Industry 4.0: Building the DigitalEnterpriseCXO konference

28 April 2016Starter: 10:30

Nils Budde, Executive Director, Epinion

Gorm Lykke Østergaard, Partner, PwC

www.pwc.com

1. Industry 4.02. Survey & Results3. What companies needs to do now

Industry 4.0 – Building the Digital Enterprise

CXO konference

PwC

Industry 4.0

3

The digital enterprise comprises of digitised and integratedprocesses, products & business models

Core Application Fields

I

Digitization ofproduct and

serviceofferings

Digitization andintegration ofvertical andhorizontal

value chains

Digital Business Modelsand customer access

III

II

IV

Industry 4.0

Compliance, security, legal & tax

Dig

ita

lE

na

ble

rs

Organisation, employees and digital culture

IT Architecture and data management

Location DetectionTechnologies

CloudComputing

Smart Sensors

AugmentedReality /

Wearables

Internet ofThings

3D Printing

Big DataAnalytics

AdvancedHuman-Machine

Interfaces

Mobile Devices

CustomerProfiling

Authentication &Fraud Detection

Core technologies to provide innovativeIndustry 4.0 solutions

PwC

Survey & Results

The 2016 Industry 4.0 Survey is based on participating 2,000+ companies from 26 countries in 9 industry sectors

26 Participating countries Industry split of 9 industries

Industrysplit

21%

19%

11%

10%

9%

4%

9%

8%

21%

Industrialmanufacturing

Engineering &construction

Chemicals

Electronics

Transport &logistics

Automotive

Others

Metals

Forest, paper & packaging

2%

Aerospace, defence & security

Mexico

USA

Canada

Brazil

Australia

JapanChina

MiddleEast

Singapore

South Africa

UK

NetherlandsDenmark

SwedenAustria

Poland

Finland

PortugalSpainFrance

Italy

Switzerland

Germany

India

Source: PwC Strategy& Global Industry 4.0 Survey 2016

Key findings of the global 2016 Industry 4.0 study

I4.0

Big investments with bigimpact: It’s time to commit

Data analytics & digital trustare the foundation oftransformation

Industry 4.0 is acceleratingglobalisation, but with adistinctlyregional flavour

Robust, enterprise-widedata analytics capabilitiesrequire significant change

Focus on peopleand culture to drive

transformation

Deepen digitalrelationships withmore empowered

customers

Digitization drivesquantum leapsin performance

Industry 4.0 - From talkto action andimplementation

Digital operations is not about technology, but aboutemployee skills & transformation management

Note: Up to three mentions possible; figures in percent

26

17

10

9

10

8

6

6

4

4

24

23

28

27

15

17

15

12

12

10

Lack of digital standards,norms and certification

16

25

21

40

36

Slow expansion of basicinfrastructure technologies

38

Concerns around loss of control overyour company’s intellectual property

14

Unresolved questions around data securityand data privacy with external data

Leadership from top management

Lack of digital culture and training

Insufficient talent 25

50

Lack of a clear digital operations vision andsupport / leadership from top management

High financial investment requirements

Unclear economic benefitand digital investments

18

Top 3 challengesBiggest challenge

Focus on peopleand culture to drive

transformation

Data analytics capabilities: 18% have advanced capabilitiesand half of companies have dedicated organizational set up

Organisation of data analytics capabilitieswithin the company

Existing data analytics capabilities today –Company perspective

Note: Answers shown are rounded Data analytics & digital trust are thefoundation of transformation

Across the world companies are expecting a significantimpact on digitisation and integration

72%

3540

319

2741

4727

409

3531

2738

1926

33

JA

CAMX

CN

DACH

UK

NLS

FRIT

E/PTDK

ME

US

IN

SABR

7677

5772

6462

8265

6474

7769

5976

6071

82

SA

UK

NL

CN

S

JAME

MXCABR

US

IN

DKE/PT

DACH

ITFR

Companies with high digital capabilities –In 5 years

Companies with high digital capabilitiesToday

+39p33%

Robust, enterprise-wide data analyticscapabilities require significant change

Industry 4.0 is accelerating globalisation with regional differences

Regional expectations – Big gains are anticipated by industrial products companies in all regions

Industry 4.0 isaccelerating globalisation,but with a distinctlyregional flavour

Industrial companies globally invest 5% oftheir revenue or $900 billion p.a. until 2020

Expected return on investment period for digitalinvestments

Industry 4.0 investment(in % p.a. until 2020)

Big investments with big impact:It’s time to commit

From talk to action – Industry 4.0 is moving from strategichype to operational reality

