As Deloitte Digital envisions the future of businesses, we wanted to know how companies currently invest in Industry 4.0 to enable digital transformation.

To find out, we conducted a global survey of 361 business executives from organizations in seven industries (aerospace and defense, automotive, chemicals and specialty materials, industrial manufacturing, metals and mining, oil and gas, and power and utilities) with annual revenues ranging from $500 million to more than $25 billion. Respondents included both C-suite and non-C-suite executives representing different business functions from organizations spread across 11 countries in APAC, the Americas, and Europe.

The study brought to light five interesting paradoxes surrounding digital transformation:

1. The strategy paradox: Perhaps unsurprisingly, most respondents (94 percent) said that digital transformation is a top strategic objective for their organization. However, just 68 percent of respondents see digital transformation as a medium for profitability, with only 11 percent of R&D budget targeted for digital transformation. So while almost every organization recognizes the importance of digital transformation, not all of them are fully exploring its strategic potential.

2. The supply chain paradox: Executives identified supply chain as the top priority for both current and potential digital transformation investments. However, chief supply chain officers and others outside of the C-Suite—the very people most involved with supply chain strategy and operations—often do not have a seat at the table when it comes to digital investment decisions.

3. The talent paradox: Executives report feeling quite confident about the state of their talent pool, with only 15 percent stating they need to dramatically overhaul their talents’ skills and compositions. But with that said, it’s important to know that finding, training, and retaining the right talent stands as the most pressing organizational and cultural challenge.

4. The innovation paradox: Our survey results confirm what we’ve seen in previous Deloitte studies—that productivity improvement and operational goals largely drive transformation initiatives. That means that organizations may be using advanced technologies primarily to do the same things better to generate positive ROIs. However, such organizations may be leaving innovation-driven opportunities untapped; our survey found that high ROI is almost as likely to result from investments in innovation as from investments in productivity and operations.

5. Getting around the physical-to-digital-to-physical (PDP) loop: The ability to fully harness information from connected assets and use it to drive informed decisions is crucial for implementing Industry 4.0—but it’s a goal few organizations have yet been able to fully achieve.

What does this mean for our clients and how can we help? Deloitte Digital and GE Digital joined forces to transform the digital core, power the industrial Internet of things (IoT), and turn industrial insights into accelerated returns. By embracing industrial IoT, clients can reduce reactive maintenance costs, increase asset availability, improve employee productivity, and reduce environmental health and safety incidents. We are helping clients across a range of industries and sectors, including manufacturing, oil and gas, mining, power, and utilities.

At the end of the day, our survey results confirm the faith business leaders are placing in Industry 4.0 and the potential it offers to transform the organization. But our survey results also reveal a number of things that leaders should keep in mind as they traverse the digital transformation journey:

  • Once undertaken, digital transformation is central to the organization, touching upon every aspect of the company. It is not some abstract endeavor, limited to one function or department.
  • Each digital transformation initiative is unique. There is no single “right way” to do it. The best approach is the approach that works best for the specific circumstances of each organization.
  • The culture of the digital organization should be inclusive. A culture of experimentation and acceptance of failure can help ensure that technology implementation does not fizzle out with initial hiccups.

To learn more about Industry 4.0 and how organizations can advance their digital transformation efforts, take a look at “The Industry 4.0 paradox: Overcoming disconnects on the path to digital transformation” and our extensive collection of Industry 4.0 insights.

Andy Daecher, principal, Deloitte Consulting LLP, specializes in advising executives on the practical applications of emerging technologies, effective management of IT organizations, and execution of complex, transformational, technology-enabled projects.