Hesitant digitization hamstrings manufacturers’ outlook

A large portion of the manufacturing industry is in danger of falling beyond, not because they don’t recognized the need for digital transformation, but because they lack concrete strategies for implementation.

As a global survey by IFS of more than 800 manufacturing executives, 82% of manufacturers believe their company will not survive for more than one to three years if it does not become more involved with information technology. 

In contrast, digital leaders are confident that they can master future challenges, with more than quarter (28%) believing they can get by for up to five years without new investments. 

Although all respondents recognized the use of digital technology as vital for their company, only 10% describe themselves as digital pioneers. In contrast, 65% of respondents see themselves as lagging behind in terms of digitalization, either dangerously far behind, stuck in the early stages of digital transformation, or having not made a concrete plan for the next steps. 

Digital roadblocks

The urgency seems clear — market turbulence, supply chain disruptions, and the looming impacts of climate change make digital transformation a necessity, not an option, for manufacturers. But what’s stopping companies for moving digital initiatives forward?  

The study identified a variety of obstacles standing in the way of digital transformation: 

• Lack of strategies and an oversupply of technological solutions: Many companies are aware of the need for digital transformation, but do not have a clear strategy and are overwhelmed by the multitude of technological options. The result is an inability to make decisions. 

• Disorientation and different priorities: The study shows that each management level sets different technological priorities. While almost all C-level representatives (94%) see cloud computing as the most important technology, the majority of division and department heads (81%) prefer IoT. Operational employees, on the other hand, are more likely to rely on digital twins (85%) and artificial intelligence (84%). These different priorities increase indecision and prevent targeted action. At the same time, the gap between laggards and digital leaders is widening. 

• Change management and IT complexity: One fifth of companies surveyed say that change management (22%) and IT complexity (21%) are the biggest obstacles. The difficulty of managing changes in the company and dealing with complex IT systems prevents the rapid implementation of digital projects. 

• Lack of investment: While digital leaders invest an average of 45% of their IT budget in transformation projects, laggards are significantly less active in this area. 

• Lack of ESG strategy: Many companies (71%) do not have a credible ESG (environmental, social, and governance) strategy, and only 39% are actively developing ESG initiatives. Action is needed to meet the demands of climate change and other sustainability aspects. 

The supply chain under control

But there are also positive developments. The survey shows that, when it comes to the ​​supply chain, almost all companies (98%) are interested in new geographical strategies to strengthen their resilience — for example, by relocating to closer or more politically stable regions. Digital pioneers rely on advanced technologies such as advanced scenario simulations, while laggards often still rely on isolated risk assessment tools. 

“The manufacturing industry is at a turning point: Although most companies have recognized the urgency of digital transformation, indecision still dominates too often,” commented Maggie Slowik, industry director for manufacturing at IFS, on the study results.

This hesitation carries risks: The longer manufacturers wait, the further they fall behind.

“In a volatile market, resilience and digital maturity are not just competitive advantages, they are essential for survival,” she explained. 

For the study, Censuswide surveyed 815 executives from manufacturing companies with a turnover of at least €180 million in the middle of last year. The participants came from 19 countries, including the UK, Germany, the US, Japan, and Indonesia, and worked in departments such as production, supply chain, finance and research.