Digital ReimaginationTM in the Manufacturing Industry

Everyone's spending on digital. But each industry uses

a combination of the digital five forces
Mobility and
Pervasive Computing, Big Data and Analytics, Cloud Computing,
Artificial Intelligence and Robotics, and Social Media
in
different ways to transform its processes, business models,
products and services, customer segments and channels, and
workplaces.
How are manufacturing firms using digital technologies to
reimagine their businesses in entirely new ways? This report
presents the findings from our survey of automotive and
industrial manufacturers across the globe, about their digital
strategies, investment, and plans.
Automotive and industrial manufacturers are planning to use
social media, mobile apps, digital sensors, and other
technologies to build closer connections to end customers and
monitor how they are using their products. They are also relying
on digital technologies to improve their existing business
processes. They hope to achieve more accurate demand
forecasts, improved customer assistance, and greater employee
feedback. What's more, manufacturers are intent on having a
clear and unified digital strategy, seeing this as a clear success
factor.
Read on to find out about the impact of these digital initiatives,
the business capabilities manufacturers are focusing on, and
their challenges and key success factors.

Contents
How Automotive and Industrial Manufacturers Are Beginning
to Digitally Reimagine Their Businesses

05

Automotive Companies Zoom up the Digital Track

07

Industrial Manufacturers: Further Ahead With Digital Technology

11

Key Success Factors for Automotive and Industrial Manufacturers

14

How Automotive and Industrial Manufacturers Are Beginning

to Digitally Reimagine Their Businesses
Automotive companies and industrial manufacturers have both firmly embraced
digital technology. A research study TCS conducted last year with large global
companies across industries found that the typical automotive company shelled out
$87 million (which was 0.3% of revenue), while an average industrial manufacturer
spent $95 million in 2014 on digital initiatives (or 0.4% of company revenue). That
spending on cloud, Big Data and analytics, mobile devices (e.g., sensors), social media,
artificial intelligence and other technologies, and the personnel to implement these
represents sizable investments. (See Exhibit 1.)

In 2014, TCS surveyed over 800 corporations about their digital strategies,
investments, and plans. The data in this report is part of the same study.
Read more about TCS Global Trend Study, The Road to Reimagination: The
State and High Stakes of Digital Initiatives, at http://sites.tcs.com/stateofdigital

Exhibit 1: How Automotive and Industrial Manufacturers Compare to Other Sectors in Digital Spending
Spending in 2014 on Digital Initiatives

Mean and % of Mean Annual Revenue

200
180

0.7%

160

0.6%
0.5%

Million $

140
120

0.8%

0.7%

0.4%

0.6%

0.5%

0.5%

0.5%
0.4%

100
80

0.4%
0.3%

60

0.3%

0.3%

0.3%
0.2%

0.3%

0.2%

40
20

7
3.0
11

6
1.8
14

.49
100

0.4%

0.4%

0
.79
2.4
188
12

.40

55

.06
110

.27

86

.67

46

.00

87

.70

37

1.9

11

.50

78

.38

95

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Mean

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05

What's more, the majority of automotive companies (64%) and industrial

manufacturers (56%) brought new digital offerings to market in 2014, and these
products and services generated serious revenue: $285 million for the average
automotive manufacturer and $230 million for the average industrial manufacturer.
Yet despite such heavy spending, we believe most automotive and industrial
manufacturers are just in the first wave of the digital revolution. It's a wave we refer to as
'digitization' that is, the streamlining of existing supply chain, marketing, selling, and
other business processes. However, our research suggests that some of these
companies are beginning to embrace what we see as the second and third waves:

The Three Waves of the Digital

Revolution are:

Digitization: Streamlining
existing business processes

Digital Transformation:
Revamping business process
to create whole new customer
experience

Digital Transformation
Revamping business processes to create a whole new experience for customers, both
before and after they purchase the manufacturer's product. We believe industrial
manufacturers have significant opportunities to use mobile apps to gain insights from
customers about their products and service offerings; improve the shop floor through
sensors that digitize the entire assembly line; and give customers technologies they
can wear that capture information about how they're using their products. We see
automotive companies more aggressively using mobile apps as well to assess the
customer experience, and monitoring social media comments so they can
continuously gauge how customers feel about their products.
Digital ReimaginationTM
Bringing a completely new business model to market, with new digitally-enabled
products and services. Automotive companies will be spending heavily on the humanmachine interface (HMI) the digital car dashboard that tells drivers about road and car
conditions, and lets them adjust everything from the temperature to the radio dial. And
because the sensors embedded in everything from construction equipment and jet
engines to power turbines will deliver digital information on their operating status as
customers use them, industrial manufacturers will be able to sell all kinds of preventive,
repair, and other maintenance services that were not possible before digital online
connections.
Over the rest of this decade, many automotive and industrial manufacturers will be
using digital technologies to connect themselves to their end customers and monitor
the way they are using their products. The impact for many promises to be nothing
short of revolutionary: troubleshooting their products while customers use them and
even fixing them before customers know it, as well as selling new digital offerings
(services, infotainment, data, etc.) by which customers can get more value from their
cars, tractors, construction equipment and heavy equipment.
In each industry, such changes are likely to play out differently, and at different speeds.
In this article, we'll report on the changes under way in both sectors, and what the
companies say is ahead on the digital front for them over the rest of the decade.
Let's begin with the automotive sector.

