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  • Digital Transformation in Product Design and Development:

    The Opportunity for SMB Manufacturers

    An IDC InfoBrief, sponsored by Siemens | July 2018

    Research by Ray Boggs, Program Vice President, Small and Medium Business Research, and Jeffrey Hojlo, Program Director, Product Innovation Strategies

  • pg 2

    An IDC InfoBrief, sponsored by SiemensDigital Transformation in Product Design and Development: The Opportunity for SMB Manufacturers

    © IDC Visit us at IDC.com and follow us on Twitter: @IDC Document # IDC_Siemens_IB2018

    Executive Summary Small and midsize manufacturing firms (less than 3,000 employees) are embracing digital transformation to engage with the emerging digital economy. Three critical elements are associated with digital transformation:

    Coordinating diverse resources with new ways to run and grow the business by using 3rd Platform technologies*

    Leveraging Innovation Accelerators such as robotics, 3D printing, machine learning, and artificial intelligence (AI) to capitalize on or establish new business models

    Integrating technology resources into new business processes not just to modernize but transform

    This IDC InfoBrief examines the current and future investment plans of different-sized manufacturers so firms can see where an adjustment in their investment plans for product design and development might be appropriate. While small and midsize manufacturing firms have made major strides in improving product design and development, the competitive landscape will become increasingly demanding. SMB firms will be encouraged by customers and competitors to make optimal use of the latest technology to support digital transformation.

    New business processes

    Leveraging innovation

    Almost all SMB manufacturers have made significant progress in utilizing some digital transformation components, but there is still more work to do.

    * The 3rd Platform consists of four technologies (Big Data & Analytics, Cloud, Mobile, and Social) that allow businesses to accelerate their digital transformation. Innovation Accelerators are six technologies (IoT, Cognitive/AI, Next-Gen Security, 3D Printing, Augmented and Virtual Reality, and Robotics) that in tandem with the 3rd Platform can aggressively propel growth and deliver enhanced digital experiences.

    3rd Platform technologies

  • pg 3

    An IDC InfoBrief, sponsored by SiemensDigital Transformation in Product Design and Development: The Opportunity for SMB Manufacturers

    © IDC Visit us at IDC.com and follow us on Twitter: @IDC Document # IDC_Siemens_IB2018

    Methodology Research findings come from IDC’s worldwide survey of 420 manufacturers with fewer than 3,000 employees, with detail on firms with fewer than 100 employees, those with 100-499 employees, and those with 500-2,999 employees. Select results of a separate survey of 300 North American manufacturers with 1,000+ employees (with 120 respondents from 5,000+ employee firms) are included for comparison. In cases where comparisons are made with large companies, the SMB sample is limited to those firms with fewer than 1,000 employees (N=380) to avoid overlap in the size groups.

  • pg 4

    An IDC InfoBrief, sponsored by SiemensDigital Transformation in Product Design and Development: The Opportunity for SMB Manufacturers

    © IDC Visit us at IDC.com and follow us on Twitter: @IDC Document # IDC_Siemens_IB2018

    SMB Top Business Priorities: Productivity/Efficiency, Customer Engagement, Revenue Growth Digital transformation will play an important role in helping SMBs address key business goals like improving internal efficiency while expanding customer engagement to improve competitive position. Expanding to new markets is a priority for large businesses and SMBs are moving in the same direction. SMBs are focusing on efficiency and other priorities that larger companies have already addressed. The alignment of multiple goals is at the heart of digital transformation imperatives: sharpen internal processes, engage effectively with customers, and drive revenue growth through market expansion.

    Top SMB Priorities Now Top Expected in 3-4 Years

    20.5% 21.3%

    20.5% 17.6%

    20.3% 17.1%

    18.2% 16.6%

    17.4% 16.3%

    1. 1.

    2. 2.

    4. 4.

    3. 3.

    5. 5.

    Improve productivity/efficiency Expand to new markets

    Attract/retain customers Attract/retain customers

    Increase revenue Improve productivity/efficiency

    Improve service to customers Increase revenue

    Reduce operational risk Address increased competition

    Note: Multiple responses were allowed.

