Industry 4.0 is transforming manufacturing rapidly and digital transformation has been on many CXOs’ agenda for a number of years. Despite this, only a small group of companies is in a position to gain real competitive advantage from this operations revolution. In PwC’s Strategy& Global Digital Operations Study 2018, only 10% of global manufacturing companies are dubbed ‘Digital Champions’, while almost two-thirds have barely or not yet begun the digital journey.
For its report, ‘Digital champions: How industry leaders build integrated operations ecosystems to deliver end-to-end customer solutions‘, PwC’s consulting capability, Strategy&, surveyed 1,155 executives at global manufacturing companies in 26 countries, including South Africa, and asked them about their views on Industry 4.0 and digital operations. Based on the outcomes, PwC developed a digital maturity index to explore the role of frontrunners – the so-called ‘Digital Champions” – and what distinguishes them to outpace their competitors.
Pieter Theron, PwC partner advisory services and head of Industry 4.0 South Africa, says: “Digital Champions are noteworthy because they view digitisation in ways that are far-reaching and aggressively innovative, well beyond automation and networking. It is disappointing to note that none of the manufacturing companies we surveyed in South Africa is a Digital Champion and most fall into the Digital Novice category (the least digitally mature companies in the report).”
From a regional perspective, Asia Pacific (APAC) is most advanced, with 19 percent of companies from that region in the Digital Champion category. These companies are championing the digitisation and end-to-end integration of their operations, introducing digital products and services and connecting new technologies across their organisations at a much faster rate than their peers in the Americas (11%) and EMEA regions (5%).
Because of the number of Digital Champions, Asia-Pacific companies expect 17% growth in digital revenue over the next five years, compared with the 13% growth anticipated by EMEA companies. That gap is expected to continue to widen, as 32% of Asian companies plan to have established mature digital ecosystems in the next five years, compared with 15% in EMEA and 24% in the Americas. This is not good news to South African manufacturers as it will result in a growing competitive gap that will become increasingly difficult to bridge.
Key findings of the report
- Consumer goods (6%), Industrial manufacturing (6%) and Process industries (6%) are lagging significantly behind Automotive (20%) and Electronics (14%), which have the largest share of Digital Champions. There are no Digital Champions among the South African companies that participated in the survey.
- The bulk of global manufacturing companies are applying new technologies to their operations in an experimental way instead of a coordinated strategic effort to increase revenue and reduce costs.
- Two-thirds of companies don’t have a clear digital vision and strategy to support digital transformation and culture, and in South Africa digital transformation is conservative and sporadic.
South Africa lagging behind on path towards digitisation
Digitisation will lead to an increase in production in mature markets, as it reduces operation costs and enables companies to rely less on labour arbitrage. However, companies in the EMEA region (including South Africa) mostly don’t get beyond a medium level of supply chain integration and are often lacking high automation and connectivity in their manufacturing operations. Compared to their Asia Pacific counterparts, EMEA companies also more often fail to connect their strategic, operational, technological and people-related capabilities, and less often incorporate partners in their business models to create customer value.
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