Heavy industry sectors take defensive approach to digital transformation

A new Deloitte survey has revealed that the majority of businesses in a range of heavy industry sectors are taking a defensive approach to their digital transformations despite recognising the value of Industry 4.0 technologies.

“In Southeast Asia, there has been a mix of enthusiasm and ambitious plans for future investment in digital transformation,” says Deloitte Southeast Asia’s Energy, Resources & Industrials Leader Ng Jiak See in conjunction with the release of the Deloitte’s latest ‘Unlocking the potential of the Fourth Industrial Revolution’ global survey report, which focuses on the digital journey in the manufacturing, mining, power and oil & gas industries.

See continues; “However, with an ever-proliferating list of technologies, it can be challenging for players to determine, prioritise, and invest in the tools that can best help them meet their strategic objectives. As a result, many organisations remain frozen in place, fending off competitive pressures by isolating their technology usage to defending and maintaining their current positions.”

The study, which surveyed more than 350 heavy industry executives in 11 countries across Asia, Europe, and the Americas, with over half of those representing organisations generating revenues in excess of $1 billion, found a common disconnect across sectors as to a recognition of the coming impact of digitisation on the global business landscape and investment intentions and actual strategic and operational actions.The analysis identified four primary paradoxes, including; the strategy paradox, which shows that while the vast majority of executives believe digital transformation is imperative, comparatively few consider it a means of enhancing profitability, and; the innovation paradox, by which investments are driven by improvements to productivity rather than innovation.

The two further paradoxes noted are the supply chain paradox, with supply chains considered a priority area for investment but not a driver of innovation and chief supply chain leaders being left out of the conversation, and; the talent paradox – whereby organisations generally believe they have the right talent in place to support digital transformations, but cite talent management – recruiting, training and retention – as the most difficult organisational and cultural challenge.

Taken together, the report contends, the results suggest that while organisations are enthusiastic for Industry 4.0 technologies – those which connect and combine the physical with the digital such as robotics, artificial intelligence, the Internet of Things, and cloud computing – most are still trying to navigate a balance between improving current operations and chasing new opportunities for innovation and business model transformation.This approach is described by Deloitte as a defensive position, with companies understanding the strategic importance of digital transformation but not perhaps the strategic possibilities, and investments designed to protect rather than grow businesses, or, as Deloitte puts it, ‘essentially, leveraging advanced technologies to do the same things better’.

For example, half of the survey’s respondents cited productivity goals (e.g. improved efficiency) as a key driver of digital transformation, and nearly half again cited operational goals (e.g. reduced risk). Meanwhile, less than a quarter pointed to an increased desire for innovation – compared to the 29 percent who were motivated by competitive pressures.

“Organisations are striving for balance between improving current operations and unleashing the transformative capabilities afforded by Industry 4.0,” concludes Mark Cotteleer, managing director of Deloitte’s Center for Integrated Research. “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.”