06

Digital ReimaginationTM:
Bringing a completely new
business model to market

Automotive Companies Zoom up the Digital Track

In our study, we surveyed some of the world's largest automotive companies (average
revenue per company was $40 billion). About two-thirds (64%) were automotive
manufacturers, and another 21% made auto parts. Leveraging digital technologies is
critical for these companies: Nearly two - thirds (61%) said their digital initiatives were of
major importance or, in fact, the most important factor in their company's success over
the rest of the decade.

Two-thirds of the survey

participants have executed
digitization.

Some two-thirds of the survey participants have executed digitization to date

essentially to improve their existing businesses and business processes (the digital
strategy we call 'digitization'). (See Exhibit 2.)

Exhibit 2: Automotive Companies' Current Digital Strategies

How Respondents Characterize the Impact of Their Digital Strategies to Date
They have modernized our technologies and improved
our existing products, services, and processes

64%

They have unified our channels to customers and

transformed the customer experience but they have
kept our business model, products, services, customer
segmentation approaches, channels to customers,
business processes, and workplace the same
or largely the same
They have enabled us to create a whole new business
model, new products/services, new customer
segmentation approaches, new channels to customers,
new business processes, and/or a new workplace

32%

4%

0%

10%

20%

30%

40%

50%

60%

70%

By 2020, the automotive companies predict, their digital strategies will get bolder. Half
will have strategies of either digital transformation (39%) or digital reimagination
(11%). (See Exhibit 3.)

Exhibit 3: Automotive Companies' Digital Strategies by 2020

How Respondents Characterize The Impact of Their Digital Strategies by the Year 2020
To modernize our technologies and improve our
existing products, services, and processes

50%

To unify our channels to customers and transform the customer

experience but keep our business model, products, services,
customer segmentation approaches, channels to customers,
business processes, and workplace the same or largely the same

39%

To create a whole new business model, new products/services,

new customer segmentation approaches, new channels to
customers, new business processes, and/or a new workplace

11%

0%

10%

20%

30%

40%

50%

60%

07

A clear minority were using digital technologies to continuously monitor their

customers. While nearly half were tracking social media comments, only 29% said they
had digital sensors or other devices embedded in or attached to their products. And
only 39% had mobile apps by which they could monitor and communicate with
customers. Even fewer only 7% had wearable digital devices for customers. (See
Exhibit 4.)
However, asked whether and how they would connect digitally to customers by the
year 2020, the majority of automotive companies said they would monitor customers
through social media, mobile apps, digital sensors, and other devices.

Exhibit 4: The Rush for Automotive Companies to be Digitally Connected to Customers

Which Respondents Currently Gather Digital Data on Customers and Which Plan to by End of 2020
Continuous monitoring and analysis of customers comments in
public social media sites (e.g., Facebook, LinkedIn, Twitter, etc.)

46%

Mobile apps for our customers' mobile devices

39%

Digital sensors and/or other digital devices embedded in or

attached to the physical products that we make for customers

39%

29%

Digital products that we sell and distribute online directly to

customers' computers (e.g., streaming video or audio)

Digital devices that our customers can wear (e.g., digital bracelets)
or can attach to other products they use but which are not made
by our company

50%

50%

25%

46%

7%

Other digital online connections to customers

57%

50%

0%

20%

43%

40%

60%

Currently

08

80%

100%

By 2020

The impact for customers: a much better customer experience, with suppliers having
the ability to continuously monitor and improve the way their products are performing
for customers and make technology-enabled changes on the fly. Asked specifically
what they want their digital initiatives to achieve over the decade, auto companies said
the three most important were (Exhibit 5):

The impact for customers:

a much better customer
experience.

The biggest challenge is the

difficulty of creating an
overarching digital strategy
in the organization.

