Has the Digital Transformation Reached an Inflection Point?

Feb. 9, 2023
ARC Advisory Group research indicates that only 11% of industrial companies are currently driving business results from digitalization, but nearly 50% are in the process of digitally transforming.

The concept of industry’s digital transformation is typically teased along the lines of new operational capabilities and business possibilities. Though such positioning is accurate, the reality is that digital transformation has fast become less of an optional enhancement and more of a requirement.

“It’s the only way to respond to sustainability, changing customer requirements, competitors who are in the process of transforming, increased operating resilience, supply chain volatility, cost control, and increasing product and packaging complexity,” said Greg Gorbach, vice president of digitalization and Internet of Things at ARC Advisory Group, during the ARC Industry Leadership Forum 2023.

Citing recent ARC Advisory Group research of industrial manufacturing and processing companies, Gorbach noted that 15% of respondents had thus far done little or no work around digital transformation and 26% were just beginning to automate but have not yet coordinated operations and analyses around these new automation initiatives. Only 11% of respondents said they had moved beyond integration of data from automated systems to drive real time insights that are being used to optimize processes and workflows and yield specific business results.

The picture these research results paint of industrial business is one where more than 40% haven’t begun the digital transformation or are just beginning to do so, with nearly 50% still somewhere in the process of transformation.

With 50% of industry at some stage of transformation, it’s safe to say we’ve passed the inflection point of whether the digital transformation is truly real. Given this current stage of industrial digital development, what factors are driving the transformation at this point?

Train new and existing workers for digital transformation with workflow and simulation software.

Research results noted by Gorbach showed that the four principal drivers currently behind digital transformation are 1) Growth—expanding into new markets, segments, or geographies; 2) Reducing operations and product costs; 3) Improved EBITDA and general revenue growth; and 4) Sustainability. Each of these factors were clustered within a few points of each other in ARC’s research.

A secondary tier of industrial digital transformation drivers are innovation around new products or services, security, attracting and retaining customers, and regulations.

Funding and skills development

Providing insights into the digital transformation underway at ZF Group during his presentation at the ARC event, Gabriel Gonzalez-Alonso, senior vice president and head of corporate production management at ZF Group, stressed that digital transformation activities should be funded “out of the normal budget (i.e., not out of a separate digital transformation budget). Otherwise, cuts will be made and directions will be changed that effect the transformation.”

ZF Group is a global supplier of automotive components and technologies.

Though money is the priority in making the digital transformation possible, according to Gonzalez-Alonso, the second most important aspect is skills. Even though specific skills in specific areas will be focused on at the start of the digital transformation, “you need the entire team to be upskilled and trained,” he said. “Not just IT and maintenance, you need to bring along all operations teams.”

Gonzalez-Alonso said ZF Group holds three-day basic training sessions built around use cases for all team members. He added, “We give every employee access to basic information via Microsoft Teams so they can all feel a part of the transformation.”

When it comes to the speed of transformation at your company, Gonzalez-Alonso stressed that it must be done step by step. “It’s just like with smartphones,” he explained. “No one came to your house and taught you how to use it; but you started using them bit by bit and using new smartphone technologies as they were developed. Now we cannot imagine life without them.”

About the Author

David Greenfield, editor in chief | Editor in Chief

David Greenfield joined Automation World in June 2011. Bringing a wealth of industry knowledge and media experience to his position, David’s contributions can be found in AW’s print and online editions and custom projects. Earlier in his career, David was Editorial Director of Design News at UBM Electronics, and prior to joining UBM, he was Editorial Director of Control Engineering at Reed Business Information, where he also worked on Manufacturing Business Technology as Publisher. 

Sponsored Recommendations

Measurement instrumentation for improving hydrogen storage and transport

Hydrogen provides a decarbonization opportunity. Learn more about maximizing the potential of hydrogen.

Learn About: Micro Motion™ 4700 Config I/O Coriolis Transmitter

An Advanced Transmitter that Expands Connectivity

Learn about: Micro Motion G-Series Coriolis Flow and Density Meters

The Micro Motion G-Series is designed to help you access the benefits of Coriolis technology even when available space is limited.

Micro Motion 4700 Coriolis Configurable Inputs and Outputs Transmitter

The Micro Motion 4700 Coriolis Transmitter offers a compact C1D1 (Zone 1) housing. Bluetooth and Smart Meter Verification are available.