Stephanie Terrill is partner, national leader of management consulting, KPMG in Canada, and Yvon Audette is chief operating officer, management consulting services, KPMG in Canada
Are you ready for 5G?
Canada’s industrial companies – so vital to our economy – are not investing nearly enough in their digital capabilities to remain competitive globally and drive sustainable growth. This is worrisome.
While mining and energy companies already use digital technologies, such as self-driving trucks to haul ore or integrated sensors to monitor pipeline, machinery or equipment integrity, much more could be done.
We recently talked to C-suite leaders at 165 regional and national Canadian industrial companies in the manufacturing, mining, oil and gas, power utilities, construction, transportation and infrastructure sectors.
The KPMG survey found that nearly 75 per cent intend to invest less than 5 per cent of their annual revenue on improving their digital capabilities. That’s not nearly enough to compete with the world’s best.
According to the World Economic Forum, new technology investments were key in driving productivity gains in the decade after the 2008 global economic crisis. But productivity wasn’t uniform across industry players. The gains were actually driven by the top 20 per cent in each industry with the majority seeing their productivity drop.
As a country, we can’t afford to be followers.
At a minimum, Canadian companies need to double, if not triple, their planned digital investments. Why?
If companies are not already investing in and leveraging today’s digital capabilities, how will they be ready to compete in the brave new world of 5G, with its superfast data speed and virtually instantaneous connectivity at every step along the value chain?
The reality is, companies are struggling to drive sustainable growth. While the lower Canadian dollar helps put the exporters on a more competitive footing, industrial companies – regardless of size and sector – really need to use this time now to become digitally ready.
Although, most Canadian firms have made investments, most are too modest and, at times, too linear. As many as 80 per cent appear to be looking for quick wins, expecting a return on investment (ROI) in three years or less. Two in five expect a ROI within two years.
Investments in cloud technology, for example, can deliver noticeable returns quickly because it’s very effective for eliminating friction in business processes; it doesn’t require a lot of IT resources and isn’t complex. But, that’s not enough to move the dial; that’s just the starting point.
Some companies say they are struggling to achieve the integration needed to realize the full potential of data and many seem to have dismissed the opportunities and insights that big data can offer. Our survey revealed that only one in five (21 per cent) are actively leveraging data analytics.
Canadian companies need to do more than make incremental investments to build a modern digital foundation for that great leap forward.
They need to capitalize on the benefits from new exponential technologies, such as robotics, artificial intelligence (AI), machine learning, machine-to-machine (M2M) communication and the Internet of Things (IoT).
Robotics and M2M capabilities can speed up production, while IoT facilitates predictive maintenance, reduces downtime and costs, and provides greater visibility into production and delivery.
Yet only one in four of companies we surveyed use robotics, and just 23 per cent are using IoT technology. In the plus column, nearly half (46 per cent) plan to implement intelligent automation.
Productivity expectations are only going in one direction: up – consumers and investors expect advances almost daily. This means companies should already be investing in IoT-compliant technology, especially to connect their legacy equipment. It’s fast becoming a baseline requirement for companies in these capital-asset-intensive sectors; those that fail to invest in IoT will quickly fall behind.
Here is what you should consider:
- Think strategically about your technology investments. Direct funds where they will make the biggest impact on your long-term competitiveness.
- Begin with the problem. With so many exciting technologies, it can be easy to get carried away. Focus on the problem you are trying to solve.
- Re-evaluate your ROI expectations: You can realize important value from digital technology, but full transformation takes time.
- Increase investments in digital transformation.
- Identify internal skills gaps.
- Create a plan for data collection based on what’s important to your business. Define the problems you’re trying to solve with data, then determine the types of data that needs to be collected and mined for insights.
To truly stand the test of time, companies need to link their front, middle and back offices to become a more powerful, seamless, connected enterprise.
Digital transformation is no longer an option; it is an imperative.