In Focus Commercial Credit


Countdown to the ‘tipping point’


Forecasting the remaining window for competitive advantage from digital investment as we move towards ‘Industry 4.0’


Brian Foster Head of industry finance, Siemens Financial Services in the UK


The key question relating to digital transformation in manufacturing is no longer ‘whether’ to invest in it, but rather ‘when’ to do so. Whilst most manufacturers understand


the benefits of investing in digitalised technology, ‘Industry 4.0’ requires transformational change at a pace the majority of manufacturers are not yet matching. If manufacturers continue on the current


trajectory, they are unlikely to meet the realities of manufacturing, both now and in the future, and may be disrupted by competitors and new market entrants. Accordingly, manufacturers must embrace


digitalisation now in order to draw the benefits of early adoption, or else risk being left behind.


Research Estimating the ‘tipping point’ of Industry 4.0 – the point at which the pioneering first half of manufacturers will have substantially migrated to Industry 4.0 digital-production platforms – is the focus of our latest research. Manufacturers across the world are in a race against time to gain competitive


Later adopters will still benefit from the cost savings and economies from digital transformation, but their investment will merely represent a must-do strategy of realignment, enabling them to compete in markets at all


advantage from Industry 4.0 investment before the tipping point of majority adoption. While the first 50% of players to invest in


new technologies or business models will gain a significant competitive advantage over rivals – an estimated 25% gain on return on capital employed by 2035 – the second half of the manufacturing community will simply be playing a game of catch-up. Later adopters will still benefit from the


cost savings and economies from digital transformation, but their investment will


merely represent a must-do strategy of realignment, enabling them to compete in markets at all. It is, therefore, critical to know how long


the window of opportunity will last for manufacturers to be part of the first cohort in digital transformation. Our report ‘Countdown to the tipping


point for Industry 4.0’ captures testimony from over 40 manufacturers, trade associations, and academics from across the world, in order to forecast the window of opportunity for manufacturers to reap the expected return on investment from their digital-transformation initiatives. Respondents estimated that larger


manufacturers would reach this point within five and seven years, whereas SME manufacturers would take nine to 11 years – thus highlighting the two-tier nature of the digital race. Even within that window of opportunity, the pressure to transform remains high – after all, the competitive advantage from conversion reduces as more and more manufacturers adopt Industry 4.0 platforms. Respondents were also asked about the proportion of manufacturers to have


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www.CCRMagazine.com


September 2019


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