The study, analysing over 1,200i manufacturing companies of all sizes, highlighted the extent of digital technology adoption and its challenges and benefits and found that 25-30 per cent of manufacturers have reached ‘significant’ii levels of digitalised technologies.
Perceptions of digital transformation
This level of current digitalisation investment suggests there is still much room for growth. Prior studies have largely focused on highly automated large manufacturers and, as a result, have implied high levels of digital transformation. Those existing studies are nevertheless valuable, offering insights into early adoption lessons and return-on-investment technologies. However, this research provides a broader perspective, and indicates that across the whole of manufacturing industry, our perceptions of digital technology adoption may be a little exaggerated.
The sustainability connection
Analysis of our respondent data reveals significant production performance gains and cost savings for organisations investing in digital transformation. However, sustainability benefits from digital platforms have been weaker, possibly because many manufacturers have failed to link the two more strongly in internal business cases. Despite this, some organisations have observed sustainability outcomes emerging even though they did not specifically embrace sustainability targets into their digitalisation plans.
Our study underscores the commercial benefits of digital transformation and opportunities to enhance return-on-investment by aligning with sustainability goals. These findings should motivate manufacturers at all stages of their digital journey to capitalise on promising commercial benefits and align with early adopters.
Accelerating the pace
The ThoughtSpark study also proposes a focus on three main areas to accelerate the pace of adoption.
Firstly, incentives. Some existing policies have focused on boosting digital transformation, notably through initiatives like Europe's Next-Generation EU investment plan, targeting 20 per cent of funds for digital transformation to enhance competitiveness and resilience. Additionally, the EU 2020 Industrialiii Strategy aims to facilitate green and digital transitions through regulatory frameworks. However, despite these efforts, widespread adoption remains limited, particularly among SMEs. Policymakers must explore further incentives like tax breaks and subsidies while enhancing public information initiatives to aid companies in building investment cases. Additional support from relevant bodies and governments is crucial to inspire confidence in SMEs to embrace digitalisation.
Second, evidence. SMEs need convincing evidence-based guidance to encourage them to embark on digital transformation. Despite guidance from industry associations, more is needed to speed up adoption of digital platforms. Industry conferences frequently highlight the need for real-life examples and shared experiences to inform investment decisions and learn from both successes and failuresiv. Without collaboration, meeting climate targetsv will be hindered. Policymakers and industry experts recognise the link between digital transformation and sustainability, emphasising the need to accelerate adoption. However, challenges like high costsvi and lack of evidence linking digital tech to sustainability gains persist. More research and evidence-sharing are needed to inspire investment confidence and facilitate affordable financing.
Finally, access to finance is crucial for making ambitious digitalisation and sustainability goals achievable. Manufacturing companies often hesitate to commit their own capital to technology investments, thus third-party financing plays a critical role in enabling digitalisation and sustainable manufacturingvii. Specialist finance offers flexible financing structures, individualised packages, and cash flow benefits, making powerful digital solutions affordable. Additionally, this specialist finance helps technology vendors manage their cash flow and covers all costs associated with transitioning to digitalised systems, ensuring financial sustainability throughout the process.
In essence, ThoughtSpark's findings indicate moderate digitalisation levels in European and North American manufacturing. To drive this transformation forward, collaborative efforts, supportive policies, and tailored financing solutions are imperative, particularly for SMEs. By leveraging these resources effectively, the manufacturing sector can unlock significant potential for growth, innovation and commercial advantages.
Paul Lindsell, managing director, ThoughtSpark
1 The ThoughtSpark survey covered 1,223 manufacturing respondents, surveyed between 2023 and January 2024. Interviews were conducted in person, by telephone and by email. Respondents were asked to give their estimate of digital adoption among manufacturers of all sizes, large, medium and small. They were also asked about the benefits gained from such digital investments.
2 ThoughtSpark, (2023/4). Digital Divisions. Digital Transformation: Where are the majority of manufacturers today?
3 European Commission, (2021). Updating the 2020 Industrial Strategy: towards a stronger Single Market for Europe's recovery. https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1884
4 For instance: Morgan, B. (2019) Companies That Failed At Digital Transformation And What We Can Learn From Them. Forbes. https://www.forbes.com/sites/blakemorgan/2019/09/30/companies-that-failed-at-digital-transformation-and-what-we-can-learn-from-them/
5 Beier, G. (2021) Making the Digital Transformation Deliver for Sustainability. Research Institute for Sustainability Helmholtz Centre for Potsdam. https://www.rifs-potsdam.de/en/blog/2021/05/making-digital-transformation-deliver-sustainability
6 Moghrabi, I. A. R. et al. (2023) Digital Transformation and Its Influence on Sustainable Manufacturing and Business Practices. Sustainability 2023, 15, 3010. https://doi.org/10.3390/su15043010
7 For instance: OECD. (2020) Private Finance for Sustainable Development (PF4SD) Conference.
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