DIGITAL TRANSFORMATION IN THE SPANISH INDUSTRY

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1 DIGITAL TRANSFORMATION IN THE SPANISH INDUSTRY CAPTURING THE BUSINESS OPPORTUNITIES BUSINESS SWEDEN IBERIA, 2017

2 This report aims to support sales channels efficiency for Swedish technology companies on the Spanish market Insights gathered from interviews with SME s in the Spanish metal manufacturing system show different needs, shaping business opportunities for technology companies with digital solutions providing: 1. Access to automated solutions at a reasonable cost 2. Appropriate customized solutions and support in imposing a digital transformation among customers and suppliers 3. Support in developing internal competence for new technologies and finding user-friendly solutions 4. Cyber security Industries are exposed to constant digitisation and the resulting digital transformation is one of the major challenges today in Spain. Several indexes demonstrate that the Spanish industry in many aspects fall behind the average in Europe. On the other hand, digital transformation in Spain could contribute to an increase of earnings of million until The Ministry of Industry, Energy and Tourism in Spain (MINETUR) recently launched an initiative to increase the GDP through digital transformation of the Spanish industry. This also promotes a sense of urgency, in the society and among companies, to digitally transform the Spanish industry. Sweden is highly ranked in above-mentioned indexes. It has also come further in the development of mentioned areas. This gap between Sweden and Spain is an interesting opportunity for Swedish technology companies to capitalize upon; business opportunities created by the need to stay in line with the digital transformation. CHRISTIAN KARLSSON Project Manager christian.karlsson@business-sweden.se

3 DIGITAL TRANSFORMATION IN THE SPANISH INDUSTRY The momentum is now. The digital gap between countries generates business opportunities for companies with a product or service offering that enables the transformation of the industry and, especially, for companies with experience from more early-adopting markets. Business Sweden has conducted a research including profound interviews with 10 small and medium sized enterprises in the metal manufacturing and automotive sectors, two of the most important sectors in the Spanish manufacturing industry in relation to added value and occupation. Several indexes indicate that Spain is lagging behind in the digital transformation. For this reason, the Spanish Ministry of Industry 1 (MINECO) recently launched an initiative 2 to increase the contribution to GDP by million until 2025 by digital transformation. SPAIN AND ITS POSITION IN A DIGITAL CONTEXT Spain is today the 5 th largest economy in the European Union, and the 13 th globally. In March 2017, the country showed its highest production levels since 2008, and in October 2017 employment had risen for 37 successive months. Further proof of the positive growth trend is the continous expansion of the manufacturing industry. In October 2017 the PMI (Purchasing Managers Index) reached 54,6 3 and has constantly been above 50 since The industry sector in Spain represents 13% of the added value and 11% of the working population. Therefore, it plays a fundamental role in the Spanish economy. For Sweden, the numbers are relatively similar, the industry contributes to 17% 4 of the added value. The similar rate of importance of the industry to the economies, makes a comparision of the two countries interesting. The European Digital Economy & Society Index, DESI, (see figure 1, page 4) shows that Spain (ranked #14 in 2017), is lagging behind the average of the European Union in several aspects. On the contrary, Sweden (ranked #3) is 1 Ministry of Economy, Industry and Competitiveness (MINECO), former Ministry of Industry, Energy and Tourism (MINETUR) 2 La Transformación digital de la Industria Española: Informe Preliminar. Madrid. Retrieved from (data retrieved ) 4 (data retrieved ) CAPTURING THE BUSINESS OPPORTUNITIES BUSINESS SWEDEN 3

4 ahead of both Spain and the average of the Euopean Union. 5. Digital public Services 4. Integration of digital technology Figure 1. Digital Economy & Society Index (DESI). Source: European Commission, data retrieved Furthermore, on global level Spain was ranked as #35 (2016) in the Networked Readiness Index, NRI (see figure 2). Sweden was ranked as #3, hence there is a clear gap between the countries. 9. Economic impacts 8. Government usage 1. Connectivity 3. Use of Internet 2. Human Capital Spain Average EU Sweden 10. Social impacts 7. Business usage 1. Political and regulatory environment 6. Individual usage Spain 2. Business and innovation environment 3. Infrastructure and digital 5. Skills Sweden 4. Affordability target for Spain to be ranked as number 10 concerning the DESI, and as number 20 regarding the NRI, by Another example, and in order to increase the contribution to GDP, is the previous mentioned launch of Industria Conectada 4.0 in 2015 by MINECO. This initative complements the national digital agenda and the agenda to strengthen the industrial sector. It aims to Ensure knowledge and competencies for Industry 4.0 Encourage multidiciplinary collaboration Encourage development of offers of Enablers Promote the implementation of Industry 4.0 In addition to this strategy, during 2016, a tool to increase the knowledge about the individual company s maturity in relation to digital transformation was developed, aiming to help enterprises to better understand their current situation in this area. Furhtermore, through the initiative, financial aid has so far been given to 25 middle sized and large corporations in a pilot project to direct implement digital transformation in enterprises in the Spanish industry. This program will, during 2017 and upcoming years, be rolled out to encompass enterprises in a larger scale which will result in efforts to digitally transform the industry, and thus, creating business opportunities for those with relevant solutions. Figure 2. Network Readiness Index 2016 Source: World Economic Forum, data retrieved The digital transformation for the Spanish industry is a prioritized matter and several forces work together to push the digital transformation towards the goal of Industry 4.0, creating an sense of urgency in the market. As an example of this, and in relation to above mentioned indexes, the Spanish Business Organizations Confederation (CEOE) 5 has set a BUSINESS OPPORTUNITIES FOR COMPANIES IN SWEDEN The interviews performed by Business Sweden Iberia concluded some general statements about the current state of digital transformation. Low extent of digital relationships and e- commerce The company web site is mostly used to attract new customers 5 Confederación Española de Organizaciones Empresariales 4 BUSINESS SWEDEN CAPTURING THE BUSINESS OPPORTUNITIES

