Manufacturing businesses in India are keen to invest in digital technologies but are struggling to derive tangible business benefits due to an imbalanced approach to digital investments, according to Reinventing Business with Industry X.0, a new report from Accenture (NYSE: ACN).
Ninety-three percent of the executives surveyed – who represent 29 manufacturing and production companies in India with an annual turnover of at least USD 1 billion – want to leverage digital for growth, with 76 percent intending to use digital to create new, experience-driven revenue opportunities. However, only 31 percent plan to use digital to drive greater operational efficiencies, likely missing out on bottom-line improvements.
“There appears to be a singular focus on revenue growth, with businesses neglecting an important requirement of the digital era: the transformation of operations to unlock trapped value,” said Anindya Basu, geographic unit and country senior managing director – Accenture in India. “Businesses in India must place equal emphasis on using digital to drive efficiencies at the heart of the business and using the freed-up funds to drive strategic investments in new products, customer experiences and business models that create long-term value.”
For example, Accenture research has found that industrial equipment companies globally could reduce their total cost per employee by almost 20 percent and increase their market capitalization by nearly 25 percent if they combine innovative technologies such as autonomous robots, artificial intelligence, blockchain, big data and 3D-printing.
Indian manufacturers have been struggling to achieve globally competitive scale and productivity. While the industrial sector in India has grown 6 percent annually since 2011, to more than US$700 billion in 2016, the value addition per employee is one of the lowest in the world, at only US$6,000.
An action plan for success
The Accenture report suggests that the right combination of digital technologies could help Indian industrial companies address this issue, as the technologies hold the potential to drive dramatic efficiency improvements and exponential revenue growth. Specifically, the report recommends that companies adopt a new approach that Accenture refers to as Industry X.0. It is an action plan for becoming more adept at embracing technological change and digital technologies to manage the shift from industrial manufacturing to producing and delivering digital products and services and supporting them in the field.
According to the report, Indian businesses should take six actions to derive value from Industry X.0:
Transform the core: Drive new levels of efficiency by building core engineering and production systems around digital technologies. Ensure that physical machines and software systems are tightly integrated for predictive maintenance, and help scale automation to optimize production runs and improve overall equipment effectiveness.
Create hyper-personalized experiences: Design and deploy products, services and platforms that constantly adapt to changing customer needs. Use big data to generate real-time insights to enable decision making, and enhance the customer and workforce experience through smart, digital touchpoints.
Innovate business models: Create new business models to drive differentiated customer value propositions well beyond the point-of-sale interaction. Use the internet of things (IoT) and Industrial IoT to develop connected and intelligent products that can be monetized via software-based-services and pay-per-use revenue models.
Build a digital ready workforce: Recruit, train and retain talent with skills, such as software engineering and machine learning, for the digital enterprise. Encourage collaboration between people and machines.
Build new ecosystems: Build an ecosystem of supply chain partners including start-ups and customers to scale new digital business models rapidly. Tap into internal and external sources for new ideas, while nurturing innovation clusters to prototype early-stage technology use cases.
Pivot Wisely: Synchronize innovation and growth through balanced investments in the core business and in new business. Stay focused on traditional performance metrics while keeping an eye on disruptors, and continuously inject digital technologies into mainstream operations.
“Industry X.0 will unleash a new level of energy into the manufacturing industry,” said Raghu Gullapalli, managing director - industrial, Asia Pacific, Africa, Middle East & Turkey (AAPAC), Accenture. “To harness the true potential of digital for profitable growth in the future, Indian companies need to look at immediate-term value extraction from legacy data and build a progressive roadmap for connecting their products, equipment, supply chain, people and customers. Companies that embark on this journey in a holistic manner today will emerge as the digital leaders of tomorrow.”