TMDigital Reimagination 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

05

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.)

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

Mean % of Mean Revenue

200

180

160

140

120

100

80

60

40

20

0

0.4%0.5%

0.4%

0.6%0.5%

0.3% 0.3%

0.5%

0.2% 0.3%

0.7%

0.4%

0.3%

0.4%

Overall

Banking/ Financial Services

Insurance

Telecommunications

High-Tech

Utilitie

s

EnergyRetail

Consumer Packaged Goods

Automotive

Media & Entertainment

Travel/Hospita

lity/Transporta

tion

Healthcare/ L

ifeSciences

Industrial M

anufacturing

0.8%

0.7%

0.6%

0.5%

0.4%

0.3%

0.2%

0.1%

0.0%113.07

141.86100.49

188.79122.40

55.40110.06

86.2746.67

87.0037.70

111.9378.50

95.38

Spending in 2014 on Digital Initiatives�Mean and % of Mean Annual Revenue

Mill

ion

$

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

06

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:

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.

TMDigital Reimagination

Bringing a completely new business model to market, with new digitally-enabled products and services. Automotive companies will be spending heavily on the human-machine 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.

The Three Waves of the DigitalRevolution are:

Digitization: Streamlining existing business processes

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

TM: Digital Reimagination

Bringing a completely new business model to market

07

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.

Some to date two-thirds of the survey participants have executed digitizationessentially to improve their existing businesses and business processes (the digital strategy we call 'digitization'). (See Exhibit 2.)

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 2: Automotive Companies' Current Digital Strategies How Respondents Characterize the Impact of Their Digital Strategies to Date

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 modernized our technologies and improved our existing products, services, and processes

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

0% 10% 20% 30% 40% 50% 60% 70%

64%

32%

4%

Exhibit 3: Automotive Companies' Digital Strategies by 2020

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

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

0% 10% 20% 30% 40% 50% 60%

11%

39%

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

To modernize our technologies and improve our existing products, services, and processes

Two-thirds of the survey participants have executed digitization.

08

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.

0% 20% 40% 60% 80% 100%

Continuous monitoring and analysis of customers� comments in public social media sites (e.g., Facebook, LinkedIn, Twitter, etc.)

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

Mobile apps for our customers' mobile devices

Digital sensors and/or other digital devices embedded in or attached to the physical products that we make for customers

Digital products that we sell and distribute online directly to customers' computers (e.g., streaming video or audio)

Other digital online connections to customers

39% 39%

29% 50%

25% 46%

7% 57%

50% 43%

Currently By 2020

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

46% 50%

09

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):

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.

The impact for customers: a much better customer experience.

The biggest challenge is the difficulty of creating an overarching digital strategy in the organization.

10

21%

21%

21%

21%

25%

25%

29%

39%

39%

43%

43%

43%

43%

46%

46%

46%

50%

54%

54%

54%

57%

57%

61%

61%

64%

68%

71%

A major change in how we price our offerings

The ability for customers to download our products/services online

The ability to create entirely new production processes

The ability to offer a preventative maintenance service

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

The ability to create entirely new channels (such as mobile or social) for distributing our products

The ability to create much smaller customer segments (even possibly segments of one � i.e., micromarketing)

The ability to inexpensively get customers to automatically reorder/repeat their purchases

The ability to tailor our products/services to much smaller customer segments (even, possibly, segments of one)

Creation of a culture of transparency and openness

The ability to create new channels of customer support such as via mobiles or social media

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

The ability to make software and software-related improvements to our products/services while customers are using them.

Creation of a culture of speed � i.e., fostering an environment in which our employees make things happen quickly

Creation of whole new value for customers (i.e., going beyond the traditional value we have provided)

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

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

The ability to have a much deeper understanding about why customers choose our products/services over our competition�s products/services

so that we can provide the right design, features and functions

The ability to monitor how customers are using our products/services to identify whole new products or services

The ability to rapidly inform customers about new products/services and get them to buy these products/services

The ability to make much faster changes to our products/services or to invent whole new products/services much faster

The ability to reduce inventory in the supply chain

The ability to improve customer assistance when our products/services aren�t working properly

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 monitor how customers are using our products/services to identify customer needs for improvements to existing products or services

Substantial increase in how much information and feedback our employees share across business functions and levels of the company

The ability to more accurately predict demand for our products/services

Business Capabilities That Companies Want Their Digital Initiatives to Achieve or Improve

0% 10% 20% 30% 40% 50% 60% 70% 80%

Exhibit 5: What Automotive Companies Want From their Digital Initiatives

11

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

0% 10% 20% 30% 40% 50% 60%

44%

49%

7%

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

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 modernized our technologies and improved our existing products, services, and processes

How Respondents Characterize the Impact of Their Digital Strategies to Date

Exhibit 7: Industrial Manufacturers' Digital Strategies by 2020

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

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

0% 5% 10% 15% 20% 25% 30%

11%

37%

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

To modernize our technologies and improve our existing products, services, and processes

32%

35% 40%

12

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.