5 A general desire to create more digital and integrated relationships with suppliers and customers. The already close (off-line) relationships with suppliers and customers will facilitate that transition. Ongoing and future planned investments in Enterprise Resource Planning (ERP) systems and automated solutions Embedded technology is not yet widely used Interest in collaborative robotics, RFID tags, 3D printing, drones, sensors, QR codes and predictive maintenance as future investments Vision about technologies to create intelligent warehouses and smart factories Digital transformation brings challenges and needs, shaping business opportunities for Swedish companies to exploit. 1. Access to automated solutions at a reasonable cost a. Automated solutions. Although already in place to some extent, these are top priority for future investments. b. Collaborative robotics c. Solutions for predictive maintenance However, these investments are the most prominent challenges to their digital transformation due to the high cost in relation to limited resources. Key will be to enable the enterprises to access the automated solutions needed, in order for them to boost their digital transformation. 2. Appropriate customized solutions and support in imposing a digital transformation among customers and suppliers a. The challenge of selecting appropriate solutions; indicating a need for knowledge about the benefits of existing solutions and drivers to impulse the digital transformation b. Convincing customers and suppliers to digitally transform in order to obtain network externalities from proper transformation 3. Internal competence for new technology and user-friendly solutions A major challenge for the enterprises in the concerned sectors is the internal resistance to change, together with the lack of competencies of tasks a digital transformation brings. The companies are highlighting two areas for the continued development: a. Strong internal leadership b. Simple and user-friendly solutions 4. Cyber security The enterprises also raise concern about cyber security. Keeping the increased amount of digital data away from hackers is a crucial challenge these enterprises are facing. THE MOMENTUM IS NOW The main challenge for the Spanish industry in their digital transformation will be to find suitable solutions in terms of appropriate technology to a reasonable cost. Also, the ensurance of cyber security is of great importance. The number of devices connected to the Internet is growing and, as a result, the environment in which enterprises are doing business is rapidly changing. To transform digitally is therefore no longer an option but a necessity to sustain the competitiveness. Sweden is today, thanks to the collaboration between academia, enterprises and institutions, and the openess to collaboration between small and large enterprises, ranked as the second most innovative country in the world and is also ranked high in the DESI and NRI indexes. Furthermore, due to a history of high labor costs, Sweden has, in order to remain competitive in the global market, come a long way in the use of automated solutions and is now starting to bring back production that was earlier moved to low salary countries. Hence, in terms of automated solutions Sweden is ahead of many other countries. Moreover, Sweden has for a long time had a well developed infrastructure for the adoption of digital solutions and is considered to be a role model CAPTURING THE BUSINESS OPPORTUNITIES BUSINESS SWEDEN 5

6 when it comes to achiving much with limited resources. Given the we have identified between Spain and Sweden regarding digital transformation, there is a clear possibility to position and gain business deals by offering relevant technology and knowledge needed for the transformation. In Spain, the industry in general constitutes a large percentage of the GDP. The metal manufacturing and automotive sectors in particular, are sectors contributing the most to added value and occupation and are therefore the most prominent targets (not excluding other important sectors e.g. chemical, food and beverage). The existing gap between Sweden and Spain, together with the expansion of the Spanish manufacturing industry, the rapid economic growth and initiatives to support a digital transformation are all creating a momentum for Swedish companies to find business opportunities by exploiting the needs for digital transformation in the Spanish industry. Connected Business by Sweden is a platform launched by Business Sweden Iberia in May 2017 and will serve to carry out several initatives locally together with Swedish industry representatives (already established locally or not). Dialogues regarding strategic collaborations are being held with national and regional institutions, currently in charge of drafting longterm plans for the digital transformation of its manufacturing industry. In parallel, a need and opportunity analysis is being carried out at several Iberian multinational corporations in order to find business and collaboration opportunties for Swedish companies, bringing them innovative solutions in a collaborative winwin format. For more information, please contact the Business Sweden Iberia office. #wegrowinternationalrevenue HOW CAN BUSINESS SWEDEN SUPPORT? Business Sweden supports Swedish companies to grow their international revenues. We provide strategic advice, sales execution and operational support to help companies grow their international revenues. They can trust us to shorten time to market, find new revenue streams, and minimize risks. We have a unique position as an independent partner and trustworthy facilitator; we deliver proven results to all companies that put their trust in our hands. We all share a passion for making a difference, and are committed to professional excellence at every step. For Business Sweden Iberia, the industrial sector, and specifically its digital transformation, is a strategic priority for the upcoming years. 6 BUSINESS SWEDEN CAPTURING THE BUSINESS OPPORTUNITIES

7 BUSINESS SWEDEN Box 240, SE Stockholm, Sweden World Trade Center, Klarabergsviadukten 70 T F info@business-sweden.se Business Sweden s purpose is to help every Swedish company to reach its full international potential and help companies abroad to reach their potential by investing in Sweden. The purpose is operationalised through 450 staff deployed at 14 offices in Sweden and at 55 offices in 49 key markets abroad. Feel free to contact us for any questions regarding Swedish international trade or foreign investments in Sweden.