Thinking out of the toolbox full deck

Institute for Business Value
How digital technologies are powering the operations revolution
Thinking out of the toolbox
Study Findings

The need for deep change
A new kind of industrial revolution is upon us, as digital technologies redefine business strategy and
operational execution. Executives are under pressure to innovate and make smart investments in game-
changers like the Internet of Things (IoT), mobility, cloud computing and analytics. Challenges remain,
such as talent issues, data security and more. And while some industries are embracing a
transformation agenda – redefining core processes and creating new business models for competitive
advantage – others are lagging behind. What can executives do to stay at the forefront of the digital
operations revolution?

To learn more about this digital revolution, we surveyed 750
executives. They are retooling and reinventing their operations
A wide range of industries Across the world
3
Q1. What is your firm’s industry segment?
Q2. Where are you located?
Q3. What is your job title?

Contents
 Digital transformation demands a new operations strategy
– Recommendations for building a digital operations strategy
 Keeping data safe
– Recommendations for digital operations security
 You still need people in a digital world
– Recommendations to get back on the human track
 Summary: Blurring traditional industry boundaries
4

5
Aside from economic conditions, technology change is the TOP
global trend expected to have an impact over the next 3 years
Tech and talent are top-of-mind issues
 Technology and
the largest non-
factors expecte
impact over the
years.
 Executives from
and Governmen
more likely to ci
top area of impa
50%, respective
 Availability of sk
ranks much hig
execs (48%).
Select up to 3
Q8. Which global trends do you expect to have the greatest impact on your firm over the next three years?
Tech and talent are top-of-mind issues
 Technology an
the largest non
factors expect
impact over th
years.
 Executives fro
and Governme
more likely to
top area of imp
50%, respectiv
 Availability of s
ranks much hi
execs (48%).
Select up to 3

There is a rapid evolution upon us to develop and execute integrated
digital strategies
6
Q11. Which of the following describes your firm’s digital operations strategy today?

7
New technologies are here to stay and companies are solid in their
investments
Q10. How important are the following technology trends to your company’s business strategy?
Q13/Q15. Which of the following digital operations initiatives have received the greatest level of investment over the past 3 years? Next 3 years? Select up to 3.
Investment levels reflect early stage of m
Select up to 3 for each time period
Cloud
BD&A
IoT
Mobile
Social
M2M
Cognitive
Additive
Drones
Location
Robotics
Investment levels reflect early st
Top investmentsTop technology trends
Big Data and Analytics
Location technologies (RFID)
Cognitive computing
Collaboration & social
technologies
Machine-to-Machine connectivity
Cloud computing
Mobile technologies & applications
Internet of Things
Drones
Additive manufacturing (3D printing)
Robotics
34%
34%
30%
28%
27%
20%
22%
19%
16%
5%
“Highly important responses”
First Tier
Second Tier
Third Tier
35%

8
Predictive analytics is being applied to a large range of application
areas
Q22. How mature are your applications of predictive analytics in the following areas?
“Quite developed” and “Highly developed” responses
Maturity is growing across a number of areas, with
continued investments

Recommendations
•Think beyond the “possible”.
Digital operations require new
technologies, a cultural vision
and new ways of working.
•Crunch the numbers. Build a
robust analytics components
into your strategy.
•Look to the marketplace.
Understand how customer
needs affect your operating
model design.
Digital transformation
demands a new operations
strategy
9
The financial impact of implementing digital operations is vast, as new technologies bring an
enhanced level of automation, control, and quality. Competitive advantage tops the list.
Case: A major aircraft manufacturer

US Aerospace manufacturer uses predictive analytics and IoT
sensors to maximize insight and prevent costly aircraft-on-ground
events
 US-based aircraft engine manufacturer collects a vast amount of data about its engines
through various databases and sensors, but it had no holistic way of integrating/analyzing the
information to proactively address engine issues.
 The Predictive Maintenance and Quality solution, an analytics platform, creates models to
predict the propensity for different types of aircraft-on-ground engine events, allowing the
company to proactively prevent costly engine shutdowns and repairs.
 Benefits:
 100% prediction of aircraft-on-the-ground events for high-risk engines
 97% accuracy in predicting engine events that lead to airline disruption
 $Millions in extrapolated cost savings
10

Contents
11

But companies haven’t adequately addressed security –
CyberSecurity threat is the top challenge
12
Security is top investment
in the next 3 years52%
Concerned with the threat
of cyber security risk
Q20. To what extent do the following present a challenge as you develop these digital operations initiatives?