More accurately predicting customer demand

Increasing the information employees share across levels and functions

Identifying product improvements based on how customers are using their

products

Nonetheless, judging from our research, most automotive companies have a ways to
go to shift from 'digitization' to 'digital transformation,' much less'digital
reimagination.' Several key barriers stand in the way. The biggest one is the difficulty of
creating an overarching digital strategy in the organization. Half the survey
participants said each business function had its own digital strategy, and another 11%
said there were no digital strategies at all. Only 39% said their company had one digital
strategy that guiding all their digital initiatives.
With multiple buyers of digital technologies and services
all of whom have their
own strategy
it will be extremely difficult for these organizations to establish
standards on such items as how to define data, how to integrate data streams, and
which technologies to focus on. That, in turn, will make it difficult for auto companies
to integrate
and thus understand and respond to
multiple streams of digital
customer data that flow in: from social media, automobile dealers, consumers'
smartphones, and the cars themselves.

09

Exhibit 5: What Automotive Companies Want From their Digital Initiatives

Business Capabilities That Companies Want Their Digital Initiatives to Achieve or Improve
The ability to more accurately predict demand for our products/services

71%

Substantial increase in how much information and feedback our employees

share across business functions and levels of the company

68%

The ability to monitor how customers are using our products/services to

identify customer needs for improvements to existing products or services
The ability to monitor on an ongoing basis how customers are using our
products/services to improve the design, engineering and/or production
of those products/services
The ability to improve customer assistance when our products/services
aren t working properly

64%
61%
61%

The ability to reduce inventory in the supply chain

57%

The ability to make much faster changes to our products/services

or to invent whole new products/services much faster

57%

The ability to rapidly inform customers about new products/services and

get them to buy these products/services

54%

The ability to monitor how customers are using our products/services to

identify whole new products or services
The ability to have a much deeper understanding about why customers
choose our products/services over our competitions products/services
so that we can provide the right design, features and functions
The ability to help customers increase the value they get from our
products/services (e.g., use more of the features of our products/services

54%
54%
50%

Creation of a whole new way in which we deliver value to customers

46%

Creation of whole new value for customers (i.e., going beyond

the traditional value we have provided)

46%

Creation of a culture of speed i.e., fostering an environment

in which our employees make things happen quickly

46%

The ability to make software and software-related improvements to our

products/services while customers are using them.

43%

The ability to finely tailor our pricing (e.g., based on smaller customer
segments, moment of need, availability of supply, and other factors)

43%

The ability to create new channels of customer support such as

via mobiles or social media

43%

Creation of a culture of transparency and openness

43%

The ability to tailor our products/services to much smaller

customer segments (even, possibly, segments of one)

39%

The ability to inexpensively get customers to automatically

reorder/repeat their purchases

39%

The ability to create much smaller customer segments (even possibly

segments of one i.e., micromarketing)

29%

The ability to create entirely new channels (such as mobile or social)

for distributing our products

25%

The ability for customers to manufacture our products at their site of business

25%

The ability to offer a preventative maintenance service

21%

The ability to create entirely new production processes

21%

The ability for customers to download our products/services online

21%

A major change in how we price our offerings

21%
0%

10

10%

20%

30%

40%

50%

60%

70%

80%

Industrial Manufacturers:
Further Ahead With Digital Technology
The industrial manufacturers that we surveyed were a little more advanced than the
automotive companies were in using digital technology. These companies included
those that make building materials, appliances, paper, home construction products,
lawn and garden equipment, furniture, and other gear. In all, we surveyed 66 of these
companies, the average revenue of which was $26 billion.
Nearly half (49%)had already begun to transform the customer experience, and 44%
had improved existing processes to date (i.e., followed a 'digitization' strategy). By 2020,
32% expect to use digital technologies to create a whole new business model with new
offerings ('digital reimagination'), and 37% plan to transform the customer experience.
(See Exhibits 6 and 7.)
Exhibit 6: Industrial Manufacturers' Current Digital Strategies
How Respondents Characterize the Impact of Their Digital Strategies to Date

They have modernized our technologies and improved

our existing products, services, and processes

44%

They have unified our channels to customers and

transformed the customer experience but they have
kept our business model, products, services, customer
segmentation approaches, channels to customers,
business processes, and workplace the same
or largely the same

49%

They have enabled us to create a whole new business

model, new products/services, new customer
segmentation approaches, new channels to customers,
new business processes, and/or a new workplace

7%

0%

10%

20%

30%

40%

50%

60%

Exhibit 7: Industrial Manufacturers' Digital Strategies by 2020

How Respondents Characterize The Impact of Their Digital Strategies by the Year 2020