  • pg 5

    An IDC InfoBrief, sponsored by SiemensDigital Transformation in Product Design and Development: The Opportunity for SMB Manufacturers

    © IDC Visit us at IDC.com and follow us on Twitter: @IDC Document # IDC_Siemens_IB2018

    90% of Small and Midsize Manufacturers Are Budgeting for Digital Transformation

    Even 80% of the smallest manufacturers (fewer than 100 employees) are adding budget and 20% are adding staff to support digital transformation. Firms typically start their transformation incrementally by adding budget (often reallocating funds as well) and then devoting staff resources. This “test the water” approach can be easily implemented and scaled up if results are encouraging. If you are not actively investigating digital transformation you risk losing competitive ground.

    Commitment to Support Digital Transformation (DX) by Company Size

    10 .1

    10 .1

    9. 11

    5. 0

    12 .9

    24 .8

    26 .3

    32 .5

    28 .8

    27 .3

    21 .32

    6. 4

    38 .1

    5. 0 1

    2. 4

    Additional budget, staff, Chief Digital

    Officer (CDO)

    Some additional budget. Full-time staff added to support DX

    Some additional budget. Staff

    resources being dedicated to DX

    Some additional budget. No

    additional staff

    No additional budget/staff beyond

    current levels

    % o

    f r es

    po nd

    en ts

  • pg 6

    An IDC InfoBrief, sponsored by SiemensDigital Transformation in Product Design and Development: The Opportunity for SMB Manufacturers

    © IDC Visit us at IDC.com and follow us on Twitter: @IDC Document # IDC_Siemens_IB2018

    And Many Believe They Are Making Good Digital Transformation Progress

    Over a third of larger SMBs (500-2,999 employees) indicate they are “well underway” with digital transformation.

    But smaller firms also recognize its importance – almost half agree that digital transformation will be essential to their company’s survival in the next 3-5 years.

    Assessment of Digital Transformation Progress

    24.5%

    20.2%

    19.8%

    17.4%

    9.5%

    8.6% Well underway applying technology to connect

    people, devices, and businesses effectively

    Beginning to automate different functions but not in coordinated way

    At early stage coordinating/automating within operating areas but more to do

    Beyond integration, we derive real-time insights to yield business results

    Little work, no 3rd Platform/Innovation Accelerator use. May consider

    No digital transformation work

    % of respondents

  • pg 7

    An IDC InfoBrief, sponsored by SiemensDigital Transformation in Product Design and Development: The Opportunity for SMB Manufacturers

    © IDC Visit us at IDC.com and follow us on Twitter: @IDC Document # IDC_Siemens_IB2018

    The Top Digital Transformation Goals for SMB: Improving Product Development and Design Process Improving both product development and design processes are cited by over half the SMB manufacturers surveyed. These twin goals are also related to the key business priorities of improving productivity and efficiency. They also set the stage for a wide range of other investments in process improvement, including CAD, cloud, and the use of mobile technology to streamline product development.

    31 .3

    38 .0

    37 .2

    34 .7

    34 .7

    30 .9

    28 .8

    28 .8

    28 .8

    28 .8

    24 .8

    20 .1

    30 .9

    30 .0

    28 .8

    28 .9

    23 .1

    20 .0

    21 .525

    .0

    20 .0

    Improved product development

    process

    Improved design process

    Faster time to market

    Better collaboration with manufacturing

    Better collaboration with customers

    Real-time decision making across

    the development process

    Better collaboration with suppliers and

    partners

  • pg 8

    An IDC InfoBrief, sponsored by SiemensDigital Transformation in Product Design and Development: The Opportunity for SMB Manufacturers

    © IDC Visit us at IDC.com and follow us on Twitter: @IDC Document # IDC_Siemens_IB2018

    Near-Term Impact Is an Important Investment Factor; Long- Term Impact Is More Significant as Companies Grow The continuing pressure to improve performance is reflected by how firms set their tech investment priorities. While immediate impact plays a key role in the spending decisions of all firms, the long-term implications are increasingly influential as firms grow.

    41.3 41.0

    26.9 26.9 31.7 33.1 33.938.1

    42.1 51.2 49.651.8

    % o

    f r es

    po nd

    en ts