Is manufacturing sector aiming for digital investment?

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A Cisco study indicates that global manufacturing companies are aiming for digital investments.

86 percent of manufacturers view the transition from product-centric to service-oriented revenue models as a core part of their strategies.

29 percent say services will grow faster than the product aspect of their business, said Cisco.

Cisco studied 625 manufacturing decision makers across 13 countries.

“When you look at digitization, if we can fully leverage the benefits of digitization and IoT, all the way from core manufacturing out to that end-user experience, the opportunities are exponential because we can better use all of those services, all of that data,” said Tony Bolton, CIO, Global Telecommunications, General Motors.

Industrial machine builders that leverage services are using them to drive disruptive new business models. This enables them to charge for business outcomes — such as plant uptime — just as they now charge for physical products sold as a capital investment.

Cisco’s survey says 79 percent believe that digital disruption will have a significant impact on their companies over the next three years. However, many manufacturers are either struggling with the transition to services or are not moving fast enough.

Manufacturers say digital technologies such as cloud (37 percent), Internet of Things (33 percent), and analytics (32 percent) have the greatest impact on production over the next 3 years.

According to Cisco’s economic analysis, the payoff for an average $20 billion manufacturing firm that digitizes is a profit upside of 12.8 percent over the next three years, or 19 percent over 10 years.

Economic research by Cisco Consulting Services reveals $383 billion in Digital Value at Stake coming from connected products, connected machines, and new service models alone. Manufacturers are currently leaving 76 percent of the overall industry Value at Stake on the table.

Based on the research, the number one concern is the complexity that results from selling products and services simultaneously (23 percent), along with achieving profitability in new lines of business (18 percent), and finding ways to monetize customer data (15 percent).

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