STRATEGY IN THE AGE OF INDUSTRY X.0

Transcription

1 STRATEGY IN THE AGE OF INDUSTRY X.0

2 STRATEGY IN THE AGE OF INDUSTRY X.0 Industry X.0 (IX.0), or the digital reinvention of industry, is about more than just smart factories and higher efficiency. At the heart of IX.0 is the reinvention of companies through advanced digital technologies. IX.0 companies integrate their core product innovation, engineering, manufacturing and services functions and leverage digital to drive new levels of efficiencies and customer experiences. Companies that act now to embrace IX.0 are gaining competitive advantage over their rivals. Those hesitating are falling behind, and risk never catching up. The IX.0 Framework focuses on optimization and integration of the core functions of product innovation, engineering, manufacturing and services GROW IN THE NEW New services and experiences INNOVATION AND GROWTH PRODUCT INNOVATION ENGINEERING MANUFACTURING SERVICES Industry X.0 efficiency DIGITAL ENABLERS TRANSFORM THE CORE A treasure trove of value To lead in IX.0, businesses must embrace a different approach to innovation and competitive agility: one that has no end-state, but instead views innovation as ongoing, ever-evolving and digitally enabled. This continuous innovation element must be infused into the business strategy and operating model to ensure the organization can execute in the new. According to our IX.0 global strategy research, some organizations are unearthing a treasure trove of value through the effective adoption and deployment of IX.0 strategies. In the study, we sought to understand what was driving this value. To do that we examined companies to determine their sophistication when it comes to adopting IX.0 principles and strategies. We also wanted to see how that adoption may have impacted their operating and financial performance. Our research included 400+ companies in 11 different industries from across the globe. We asked senior leaders about their priorities, actions and challenges in today s digital climate. We questioned how they re using connected products and services, new business/operating models, digital technologies and solutions to drive efficiency, new experiences and continuous feedback loops for their businesses. From a survey of 400+ senior executives across 11 industries Accenture has identified the top 17% of performers We call this group Value Makers 2 STRATEGY IN THE AGE OF INDUSTRY X.0

3 Accenture s research uncovered four distinct segments of companies based on their strategic adoption of IX.0 principles correlated to the value generated in those companies Value Index score 15% EARLY LEADERS IX.0 Disruptors 17% VALUE MAKERS 52% TRADITIONALISTS 16% EFFICIENT EXECUTORS Strategy Index score Value Makers: consistently push the envelope to find the Early Leaders: managed to generate maximum value next source of growth through the adoption of IX.0 through limited, but highly targeted adoption and strategies and have generated significant value through deployment of IX.0 strategies. their efforts. Traditionalists: our largest category of companies, Efficient Executors: made significant progress on their Traditionalists, operate in the status quo. They have few IX.0 journey but struggle to translate that progress into digital capabilities, and their strategies don t incorporate financial results. IX.0 principles. Zeroing in on Value Makers IX.0 requires companies to fundamentally rethink their value propositions when it comes to products and services to find new paths to growth. The Value Makers identified in our research are doing just that. In fact, this group is six times more likely to have increased their revenue by more than 30 percent in the last three years leveraging IX.0 strategies. And they re seven times more likely to have increased profitability by more than 30 percent when compared to Traditionalists. Compared to Traditionalists, Value Makers are 6 times more likely to have increased their revenue by more than 30 percent and 7 times more likely to have increased profitability by more than 30 percent in the last three years with IX.0 strategies. 3 STRATEGY IN THE AGE OF INDUSTRY X.0

