- Capgemini estimates the size of the connected products market globally will range between $519B to $685B by 2020.
- 92% of successful manufacturing organizations have not only created a digital vision but also have a roadmap to monitor progress.
- 60% of manufacturers are struggling to ensure digital continuity throughout their entire product lifecycles.
- 54% of manufacturers have initiated programs to enable collaboration and greater innovation with start-ups, third parties, and suppliers, expanding their digital ecosystems to include co-creators in new product development.
- Manufacturers predict 47% of all their products will be smart, connected and capable of generating product-as-a-service revenue by 2020.
- 45% of manufacturers are exploring to restructure their organization by creating a separate independent entity to develop connected products
- Only 16% of organizations are fully implementing Digital Twins while 45% are not beyond the pilot stage.
Capgemini’s study, Digital Engineering: The new growth engine for discrete manufacturers explores how digital technologies are reshaping the manufacturing landscape. The research goals of this study include examining how manufacturers are balancing the two priorities of using digital technologies to get legacy products to market quicker while investing in new smart products to enable them to drive revenues from services.
Capgemini interviewed 1,000 senior executives from global manufacturing organizations across nine countries. Segments included automotive and transportation, aerospace and defense, industrial manufacturing, industrial and agricultural equipment, high-tech, and medical devices. Of the organizations, 62% had global revenues greater than $2 billion.
Key takeaways from the study include the following:
- Capgemini estimates the size of the connected products market globally will range between $519B to $685B by 2020. Capgemini’s conservative estimate based on survey data and market analysis is that smart, connected products will add $518.9B or 6.63% to manufacturing value-added to the GNP of surveyed countries. In an optimistic scenario, where manufacturers accelerate their smart, connected product efforts, their combined efforts could potentially add up to $685.6B to manufacturing value added in 2020. Under the optimistic scenario, smart, connected products would contribute 8.76% of manufacturing value-added revenues to the GNP of the nine surveyed countries.
- Manufacturers predict 47% of all their products will be smart, connected and capable of generating product-as-a-service revenue by 2020. Capgemini’s survey found this area manufacturers globally are placing a high priority on, forcing them to reinvent themselves using digital technologies to scale fast for new opportunities. Manufacturers are predicting smart, connected products launched will jump from 35% in 2017 to 47% in 2020, growing at a Compound Annual Growth Rate (CAGR) of 10.3% a year, up from just 14% in 2014. Given constrained engineering, R&D, and production schedule availability consumed supporting legacy products today, this jump in an entirely new product category is forcing manufacturers to reinvent themselves. Just 18% of manufacturers are planning to abandon transaction-based products and shift to an entirely service-based business. The majority (54%) are planning to sell both legacy products and launch new smart, connected products that will be their platforms for services revenue.
- 66% of manufacturers say the continual challenge of sustaining legacy products while inventing new smart, connected products causes R&D and resource tradeoffs. Manufacturers realize they need to balance their transaction-driven product sales today with services and product-as-a-service revenue models that will flourish in the future. Constrained by a lack of resources and R&D priorities that are often conflicted, Capgemini finds that the most successful manufacturers are rebooting their approaches to product innovation and development, reprioritizing smart, connected products that have greater gross margin potential first.
- The most successful manufacturers have a higher percentage of smart, connected products of in their portfolios today (25% versus 20% global average) and are driving higher incremental revenues from smart, connected products (14% versus 9% global average). Capgemini found that the successful manufacturers have mastered the use of data from smart, connected products to build actionable insights. 93% of digitally successful manufacturers have mastered the ability to use data from smart, connected products to gain insights into how they can improve product designs and manufacturing techniques versus just 24% of all manufacturers globally. As data capture and analysis from smart, connected products becomes part of their DNA, successful or high-performance manufacturers develop competitive strengths that distance themselves from competitors, as is shown in the graphic below.
- Only 17% of manufacturers have made substantial progress across all the six dimensions of engineering transformation maturity by adopting digital technologies that streamline the development and launch of smart, connected products that drive services revenue and valuable data. Capgemini found that the six dimensions of a digital ecosystem, vision, leadership, and transformation plan, nurturing a digital culture, creating and launching smart, connected products, enabling digital continuity and the ability to capture, aggregate, analyze and gain insights from the voice of the product or usage data are the foundations for growing a services-based business.
Read the full article in Forbes.