast decision making on management, financing, and resource allocation concerns. Moreover, products also need to be tested or refined with customers regularly. This approach enables firms to adapt swiftly to changes in the workplace.
- Valiant culture – profitable companies cultivate a bold mindset. Accordingly, employees welcome change, are willing to take risks, and see failure as a growth opportunity.
3. A tight link between sales channels and product organisation
- Design thinking – uses narrow procedures to produce customer insights, transform them into product features and services, then swiftly pilot these features with your customers, test the impact, and repeat as needed until the intended result is realised.
- Ecosystem – involves the formation of a series of technological and go-to-market collaborations. Due to the sheer complexities of a tech-enabled transition, partner businesses must share data, perspectives, and the profit generated in a mutually satisfying and sustainable way.
Despite the fact that tech-enabled reforms in the industrial sector are still in their early stages, businesses cannot afford to wait. The earlier you start, the greater value can be reaped. So, how do you begin?
Fundamental Steps in a Tech-Enabled Transformation: What are the digital service and technology trends in innovation?
How each company will integrate innovative solutions is unique to its initial point and business goals. However, any management would do well to follow these 4 basic steps.
1. Explore each and every area of the business.
The ideal way to begin is to take a step back and think about what you want to accomplish. This isn’t as easy as it sounds though. You should assess your entire company to see where technology can add the most value. If you are an industrial distributor, for example, you may be able to increase your margins faster by digitising your selling process rather than implementing IoT-enabled services. You can also use an analytics-based pricing strategy with the assistance of a pricing team.
Our findings show that with the proper setup and pricing team in place, significant gains can occur in as little as 12 weeks. With smarter price management techniques, the team can capture at least 1.0-2.25% more margin after 6 months. In 9-12 months, organisations are commonly generating 3-7% higher margins as they find more complex and formerly unrealised potential, efficiencies, and risks.
2. Reconsider your business approach and goals.
You don’t employ technology just to minimally improve your model’s efficiency. Set a noble goal to ensure that the improvements you make do not simply reinforce the current system. Define your parameters and operational performance indicators to track progress, and make sure you have the support of your leadership. Believe that your project is a transformation, not a series of minor initiatives.
3. Recognise how innovative digital solutions alter work operations.
This must function in tandem with legacy systems and existing workflows. In this regard, you may consider an OEM that is utilising IoT-enabled technologies to provide predictive maintenance. When a customer’s system detects an issue with the equipment, it automatically alerts the OEM, who dispatches a service representative to do unscheduled fixes. Nonetheless, for this to succeed, the OEM must include these alerts into its service-dispatch protocols so that representatives are sent as soon as possible. Working in this manner is an important step toward extracting value.
4. Assess your current situation and map your transformation plans.
Establish a baseline and be honest about your initial point and digital competence, as these factors will influence how much value you can generate. Then, identify where the value is. Evaluate your strengths and create a plan that prioritises the key elements of your transformation. Visualise the value chain that your company impacts, your competitive environment, and how technology could alter it. To illustrate, think of customer-service apps. Consider 3 to 5-year timeframes to guarantee you keep up with the evolving technology and business conditions.
The digital revolution is just getting started. As data, connectivity, and processing power grow, so do chances for industrial firms to extract value with innovative solutions, products, services, operational efficiencies, and business practices.
Even though the industrial sector has been slower to digitise than many other industries, new technologies today allow businesses to redefine all of their operations, from product development to sales and service. We encourage businesses to take a bold, strategy-led approach to identify opportunities across the entire industry to achieve the best and most successful results.
For a comprehensive view on maximising growth in your company,
Are you a business in need of help to align your pricing strategy, people and operations to deliver an immediate impact on profit?
If so, please call (+61) 2 9000 1115.
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