To modernize our technologies and improve our

existing products, services, and processes

31%

To unify our channels to customers and transform the customer

experience but keep our business model, products, services,
customer segmentation approaches, channels to customers,
business processes, and workplace the same or largely the same

37%

To create a whole new business model, new products/services,

new customer segmentation approaches, new channels to
customers, new business processes, and/or a new workplace

11%

0%

5%

32%

10%

15%

20%

25%

30%

35%

40%

11

How are industrial manufacturing companies digitally connected to customers? The

largest number (41%) said they're monitoring social media comments. About a third
have mobile apps for their customers' mobile devices, and about a quarter have digital
products that customers can download to their computers. Less than one in five have
digital sensors in their products, and only about one in 10 have wearable technologies.
(See Exhibit 8.)
However, like their automotive industry counterparts, the clear majority of industrial
companies plan to establish digital online connections to customers by the end of the
decade. For example, 84% of these companies say they will attach sensors to their
products refrigerators, engines, roofing systems, and so on by 2020. Some 88%
expect to have mobile apps for their customers' smartphones. And an even greater
percentage (92%) say they will be monitoring what customers say about them in social
media.

Many industrial manufacturers

plan to establish online
connections to customers by
the end of the decade.

Exhibit 8: The Rush for Industrial Manufacturers to be Digitally Connected to Customers

Which Respondents Currently Gather Digital Data on Customers and Which Plan to by End of 2020
Continuous monitoring and analysis of customers comments in
public social media sites (e.g., Facebook, LinkedIn, Twitter, etc.)

51%

41%

Mobile apps for our customers' mobile devices

32%

Digital sensors and/or other digital devices embedded in or

attached to the physical products that we make for customers

56%

18%

Digital products that we sell and distribute online directly to

customers' computers (e.g., streaming video or audio)

66%

62%

24%

Digital devices that our customers can wear (e.g., digital

bracelets) or can attach to other products they use but which are
not made by our company

12%

Other digital online connections to customers

59%

37%

0%

10%

20%

53%

30%

40%

50%

60%

70%

80%

Currently

What do industrial manufacturers hope to gain as a result? The three most frequently
cited business capabilities they are aiming at were (Exhibit 9):

More accurate demand forecasting

Improving customer assistance when products break down

Increasing employee feedback across levels and functions

But industrial manufacturers, too, will face challenges. A slightly higher percentage of
them (than auto companies) have one overarching digital strategy (47%). But a high
percentage (41%) of companies let each function come up with its own digital strategy,
and 10% have no digital strategies at all.

12

90%

100%

By 2020

Exhibit 9: Key Business Capabilities Sought by Industrial Manufacturers

Business Capabilities That Companies Want Their Digital Initiatives to Achieve or Improve
The ability to more accurately predict demand for our products/services

66%

Substantial increase in how much information and feedback our employees

share across business functions and levels of the company

63%

The ability to monitor how customers are using our products/services to

identify customer needs for improvements to existing products or services
The ability to monitor on an ongoing basis how customers are using our
products/services to improve the design, engineering and/or production
of those products/services
The ability to improve customer assistance when our products/services
aren t working properly

63%
59%
59%

The ability to reduce inventory in the supply chain

57%

The ability to make much faster changes to our products/services

or to invent whole new products/services much faster

57%

The ability to rapidly inform customers about new products/services and

get them to buy these products/services

57%

The ability to monitor how customers are using our products/services to

identify whole new products or services
The ability to have a much deeper understanding about why customers
choose our products/services over our competitions products/services
so that we can provide the right design, features and functions
The ability to help customers increase the value they get from our
products/services (e.g., use more of the features of our products/services

57%
56%
56%

Creation of a whole new way in which we deliver value to customers

51%

Creation of whole new value for customers (i.e., going beyond

the traditional value we have provided)

51%

Creation of a culture of speed i.e., fostering an environment

in which our employees make things happen quickly

49%

The ability to make software and software-related improvements to our

products/services while customers are using them.

