How Digital Transformation Can Safeguard the Competitive Advantage of Manufacturing Companies

IFS, a global cloud enterprise software company, exclusively represented in Italy by FI Solutions, has announced the results of an IDC study titled “Shaping the Future of Manufacturing”. 

The study, which involved 160 senior decision-makers from the manufacturing sector across Europe, America, and Asia, reveals the current level of digital transformation (DX) and identifies areas where manufacturing organizations can maximize their growth. The analysis of future investment plans, IT strategy, and related challenges outlines the development path for manufacturing companies. 

In summary, the study leads to the following conclusions: 

• The greatest ROI results come from developing new business models (51%). 
• Manufacturing companies that have optimized their digital transformation (DX) journey have seen a 40% increase in profits. 
• Only 26% of the manufacturing companies surveyed aim to create new revenue streams, and only 28% are working on finding new ecosystems. 

Current Difficulties in Manufacturing and the Role of Differentiation

The main challenges highlighted by manufacturing companies, such as rising labor costs (61%), raw material costs (42%), and supply chain issues (42%), continue to be top priorities. However, the urgency to address these challenges has often prevented companies from differentiating their activities. In today’s complex international economic landscape, manufacturers must adapt their business models and focus on areas that stand out from their traditional sectors. 

As the study shows, digital transformation (DX) is firmly embedded in the strategic roadmaps of manufacturing companies: more than half (53%) continue to invest in digital initiatives to support core business operations. Companies that have successfully moved beyond the pilot stages of their digital transformation journey and are actively pursuing digital maturity are seeing increased profits. The survey shows that manufacturing organizations with an optimized level of DX have experienced a 40% increase in profits, while those with less advanced DX maturity have seen a decline in profits over the past fiscal year. 

Innovation, Ecosystems and New Markets: Roads to Success 

It is crucial that manufacturers continue to recognize the importance of advancing their digital initiatives. However, to ensure success, it is necessary to find a balance between DX investments and business priorities. It is concerning to note that 62% of the manufacturing companies surveyed do not have a clear understanding of the ROI derived from their digital transformation initiatives. If this situation persists, manufacturers risk losing their competitive edge and jeopardizing the scope and implementation of future initiatives. 

In line with this survey, recent financial results from IFS have also demonstrated that CIOs are increasingly prioritizing technology investments to enhance business resilience and generate value through digital technologies. However, without clear evidence of the resulting ROI, it will be challenging for manufacturing companies to convince senior IT management to allocate the necessary budget for digital initiatives. 

To succeed today, companies must follow the example of manufacturing organizations that actively engage with new ecosystems (28%), create new revenue streams (26%), and/or explore new markets (25%) to gain an edge over competitors. 

The survey results show that the greatest gains in ROI come from digital transformation initiatives that go beyond pilot projects and from implementing a mature DX strategy capable of effectively managing processes and people. The research further revealed that ROI benefits are achieved or even exceeded through mature digital initiatives aimed at developing new business models (51%) and engaging new ecosystems (37%). 

Maggie Slowik’s Commentary 

Maggie Slowik, Global Industry Director for Manufacturing at IFS, said: “Manufacturers are under increasing pressure to differentiate in a landscape characterized by volatility while retaining the agility which is essential for building operational resilience. We know that digital maturity impacts profit. However, without transparency and measurable ROI it will become increasingly difficult for manufacturers to scale and deliver tangible benefits from their investments.”    

Slowik continued: “The more digital initiatives deliver ROI, the easier it is for organizations to make a case for further digital investments – these must be enabled by scalable, cloud-based IT solutions (ERP, EAM o FSM) to deliver long-term revenue and profit growth. We see that manufacturers who have broken through the pilot phases of their DX journey, and continue to push for digital maturity, are already reaping the benefits of ROI as a means to generate long-term value and remain competitive.  

In the future, successful organizations will implement an advanced approach to DX that considers the “impact-scale-trust” dimensions of digital initiatives, continuously using digital technology not only to optimize operations but also to achieve advantage and create value with digital technology.”   

A complimentary copy of the IDC InfoBrief, Sponsored by IFS, The Future of Manufacturing (doc #EUR150205923, April 2023), can be found here.