(ATN) McKinsey on “Digital in industry: From buzzword to value creation”

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With Techaisle, I’ve been asked to develop data on digitization in the US SMB market. The survey questions are framed and in field, and the data should be back within 30 days; in the meantime, I’m catching up on what experts in the field have to say about digitizatioin in various business contexts.

This post, from McKinsey, provides excellent depth by probing the application of digital technologies in industrial settings; its findings also serve to highlight some of the commonalities that extend across sectors. For example, the (very good) graphic that “maps Industry 4.0 levers to the 8 main value drivers” highlights issues that are of particular importance to industrial firms, including reduction of maintenance costs, reduction of total machine downtime,  and reductions in costs associated with inventory – but it also notes that advantages can be gained in areas that apply broadly in many contexts, including forecasting accuracy, worker productivity and improved time to market. The specific degrees of benefits associated with each of these areas will vary by business sector, but they are of value in all organizations. In the same light, the statement ” digital has the potential to profoundly reshape the way industrial companies interact with and serve their customers” is true for industrial companies and also for other private sector and even public sector organizations – and some of the examples that are essential to industrial executives, such as the relationship between digital business and pricing strategies and resource allocations. would resonate with sales leaders in other types of businesses as well.

As is often the case with McKinsey’s material, the analysis here is sound and forward-looking, the narrative is detailed but readable, and the sidebars are informative without derailing the central thesis. The guidance in “five ways to win” require some profound changes in the ways that many industrial firms (and others) operate today – but that, in many ways, is the central premise driving interest in how digitization is evolving in all parts of the economy.

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From supply chains to production to customer experience, digitization is transforming the way industry functions—and unleashing global opportunities for value creation.

In the past few years, we have seen digitization bring its first benefits to the industrial sector, particularly in processing and manufacturing, yet enormous untapped potential remains. Digital capabilities such as e-commerce platforms can significantly improve traditional customer-supplier experiences. Additional advances in automation, big data and analytics, and the Internet of Things create additional opportunities for substantial gains along the entire industry value chain.

Another industrial revolution

Early signs of the digital revolution are already here. Amazon Business, a B2B e-commerce platform launched in April 2015, turned over $1 billion in sales in its first year, growing at an impressive 20 percent per month. B2B buyers increasingly prefer digital, with 94 percent conducting some form of online research before purchase.

Further changing the rules of the game are the decreasing costs of new processing technologies such as additive manufacturing and advanced robotics. For example, 3-D printing costs came down by 60 percent between 1990 and 2014, and industrial robot costs decreased 5 percent annually between 2000 and 2012.

Put concretely, what does digital bring in terms of performance jump across functions? Let’s start by looking at operations, where our experts have recently shown that the impact potential is significant across all functions..

Read the post on McKinsey.com

 

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