The Increasing Value of Cloud for OEMs

Cloud capabilities can be pivotal to a company's industrial reinvention journey when focused on a “fit for purpose” cost structure, smart products, and services innovation.

Brian R. May, Managing Director, Industrial North America, Accenture
Brian R. May, Managing Director, Industrial North America, Accenture

Cloud, the popular metaphor for a group of on-demand and computer-powered services, has largely played a support role for industrial operations in recent years. Today, however, the scaling flexibility of cloud can provide industrial companies optimized IT cost, agility, and a platform for growth, which are critical to their future success—and with good reason.

From the start of 2020, industrial companies faced a challenging outlook. Revenue growth and profitability were slowing due to a progressing global economic downturn and a significant drop in industrial production. Many were focusing on efficiency improvements, restructuring, and reshoring the production chain, already making the flexibility that comes with cloud technologies a necessity. 

Then COVID-19 struck, significantly altering the industrial value chain and fundamentally changing everything from consumer behavior to the path to market. Now, companies must also navigate an uncertain economic recovery, emerging competitive threats, new ways of working, and a new set of customer expectations in an era of profound societal change. In other words, industrial reinvention is needed now more than ever.

Using cloud capabilities can play a pivotal role in the reinvention journey when focused on three critical areas; a “fit for purpose” cost structure—enabling growth in a new business environment—and smart products and services innovation. For example, cloud digital applications are changing the way customers engage, empowering new growth models. As product portfolios continue to expand to include services and greater digital engagement, there is a need to accelerate speed-to-market to remain competitive. As part of the acceleration, e-commerce platforms can be set up quickly for customer engagement through the cloud to facilitate digital connectivity across multiple customer channels.

Cloud connectivity also enables a shift to a leaner and flexible operating model by integrating processes, platforms, and ecosystems. It supports real-time customer insights through analytics and provides the flexibility to adjust infrastructure capacity to quickly respond to new customer expectations. 

Making the journey
Here is a more in-depth look at actions industrial companies can take to optimize cost, enhance growth, and increase speed-to-market using cloud technologies:

1. Fit for purpose—Industrial companies must prioritize cost management to boost profitability and invest in reinvention. To accelerate cost optimization, companies need to leverage the benefits of data, analytics, automation, cloud, and other digital technologies at scale. This will help ensure a lean organization focused on differentiation and growth. Moreover, analytics-driven inventory right-sizing will drive sustainable gains for manufacturing and operations.

2. Growth—Industrial companies will need to retool their approach to growth. This means shifting from B2B to B2C, using direct-to-customer and digital-go-to-market models. According to Accenture research, by 2025 online sales alone are expected to reach 20% to 25%, an increase from 10% today, with up to 50% of sales being online induced. There also will be a need to diversify revenue sources by focusing on adding a portfolio of services, many of which will be digitally enabled. This shift, among other benefits, will result in greater stability during uncertain economic times.

3. Smart, connected products and services—These portfolio additions will require industrial companies to increase agility and flexibility across the entire value chain to differentiate market position and enable new revenue streams. This includes sensing, forecasting, and anticipating changing demand by both customer segment and geography, while simultaneously applying digital manufacturing to ensure faster response times. It also will require developing a roadmap for creating more resilient supply chains based on extensive data, customer collaboration, automated operations, and a digitally enabled workforce.

Maximize value
As part of the cloud journey, industrial companies will need to balance speed and value. Cloud can be both transformational and disruptive for the better, offering breakthroughs, scalability, flexibility, responsiveness, efficiency, resilience, and security. This new environment underscores the need for companies to seriously consider expanding the use of cloud technologies to maximize value and future success.

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