49%

The ability to finely tailor our pricing (e.g., based on smaller customer
segments, moment of need, availability of supply, and other factors)

49%

The ability to create new channels of customer support such as

via mobiles or social media

4 7%

Creation of a culture of transparency and openness

44%

The ability to tailor our products/services to much smaller

customer segments (even, possibly, segments of one)

44%

The ability to inexpensively get customers to automatically

reorder/repeat their purchases

44%

The ability to create much smaller customer segments (even possibly

segments of one i.e., micromarketing)

43%

The ability to create entirely new channels (such as mobile or social)

for distributing our products

43%

The ability for customers to manufacture our products at their site of business

41%

The ability to offer a preventative maintenance service

38%

The ability to create entirely new production processes

34%

The ability for customers to download our products/services online

25%

A major change in how we price our offerings

22%
0%

10%

20%

30%

40%

50%

60%

70%

13

Key Success Factors for Automotive and

Industrial Manufacturers
Executives in both industries know what they must do to transform or reimagine
their businesses with digital technology in mind. Senior managers in these sectors
say having a unified strategy that rethinks their firm's offerings and business processes
is crucial. The automotive companies rated it second in importance, and industrial
manufacturers ranked it at the top. (See Exhibits 10 and 11.)

Senior managers say having a

unified strategy that rethinks
their firm's offerings and
business processes is crucial
for success.

Exhibit 10: Key Success Factors for Digital Initiatives for Automotive Companies (Scale of 1 - 5)
Integrating technologies with existing information systems

3.46

Having a clear and unified strategy that rethinks our entire

products/services and the business processes that support them

3.39

Developing the digital technologies so they operate reliably

3.32

Determining what role our company should play amongst a

broader set of companies that are providing digitally - based
products and services to customers

3.25

Determining what other companies to work with to offer products

and services to customers
Providing customers with significant value from establishing
an ongoing digital connection with them: better usage of
products, better products, etc.

3.25
3.18

Forming strategic alliances with other companies that have key

products, services and/or technologies
Deciding how to organize our digital initiatives in the optimal way
(whether to create a new function or have it report to an existing
function, etc.)
Revamping our business model (the products/services that we sell,
how we price them, how we take them to market)

3.18
3.14
3.11

Having a digital group/function that reports to the CEO (because

its advice is going to disrupt our core businesses)
Getting our customers to agree to have a continuous online digital
connection with our company and/or the products/services we
sell to them

14

3.04
2.96
2.70

2.80

2.90

3.00

3.10

3.20

3.30

3.40

3.50

3.60

Exhibit 11: Key Success Factors for Digital Initiatives for Industrial Manufacturers (Scale of 1 - 5)

Having a clear and unified strategy that rethinks our entire

products/services and the business processes that support them

3.74

Developing the digital technologies so they operate reliably

3.65

Integrating technologies with existing information systems

3.56

Providing customers with significant value from establishing an

ongoing digital connection with them: better usage of products, better
products, etc.
Determining what other companies to work with
to offer products and services to customers

3.54
3.53

Revamping our business model (the products/services that we sell,

how we price them, how we take them to market)
Deciding how to organize our digital initiatives in the optimal way
(whether to create a new function or have it report to an existing
function, etc.)
Determining what role our company should play amongst a broader
set of companies that are providing digitally-based products and
services to customers

3.50
3.46
3.41

Forming strategic alliances with other companies that have key

products, services, and/or technologies

3.40

Having a digital group/function that reports to the CEO (because its

advice is going to disrupt our core businesses)

3.38

Getting our customers to agree to have a continuous online digital

connection with our company and/or the products/services
we sell to them

3.37
3.10

Success in digital initiatives

requires a clear vision at the
top of the organization.

3.20

3.30

3.40

3.50

3.60

3.70

3.80

However, steering business functions from going down their own digital paths requires
a clear vision at the top of the organization. The vision should begin with rethinking
how the organization could reimagine its core product and services offerings
something that many leading automotive and industrial manufacturers are already
doing.
For large manufacturing companies, the pace of digital transformation is quickening.
The rush is on to extend the digital connection to customers and suppliers and rethink
what business they are in. Those that can will likely find the rewards will far exceed the
challenges of the journey.

15

About TCS' Manufacturing Business Unit

TCS helps global manufacturers reduce operational expenditure, utilize capacity optimally, and
increase efficiencies while meeting safety and regulatory norms. We are the preferred partner for a
third of the Fortune 500 manufacturers, and have a record of enabling business innovation that helps
them meet the objectives of global operations.
The core strength of our solutions lies in our rich experience across discrete (automotive, industrial
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vertical focused Centers of Excellence (CoE) leverage this rich database to cross-reference learning
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implementation, and continued support services.
Our solutions and services portfolio spans IT-led business transformation; design, development, and
support for IT solutions; and value-added services such as outsourcing, infrastructure management,
and consulting.

Contact
For more information about TCS' Manufacturing Business Unit, visit:
http://www.tcs.com/industries/manufacturing/Pages/default.aspx
Email: manufacturing.solutions@tcs.com

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