13
Q12. What steps, if any, have you taken to transform your company’s strategy around digital operations? Select all that apply.
Is this a labor-less revolution?
While talent issues may be on executives’ radar, relatively few are
turning thought into action

Recommendations
into your strategy.
model design.
•Build your baseline. Evaluate
use cases and risk profiles to
develop security requirements.
•Don’t reinvent the wheel.
Use familiar techniques and
technologies to meet new
challenges.
•Create a trusted ecosystem.
Consider the entire landscape
of devices, networks and
applications when assessing
security scope.
strategy
Keep data safe
14
Case: A major aircraft manufacturer Case: Large industrial conglomerate

Cyber Security is the protection of an organization and its assets from
electronic attack to minimize the risk of business disruption
 What use to be an IT concern, is now very much a concern of all C-suite executives and their
direct reports.
 A cyber attack can happen to a business anytime, anywhere; if not quickly detected and
halted, companies stand to lose not only millions in revenue but also customer goodwill. A
large conglomerate in the Asia Pacific region, has grown to encompass numerous subsidiary
businesses in the automotive, leisure, logistics, chemical and airline sectors. The executives
wanted to proactively respond to even the most minor security incidents because of potential
impact, especially subsidiaries in the airline and transportation industries.
 The company implemented a Cyber Security solution to centrally monitor and analyze network
traffic and data from its subsidiaries’ disparate operational systems. This provides the high-
level view and real-time insight management needs to spot potential threats early, quickly act
to mitigate the current threat and implement predictive and proactive measures to prevent
further attacks.
 Benefits: real-time analysis to detect threats immediately reduces Cyber Security vulnerability.
15

Contents
16

17
Q12. What steps, if any, have you taken to transform your company’s strategy around digital operations? Select all that apply.
Is this a labor-less revolution?
While talent issues may be on executives’ radar, relatively few are
turning thought into action

18
Business initiatives center on innovation and growth – not people
Q9. Which business initiatives do you expect to be of greatest importance to your firm over the next three years?
Increasing innovation, entering new markets and customer responsiveness –
all growth stories – are top-ranked business initiatives for the coming years

19
Cultures are shifting to support digital operations
Q25. Thinking again about your digital operations strategy as a whole, to what extent do you agree with the following statements?
“Agree” and “Strongly agree” responses

Recommendations
into your strategy.
model design.
•Build your baseline. Evaluate
use cases and risk profiles to
develop security requirements.
•Don’t reinvent the wheel.
Use familiar techniques and
technologies to meet new
challenges.
•Create a trusted ecosystem.
Consider the entire landscape
of devices, networks and
applications when assessing
security scope.
•Make people part of the plan.
Find capabilities and talents that
will create differentiation.
•Recognize that you get what
you pay for. Invest in a digital
talent management program to
recruit and train for the right
skills.
•Embrace cultural change.
Digital transformation requires a
disciplined change management
program.
strategy
Keep data safe You still need people in a
digital world
20
Case: A major aircraft manufacturer Case: Large industrial conglomerate Case: Steel manufacturer

A steel manufacturer based in Japan implements a truly integrated
digital operations strategy . . . including a plan for people
 Business challenge: This manufacturer realized that to maximize operations, standardize
processes and improve product quality, they needed to share best practices and technical
skills/knowledge across business units.
 Solution: They implemented a cognitive computing solution, which combines content and
data from many sources. Recommending a course of action, the solution helps workers
transfer skills and share knowledge with colleagues in other divisions and ironworks locations,
easing employee transitions and improving product development processes.
 Benefit: Recognizes trends in design and manufacturing processes, leading to improvements
in product quality. Conveys know-how of experienced engineers throughout the enterprise,
accelerating rapid skills transfer.
21

Contents
22

23
Some industries are leaping ahead, while others consternate
Digital transformation industry maturity at a glance
Q10. How important are the following technology trends to your company’s business strategy?
Q17. How mature are your applications of digital operations in the following areas today?

24
Supporting slides and statistics

25
Digital operations building blocks are relatively mature
digital ops, while manufacturing and fleet management are least developed.
 High performers are more likely to say applications are mature across these areas.
 Industries report varying levels of maturity across these areas. Electronics (60%) and
Government (55%) are least likely to say customer order tracking is mature, while Retail
lags in security and surveillance and emergency management.
Digital ops building blocks are relatively mature
 Customer order tracking and security/surveillance are the most mature applications of
digital ops, while manufacturing and fleet management are least developed.
 High performers are more likely to say applications are mature across these areas.
 Industries report varying levels of maturity across these areas. Electronics (60%) and
Government (55%) are least likely to say customer order tracking is mature, while Retail
lags in security and surveillance and emergency management.
Q17. How mature are your applications of digital operations in the following areas today?

