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Management

Chinese factories must bet big on digital technology for industrial reinvention

Accenture research suggests firms in the industrial-equipment sector could save more than US$43,000 per employee if they combined robotics, AI, blockchain, big data and 3D-printing technologies

PUBLISHED : Friday, 10 November, 2017, 4:17pm
UPDATED : Friday, 10 November, 2017, 9:54pm

China remains the manufacturing powerhouse of the world, but many of its leading players are facing challenges such as overbuilt capacity and weak demand.

Revenue growth has slowed, and profitability has stagnated and in some cases declined.

While China enjoys some advantages such as mature manufacturing bases, fiscal support, a large base of tech-savvy consumers and more platform players, it also has hurdles such as increasing labour and material costs.

Plus, the piecemeal deployment and implementation of investments in digital technologies hinder the ability of Chinese businesses to innovate with connected and intelligent products.

Recognising the challenges, in 2015 China launched “Made in China 2025” as part of a road map for the country’s latest industrial modernisation. The strategy focuses on developing an advanced manufacturing sector through innovation-driven development and applying smart, eco-friendly technologies.

Its business leaders understand the power of digital and the importance of the goal of making the ethos of “Made in China 2025” a reality. They see the potential for digital technologies to bring about transformation and growth and are making big investments in a variety of leading technologies.

Yet many aren’t getting the most out of their digital investments.

The piecemeal deployment and implementation of investments in digital technologies hinder the ability of Chinese businesses to innovate with connected and intelligent products

The challenge is that to do so requires a commitment to digital transformation across the full breadth of their business activities.

So how can managers get more for their digital spending?

Chinese manufacturing companies must completely reinvent their operating models, production and value chains in a process that we at Accenture call, “Industry X. 0”.

Industry X. 0 is how Accenture defines the digital reinvention of industry, when businesses use advanced digital technologies to transform their core operations, their worker and customer experiences and ultimately their business models.

Companies that leverage the right combination of new technologies could boost both savings per employee and market capitalisation.

While it varies across industries, the combination of the technologies – including 3D printing, artificial intelligence (AI), augmented and virtual reality, autonomous robots, autonomous vehicles, big data analytics, blockchain, digital twin, machine learning and mobile computing – could have a significant impact.

For instance, previous Accenture research suggests companies in the industrial-equipment sector could save more than US$43,000 per employee if they combined robotics, AI, blockchain, big data and 3D-printing technologies

Another of its reports predicts energy companies could gain more than US$16 billion in market capitalisation if they combined technologies such as virtual reality, big data and AI.

To succeed, a careful balance of transforming core businesses while scaling new ones is needed. Embracing digital strategies in parts of the company, or merely in customer-facing channels, does not amount to true digital transformation. Companies must look beyond only improving efficiencies, and instead focus on generating a holistic approach to digital that drives sustained growth in new digitally contested markets.

A previous Accenture research report suggested companies in the industrial-equipment sector could realise additional cost savings of more than US$43,000 per employee if they combined robotics, AI, blockchain, big data and 3D-printing technologies

Companies should plan their digital strategy, identifying opportunities within and outside their company (and possibly industry boundaries). Then they should leverage digital technologies (including mobile, cloud, analytics, robotics, cybersecurity, IoT) to more effectively and efficiently design, produce, distribute and sell their products.

Chinese manufacturing companies should embrace such holistic digital transformation. With proper use of digital innovations new levels of efficiency can be achieved in the core of R&D, engineering, production, manufacturing and business support through integrated systems, processes, sensors and new intelligence.

Worker and customer experiences can be reimagined and redesigned through personalisation and advances such as immersive, augmented and virtual reality. New business models and revenue streams can be unlocked by smart, connected products, services and plants that are enabled by new ecosystems.

There is also positive news for the current workforce, as it is expected that key digital technologies will create new jobs as companies reinvent themselves to reflect Industry X.0. The research indicates that deployment of connected and intelligent products, systems and plant will lead not only to the addition of new responsibilities to existing roles, but also to the creation of entirely new roles.

To make “Made in China 2025” a reality, Chinese manufacturers should look to embrace Industry X.0.

Yu Yi is Digital Lead for Accenture Greater China

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