Shown: Percentage of companies surveyed reporting high degrees of digitization and integration (4 or 5 on a scale of 1 “very low” to 5 “very advanced”)Source: PwC Strategy& Global Industry 4.0 Survey 2016

Percentage of companies reporting high degrees of digitization andintegration today/in five years for selected operational functions

+39p33% 72%

High level ofdigitisation today

High level ofdigitisation in 5 years

Product development &engineering

68%35%

Vertical value chainintegration

Horizontal value chainintegration

42%

65%34%

41%

Digital businessmodels, product and

service portfolio

Customer access/Channels & marketing

71%

72%

64%29%

In 5 years

Today

High level of digitization by operational functionHigh Level of digitization and integrationtoday and in the next five years

Industry 4.0 - From talk toaction and implementation

Digitisation drives quantum leaps in performance and digitalrevenue

Sources of additional revenueAdditional revenue by Global Industry –in USD bn p.a. until 2020

40

108

52

103

37

11

105

28

8

Chemicals

Aerospace/Defense

Weigthes Average(%)

Total 493

Automotive

2,9

Electronics

Transport/Logistics

Forest Paper/Pack.

Metals

IndustrialManufacturing

Engineering &Construction

Digitising products and services within theexisting portfolio

New digital products, servicesand solutions

Offering big data and analyticsas a service

Personalised products and masscustomization

Capturing high-margin business: Improvedcustomer insight from data analytics

Increasing market share of coreproducts

+2,9%

Digitization drivesquantum leapsin performance

Digitisation enables quantum leaps in operationalcost reduction and efficiency increase

Sources of Lower Cost and Higher EfficiencyCost reduction by Global Industry –in USD bn p.a. until 2020

28

62

61

52

54

28

78

49

9

IndustrialManufacturing

Metals

Forest Paper/Pack.

Aerospace/Defense

Engineering &Construction

Chemicals

Weigthes Average(%)

Total

Automotive

421

3,6

Transport/Logistics

Electronics

Real-time inline quality control based on BigData Analytics

Modular, flexible and customer-tailored production concepts

Real-time visibility and more flexibalin process and product variance

Predictive maintenance on keyassets using smart algorithms

Vertical integration from sensors throughMES to real-time production planning

Horizontal integration & track-and-trace forbetter inventory & logistics performance

System based, real-time end-to-endplanning and horizontal collaboration

Digitisation of processes for smarter use ofhuman resources and higher operations speed+3,6%

Digitization drivesquantum leapsin performance

16

Source: PwC Strategy& Global Industry 4.0 Survey 2016

The golden bullet: First Movers achieve both significantrevenue growth and cost reduction

Leading companies achieving both significant digital revenue growthand cost reduction over 5 years

Cost reduction

Re

ve

nu

eg

row

th

>20%<20%

<20%

>20%

All Digital MaturePlayers

38%

52%

24%

First Mover

% companies >20% revenue increaseand >20% cost reduction cumulatedover 5 years

467

Digitization drivesquantum leapsin performance

PwC

Conclusion - What companies needs to do now

1. Companies are getting down to business with Industry 4.0• They expect cost savings of US$ 420 billion per year• They expect additional revenue of US$ 490 billion per year.

2. Companies will invest in Industry 4.0• 5% of their revenue or US$ 907 billion p.a. by 2020, with the majority

expecting a return on invest within two years.

3. Companies recognise that Industry 4.0 is accelerating globalisation, withregional differentiations.

4. Capability to manage Big Date in a way where they can manage largeamount of data fast ,is the foundation of Industry 4.0 and companies need touse the full potential of predictive analytics to succeed.

5. The biggest implementation challenge isn’t the right technology, it’s a lackof digital culture and skills in their organisation.• Companies need to drive digital transformation from the top

management all the way to the shop floor.

Conclusion:

Blueprint for implementation success:Six steps companies are taking to build a Digital Enterprise

PwC

Fremtiden har indhentet os

Source: Illustreret Videnskab & filmen Minority Report

PwC

Nils Budde – Executive Director, Epinion

Source: PwC Strategy& Global Industry 4.0 Survey 2016

Questions?

I4.0

Big investments with bigimpact: It’s time to commit

Data analytics & digital trustare the foundation oftransformation

Industry 4.0 is acceleratingglobalisation, but with adistinctlyregional flavour

Robust, enterprise-widedata analytics capabilitiesrequire significant change

Focus on peopleand culture to drive

transformation

Deepen digitalrelationships withmore empowered

customers

Digitization drivesquantum leapsin performance

Industry 4.0 - From talkto action andimplementation