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

100%0% 20% 40% 60% 80%10% 30% 50% 90%70%

Continuous monitoring and analysis of customers� comments in public social media sites (e.g., Facebook, LinkedIn, Twitter, etc.)

Mobile apps for our customers' mobile devices

Digital sensors and/or other digital devices embedded in or attached to the physical products that we make for customers

Other digital online connections to customers

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

Which Respondents Currently Gather Digital Data on Customers and Which Plan to by End of 2020

Currently By 2020

41% 51%

32% 56%

18% 66%

24% 62%

59%12%

37% 53%

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.

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

Exhibit 9: Key Business Capabilities Sought by Industrial Manufacturers

Business Capabilities That Companies Want Their Digital Initiatives to Achieve or Improve

63%

66%

A major change in how we price our offerings

The ability for customers to download our products/services online

The ability to create entirely new production processes

The ability to offer a preventative maintenance service

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

The ability to create entirely new channels (such as mobile or social) for distributing our products

The ability to create much smaller customer segments (even possibly segments of one � i.e., micromarketing)

The ability to inexpensively get customers to automatically reorder/repeat their purchases

The ability to tailor our products/services to much smaller customer segments (even, possibly, segments of one)

Creation of a culture of transparency and openness

The ability to create new channels of customer support such as via mobiles or social media

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

The ability to make software and software-related improvements to our products/services while customers are using them.

Creation of a culture of speed � i.e., fostering an environment in which our employees make things happen quickly

Creation of whole new value for customers (i.e., going beyond the traditional value we have provided)

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

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

The ability to have a much deeper understanding about why customers choose our products/services over our competition�s products/services

so that we can provide the right design, features and functions

The ability to monitor how customers are using our products/services to identify whole new products or services

The ability to rapidly inform customers about new products/services and get them to buy these products/services

The ability to make much faster changes to our products/services or to invent whole new products/services much faster

The ability to reduce inventory in the supply chain

The ability to improve customer assistance when our products/services aren�t working properly

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 monitor how customers are using our products/services to identify customer needs for improvements to existing products or services

Substantial increase in how much information and feedback our employees share across business functions and levels of the company

The ability to more accurately predict demand for our products/services

Business Capabilities That Companies Want Their Digital Initiatives to Achieve or Improve

0% 60% 70%

63%

22%

25%

34%

38%

41%

43%

43%

44%

44%

44%

4 7%

49%

49%

49%

51%

51%

56%

56%

57%

57%

57%

57%

59%

59%

10% 20% 30% 40% 50%

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.)

Exhibit 10: Key Success Factors for Digital Initiatives for Automotive Companies (Scale of 1 - 5)

3.46

3.39

3.32

3.25

3.25

3.18

3.18

3.14

3.11

3.04

2.96

2.70 2.80 2.90 3.00 3.10 3.20 3.30 3.40 3.50 3.60

Integrating technologies with existing information systems

Having a clear and unified strategy that rethinks our entire products/services and the business processes that support them

Developing the digital technologies so they operate reliably

Determining what role our company should play amongst a broader set of companies that are providing digitally - based

products and services to customers

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.

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)

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

Senior managers say having a unified strategy that rethinks their firm's offerings and business processes is crucial for success.

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.

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

3.74

3.65

3.56

3.54

3.53

3.50

3.46

3.41

3.40

3.38

3.37

3.10 3.20 3.30 3.40 3.50 3.60 3.70 3.80

Having a clear and unified strategy that rethinks our entire products/services and the business processes that support them

Developing the digital technologies so they operate reliably

Integrating technologies with existing information systems

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

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

Forming strategic alliances with other companies that have key products, services, and/or technologies

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

15

Success in digital initiatives requires a clear vision at the top of the organization.

All content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties.

Copyright © 2015 Tata Consultancy Services Limited

IT ServicesBusiness SolutionsConsulting

Contact

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

About Tata Consultancy Services Ltd (TCS)Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match.TCS offers a consulting-led, integrated portfolio of IT and IT-enabled infrastructure, engineering

TMand assurance services. This is delivered through its unique Global Network Delivery Model , recognized as the benchmark of excellence in software development. A part of the Tata Group, India�s largest industrial conglomerate, TCS has a global footprint and is listed on the National Stock Exchange and Bombay Stock Exchange in India.

For more information, visit us at www.tcs.com

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 manufacturing, and aerospace) and process industries (chemicals, cement, glass, and paper). Our vertical focused Centers of Excellence (CoE) leverage this rich database to cross-reference learning and drive innovation in business solutions for standardized processes, assets and templates, ERP 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.

TCS

Des

ign

Serv

ices

P

04

15

II

I