26
Early gains are in productivity, efficiency and innovation
value in terms of creating new business models (17%). On the other hand, many firms say
they have created new business models to transform around digital ops (see Q12).
 High performers are significantly more likely to say they are seeing good or significant value
from their investments—88% say they are achieving competitive advantage.
Early gains in productivity, efficiency, and innovation
 The payoff from these wins comes in achieving competitive advantage.
 Respondents are most likely to say that these digital ops initiatives have had limited or no
 High performers are significantly more likely to say they are seeing good or significant valu
Q14. From the top three investments, to what extent have you seen value in the following areas from these investments to date?

27
Expectations remain fairly constant over the next three years, with
greater focus on innovation
Q16. From the top three investments in the next 3 years, to what extent do you expect to see value in the following areas from these investment?
Early gains in productivity, efficiency, and innovation
 The payoff from these wins comes in achieving competitive advantage.
 Respondents are most likely to say that these digital ops initiatives have had limited or no
 High performers are significantly more likely to say they are seeing good or significant valu
are similarly unchanged.
 Competitive advantage, operational efficiency, and workforce productivity will remain top
areas of impact—but increasing innovation will be more affected in the next three years.
 Past success informs expectations for tomorrow—high performers expect to see more
value from investments than their less-successful peers.

28
Firms are continuing to invest in applying the new technologies to
their digital operations
Q18. In which applications of digital operations do you expect to invest most in three years?
Security spending remains a priority
 Executives are already fairly confident in their security and surveillance skills relative to
other areas (see Q17), but continued investment over the next three years shows that firms
are not letting their guards down.
 Energy management is more important to Electronics (46%) and Energy/Utilities (44%)
firms, while Automotive companies are more focused on inventory and warehouse control
(44%) and facility management (42%).
Q18. In which applications of digital operations do you expect to invest most in three years?
Select up to 3

29
Digital operations drive efficiency and customer service
Q19. What are the biggest benefits you expect to achieve from these applications of digital operations in the next three years?
Digital ops drives efficiency and customer service
 Energy/Utilities f
more likely to cit
operational effici
benefit (62%); Au
Government are
cite better custom
 North American
firms are more li
increased opera
efficiency and be
chain manageme
logistics. Meanw
American firms a
to expect better
service (35%).
Select 3
Digital ops drives efficiency and customer service
 Energy/Utilities firms are m
more likely to cite increase
operational efficiency as a
benefit (62%); Automotive
Government are more like
cite better customer servic
 North American and APAC
firms are more likely to ex
increased operational
efficiency and better supp
chain management and
logistics. Meanwhile, Nort
American firms are less lik
to expect better customer
service (35%).
Select 3

30
Predictive analytics are meant to increase operational efficiency
Q21. Which of the following have been identified as significant drivers of your organization’s predict analytics initiatives over the next 3 years?
Predictive analytics meant to increase operational efficiency
 Key benefits of predictive analytics overlap with digital operations. After efficiency, better
customer service and supply chain management are the most significant drivers of these
initiatives.
 High performers are more focused on supply chain management and logistics (48%).
 Automotive, Consumer Products, and Energy/Utilities are more likely to say better supply
chain management and logistics are a top driver.
 European respondents are less likely to cite better supply chain management and logistics
Select up to 4
Predictive analytics meant to increase operational efficiency
 Key benefits of predictive analytics overlap with digital operations. After efficiency, better
customer service and supply chain management are the most significant drivers of these
initiatives.
 High performers are more focused on supply chain management and logistics (48%).
 Automotive, Consumer Products, and Energy/Utilities are more likely to say better supply
chain management and logistics are a top driver.
Select up to 4

31
Predictive analytics toolkit is fairly mature
Q22. How mature are your applications of predictive analytics in the following areas?
of areas.
 Chemicals/Petroleum are more likely to say their analytical insight (64%) and inventory and
network optimization (61%) is mature.
 Latin American firms are more likely to say inventory and network optimization (62%) and
product quality monitoring applications (62%) are mature.
Predictive analytics toolkit is fairly mature
 High performers are again more likely to say their applications are mature across a number
of areas.
 Chemicals/Petroleum are more likely to say their analytical insight (64%) and inventory and
network optimization (61%) is mature.
 Latin American firms are more likely to say inventory and network optimization (62%) and
product quality monitoring applications (62%) are mature.

32
Predictive analytics investments focus on foundational uses
Q23. In which applications of predictive analytics do you expect to invest most in three years?
Predictive analytics investments focus on foundationa
 Respondents a
working on the
building network
and infrastructu
yet as focused
like warranty an
prognostics.
 Consumer Prod
Energy/Utilities
focused on inve
network optimiz
 Respondents a
industries are ro
equally likely to
these areas.
Q23. In which applications of predictive analytics do you expect to
invest most in three years?
Select up to 3

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