Deloitte Global's new report, ‘The Industry 4.0 paradox: Overcoming disconnects on the path to digital transformation', finds that businesses plan to invest heavily in digital transformation, but strategic and operational paradoxes threaten to hamper these efforts.
The Deloitte Global survey of more than 350 executives in the manufacturing, power, oil and gas, and mining industries, explores how organisations in these sectors are investing - or planning to invest - in digital transformation, some of the key challenges they face in making such investments, and how they are forming their technical and organisational strategies around digital transformation.
The survey uncovered that while organisations are enthusiastic about the potential of digital transformation impacting their business, there are disconnects between their plans and actions in four key areas: strategy, supply chain transformation, talent readiness, and drivers for investment.
Tim Hanley, Deloitte's Global Industrial Products & Construction leader, said: "As organisations seek digital transformation they must consider a range of questions - from what they hope to transform, to which advanced technologies best suit their needs.
"But it is also critical to understand that digital transformation cannot happen in a vacuum. It does not end simply with implementing new technologies and letting them run. Rather, true digital transformation becomes central to the organisation, touching upon every aspect of the company."
Mark Cotteleer, managing director of Deloitte's Center for Integrated Research, commented: "Digital transformation is not a one-size-fits-all process. Organisations are striving for balance between improving current operations and unleashing the transformative capabilities afforded by Industry 4.0.
"To successfully align planning and investment with action, digital transformation should be baked into an organisation's strategic outlook and operational framework. Those best equipped for Industry 4.0 will fully embrace the transformative potential of technology at every level of the organisation."
Nearly all respondents to the survey (94%) indicated that digital transformation is an organisational imperative, yet many fewer - 68% of all respondents and 50% of CEOs - see it as an avenue for profitability. This indicates that while survey respondents may associate operational improvements with strategic growth, they do not necessarily associate digital transformation with revenue growth resulting from R&D-driven new products or business models. Many seem to view digital transformation as a "defensive" investment to protect, rather than grow their business.
Executives also reported that digital transformation initiatives are primarily driven by productivity improvement and operational goals - that is, using technology to complete existing tasks more efficiently. However, organisations should expand their drivers for investment, as an increased desire for innovation is about as likely to bring positive ROIs. This is increasingly important as organisations stand to be left behind by competitors embracing innovation as the key driver for investment.
Moreover, executives identified the supply chain as the top area for future investment, but only 34% of respondents view the supply chain as a driver of innovation and, surprisingly, only 22% of chief supply chain officers (CSCOs) played a key role in digital transformation decision-making.
Survey respondents generally believe they have the right talent in place to support digital transformation - only 15% of respondents indicated they need to dramatically alter the composition and skill sets. Finding, training and retaining the right talent was still the most widely cited organisational and cultural challenge.
Interestingly, the results revealed that the more respondents use these transformative technologies, the more likely they are to be satisfied with their organisation's current state of talent. At its most polarising, those that interact with these technologies on a daily basis believe their organisation has the proper talent in place 92% of the time, while those who have little to no interaction with digital technology see the greatest gap in talent and development (only 42% believe the right talent is currently in place).
According to Deloitte, the key to unlocking the potential of Industry 4.0 is fully harnessing information from connected assets to drive decision-making, a process known as the physical-digital-physical (PDP) loop. Ninety per cent of survey respondents shared that their companies gather data from the physical world, but far fewer report the ability to analyse this information and only about half share that they can act upon data in real time. Closing the PDP loop should be considered a primary objective of organisations as they invest in digital transformation.