4 So what s on a Value Maker s strategic agenda? A FOCUS ON SMART CONNECTED PRODUCTS TO CREATE NEW EXPERIENCES FOR CUSTOMERS Everyone is talking about reinventing the product. Value Makers are walking the walk. They re leveraging innovative design techniques and digital to create smart, connected products and mass customization opportunities. 36 percent of Value Makers have shifted to selling connected products and services compared with just 7 percent of Traditionalists. In three years from now, 55 percent of the Value Makers will have shifted to connected products and services, while only 30 percent of Traditionalists will have made that shift. Value Makers also pioneer the development and incorporation of interactive customer feedback. One-in-two Value Makers stated that customer engagement is their strategic priority and they proactively engage with customer after product launch. That s in stark contrast to Traditionalists where only one-in-ten reported proactive customer engagement as a strategic priority. This customer engagement enables Value Makers to offer hyper-personalization. We learned that 19 percent of Value Makers already offer hyper-personalized products and services compared with just one percent of Traditionalists. CONTINUOUS LOOP PRODUCT LIFECYCLE A continuous-loop product lifecycle is about collecting and leveraging product innovation, engineering, manufacturing, service and usage information throughout the full lifecycle from concept to disposal. Why? To gain faster time to market, to improve a product s impact when it reaches the market, and to drive manufacturing and service efficiencies. Value Makers are more than three times as likely than Traditionalists to have continuous interaction between the core IX.0 functions. Fifty-six percent of the Value Makers are already realizing the benefits such as improved customer satisfaction, loyalty and trust from continuous loop product lifecycle whereas just 27 percent of Traditionalists reported realizing benefits. To tap into the continuous-loop product lifecycle, Value Makers are leveraging digital platforms to access information within their own walls and across broader ecosystems. REINVESTMENT IN OPERATING MODELS Value Makers are strategically infusing digital with classical operations improvement efforts to get more efficiency and effectiveness from their core IX.0 functions. Incorporating digital technologies and automation were identified as the top initiatives to improve IX.0 core functions across all segments, and Value Makers incorporate them at a higher rate (25 percent more) than Traditionalists. In fact, most Traditionalists only plan to become a more connected enterprise within the next two-to-three years compared to a much more aggressive 12-month ambition of Value Makers. EXPANDED REVENUE MODELS Thanks to smart connected products, Value Makers are expanding their traditional revenue streams through the creation of new experiences for their customers. What s more, they re realizing they can convert more of their business to a Product-as-a-Service (PaaS) model. Our research indicates that Value Makers appreciate the benefits of the PaaS model more than Traditionalists and are more than three times as likely to be already using it. In fact, 40 percent of Value Makers get 50 percent or more of their existing revenue from connected products today. And in another three years, more than 75 percent of Value Makers believe they will be getting more than 75 percent of their revenue from connected products. 4 STRATEGY IN THE AGE OF INDUSTRY X.0

5 Barriers to embracing IX.0 It s difficult to become a value maker. Even for Value Makers. There are some common barriers inhibiting the successful adoption and deployment of IX.0 strategies. These include: MISSING OR INCOMPLETE STRATEGY Uncoordinated and unjustified digital investments are a leading barrier for all companies in achieving their IX.0 aspirations. The days of death by pilot need to end. Experimentation and proving value through pilots should absolutely continue. But these efforts need to be driven from an overall strategy for a company s approach to IX.0. Without a core business strategy for IX.0, value will be less than optimal. TALENT As they move further into the realm of connected products and connected operations, organizations will increasingly feel the skills gap. This skills challenge does not discriminate by level, responsibility or function. Examples of challenges include: Leadership: Just one-in-three Traditionalists claimed that corporate executives and middle management have the necessary skills to operate and deliver in digital and connected enterprises. Specific digital skill gaps: Connected products require integration of traditional hardware platforms with software platforms. For many companies, this is the first time they ll need software platform skills. Training budget/infrastructure: The clear majority of Traditionalists report struggling with the cost and time needed to upskill existing talent. OPERATING MODEL INVESTMENTS AND ORGANIZATIONAL STRUCTURES Today, most operating models are rigid, organized around the demands of an analogue world. Digital requires agility in the operating model and the associated organizational structure to incorporate changes in real time. Creating an agile operating model requires investment. More than half of those furthest along the IX.0 transformation (the Value Makers) reported their cost of restructuring their legacy systems as the greatest barrier they ve had to overcome to excel in IX.0. Other challenges include the siloed nature of product innovation, engineering, manufacturing and services. Each area is locked in its own fiefdom and struggles to collaborate. Companies need to breakdown their silos within their own walls and throughout ecosystem partners through the leverage of digital. Moving forward To become true Value Makers in IX.0, companies need to transform their operating models to find new approaches to competitive agility. Digital transformation is about more than technology. It s also about business strategy, innovation and new ways of thinking. Transforming for the digital age requires businesses to upgrade their strategic mindset to the degree they upgrade their technology infrastructure and organizational capability. The emerging role of leadership is much more strategic, focused on using digital to reimagine and reinvent the future of business itself. Those leaders need to learn from what Value Makers have achieved and how they have achieved it. IN SHORT VALUE MAKERS ARE: Leading with a comprehensive business strategy that informs its digital strategy. Integrating the core functions of IX.0 into a continuous loop product lifecycle. Optimizing core IX.0 functions through targeted digital investments in coordination with classical operational improvement efforts. Creating new experiences for their customers and employees with smart, connected products and services. Driving new revenue models afforded from smart and connected products and operating in a digital enterprise. No company s starting point or financial and competitive position is like another. Because of this, no company s Industry X.0 journey will be the same. Value Makers have effectively defined their IX.0 strategy and are executing against it. WHERE IS YOUR COMPANY ON THE IX.0 JOURNEY? 5 STRATEGY IN THE AGE OF INDUSTRY X.0

6 KEY CONTACTS RUSSELL RASMUS Global Lead, Strategy Industry X.0 JEFF McKINNEY North America Lead, Strategy Industry X.0 ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions underpinned by the world s largest delivery network Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 469,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at MAX BLANCHET Europe Lead, Strategy Industry X.0 max.blanchet@accenture.com SCAN QR CODE TO VIEW FULL REPORT Copyright 2019 Accenture All rights reserved.