Technological disruption: How industrial businesses are evolving
January 07, 2019
December saw the conclusion of phase 1 of our Future of Industries event series. The aim was to explore the role of technology in helping industrial clients improve the efficiency of their operations, but more importantly redefine their customer proposition.
Technologies including Predictive Maintenance, Virtual Reality and Asset Management are key in helping industrial businesses increase efficiency and reduce cost. These technologies help organisations move from a reactive, repair environment, bringing with it costly downtime and customer dissatisfaction, to one of anticipated and planned replacement, keeping operations running smoothly and customers happy.
However, technologies also exist that enable industrial companies to make a strategic shift from supplying customers with products (sold on features, performance and ultimately price), to propositions based around availability or solutions (focus on value over price and outcomes over features). For many industrial businesses, this strategic pivot requires the development or acquisition of new skills in the front office, but also in the back office through embedding technology or undertaking fundamental changes to their organisation.
The M&A impact
Technological disruption is accelerating, evidenced by the case studies in our 5 Days of Disruption campaign. Clients are telling us that developing new capabilities and solutions through organic investment is "too slow" an option; many are turning to M&A to accelerate strategic plans.
Here too, the landscape is changing. Outright acquisitions carry the risk of selecting the wrong technology solution. As a result, we are seeing an increase in partnerships, joint ventures or minority investments over outright acquisitions. These deal structures are notoriously complex, presenting different challenges to outright purchases, such as understanding what parties seek from an arrangement through to how each can extract themselves if required.
For some, scale and entrepreneurial culture within these emerging technology businesses can also be challenging. How they are integrated, assessed and monitored often conflicts with traditional metrics and measures used in well-established organisations. Some have sought to balance this by creating divisions focused on nurturing new relationships and integrating acquisitions into the mainstream business.
An advisor’s role
Radar scanning is also a challenge for organisations looking at how technology can help transform their traditional business. Keeping pace with emerging technologies that sit outside of traditional industries is a challenge for corporate and strategic development directors. It requires them to form networks in ecosystems where their traditional business may not operate, or to be more challenging of their advisors in how creative they are in thinking about future business models and opportunities.
Understanding the potential that new technologies offer to the industrial sector is a key area of focus for us. We work with colleagues across the PwC network to help clients understand, evaluate and execute on their strategic agenda. Whilst options have become more complex, never has opportunity and potential been greater for industrial companies.
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