For some companies, COVID-19 led to a complete realignment of their strategic priorities. For others, it simply meant to carry on doing what they do already, but at a much higher speed. No matter which category your company falls into, many big transformations now take place simultaneously, all requiring immediate attention from leadership. All this taken together makes it even harder for industrial companies to define their long-term strategic priorities.
What should executives at industrial companies focus on? Which trends should they pay attention to, and where do they need to invest today in order to stay competitive tomorrow?
Here’s are a few thoughts that may make sense to have at the top of your agenda.
#1: Build resilient supply chains. The need to make supply chains resilient before there are shortages is now more important than ever. The semiconductor shortage, which has hit the automotive industry particularly hard, should be seen as a wake-up call by industrial companies. Improving forecasting and scenario planning is mandatory. It needs to be based on real-time data, and it must cover the complete supply chain—including the suppliers of your suppliers.
#2: Diversify your core business. Twenty-five of the top 35 automotive suppliers already generate, on average, around 30% of their revenues from non-automotive businesses—a trend that is increasing. This shift shows how important it is for many industrial companies to create new business models and diversify their core business. Diversification is the key to future competitiveness for companies that serve rapidly changing customer industries.
#3: Be brave enough to divest weak divisions. For some companies, particularly industrial and electric equipment (I&EE) firms, divesting weak divisions to focus on their core business might be the right thing to do. There are examples where companies listed business divisions as a separate entity on the stock market, and increased their EBIT margin significantly. This approach shows that a “back to core” strategy can help I&EE companies focus on becoming a champion in the space where they have differentiating capabilities.
#4: Invest in your digital portfolio. Many industrial companies rebounded faster from the economic impact of the pandemic than forecasted. They profit from strong growth in major markets and the quicker-than-expected rebound in some customer industries. To translate this short-term rebound into long-term growth, industrial companies must strengthen their digital solution portfolios to respond to evolving customer expectations and benefit from the new opportunities in a post-pandemic world.
#5: Adopt sustainable practices. Sustainability is not a trend; it’s a source of future competitiveness for industrial companies and their customers. Industrial equipment companies, for example, see a growing demand for green solutions from their customers to reduce their emissions and enable circular economy models. In addition, industrial companies should anticipate future regulation on carbon pricing and act today to create a competitive edge.
#6: Take digital sales seriously. Industrial buyers have a clear idea of what a “good” B2B buying experience should look like. Yet many industrial companies are still not in tune with that trend. Their investments into expanding digital sales capabilities do not match the rapidly evolving B2B commerce landscape at all. It’s time to act and create new buying experiences based on customized recommendations; predictive, data-driven customer insights; and automated sales processes.
#7: Mind the talent gap. To realize their ambitious digitization goals, industrial companies must have the team to make it happen. However, IT specialists are and will continue to be in high demand. It is essential to have a long-term talent strategy and not only hire new talent, but also invest in retooling talent. Working closely together with ecosystem partners also helps to address the talent gap and overcome shortages.
#8: Focus on the long-term opportunities. The digital revolution is putting many of today’s business models into question. This is not only true for consumer industries, but also for industrial companies. Executives need to accept this new reality, challenge convention, and focus on the long-term opportunities for growth. We believe that five key growth drivers will become particularly important: cloud transformation, connected products and services, consumerization and growth, intelligent operations, and responsible and sustainable business. Executives need to make timely investments in talent and technology to shape customer-centric, digitally driven businesses primed for growth.
#9: Design operating models to support profitable growth. Industrial equipment companies have benefited greatly by allowing business units to be autonomous and control their own destiny. Business unit heads become entrepreneurs, motivated by innovating and delivering results in their part of the company. However, these models can be hard to scale profitably as the business grows. The magic happens when core processes are leaned out and standardized while still maintaining that entrepreneurial spirit.
#10: Build resilience to cyber-attacks. The risk of cyber-attacks against industrial companies is no longer theoretical. According to the latest “Cyber Investigations, Forensics & Response” update from Accenture, 16% of all cyber intrusion activity targets industrial companies. C-levels need to understand the urgency and address this new threat. We believe that companies have to look at cyber threats holistically and make sure to fully protect their supply chain, subsidiaries, and affiliates.
Acting on the ten strategic priorities above will allow companies to build a good base and weather any storms that may come.or some companies, COVID-19 led to a complete realignment of their strategic priorities. For others, it simply meant to carry on doing what they do already, but at a much higher speed. No matter which category your company falls into, many big transformations now take place simultaneously, all requiring immediate attention from leadership. All this taken together makes it even harder for industrial companies to define their long-term strategic priorities.