Tom Lawton, head of manufacturing at BDO, shares his views on the digital transformation journey of UK manufacturers.
At BDO, we recently published our Digital Transformation 2019 report, which provided me with further insights into the adoption of digital technologies in UK manufacturing.
The good news is almost half (46%) of manufacturers now have a good understanding of Industry 4.0 technologies and digital transformation. This is a big step forward since the 9% reported in 2016.
One in ten manufacturers have already invested £5m or more in the past two years, and another 14% plan to do so over the next five.
On a less positive note, however, is that the proportion of UK manufacturing making no investment in digital projects has fallen considerably in the past three years.
A fifth (21%) of companies have curtailed spending as Brexit uncertainty and tough trading environments lean in favour of risk rather than reward.
For the majority of businesses I work with, it’s clear they recognise the benefits of a more digitally-focused future but many lack the confidence – in both the market and in their own growth trajectory – to invest in the digital transformation of their business.
They are nervous about embarking on change programmes because they could compromise existing operations or be an expensive investment for little return.
It’s natural to worry about introducing leading-edge technologies with an unproven track record but that’s no longer what most digitalisation is about.
Innovation not invention
It may seem counter-intuitive but technology is not the first thing you should focus on in a digitalisation programme. Technology and digital solutions provide ideas and opportunities to exploit but only if they resolve a genuine issue for your business.
It is not all about robots and AI; in the same way that innovation is not all about invention. Businesses should consider their digital strategy as business evolution not industrial revolution.
Major investment will not necessarily represent the best value for money for the typical manufacturer seeking to digitalise their businesses. Starting small is often where the value proposition is clearer.
More modest steps like investing in cloud solutions, ensuring your Customer Relationship Management (CRM) or Enterprise Resource Planning (ERP) software is up to date and properly embedded in the business can improve productivity without the need to invest millions of pounds into major projects.
Businesses should look at legacy systems and processes, their IT infrastructure and the requirements of major clients.
By focusing on low-hanging fruit and picking issues where they can introduce digital solutions quickly and easily, will help gain the early wins needed to build confidence and buy-in.
Skills and talent
There is another fundamental barrier for an industry trying to embrace a ‘digitally fluent’ future – skills.
Despite moves to foster digitalisation, UK manufacturing remains hamstrung by the skills set of its current workforce and it’s time the government took action.
Companies are trying to embrace a digitally-fluent future but they need better support from a government that is mired in Brexit and seemingly forgetting that the world is moving on without us.
Only 21% of manufacturers believe the government is doing enough to help them address the skills gap that currently exists and the vast majority (84%) want them to do more to deliver skills for manufacturing digitalisation.
Companies are expressing genuine concern that the education system is failing to deliver the right STEM talent that will ensure the sector is fit for the future.
While the government has made some progress with expanding apprenticeship schemes and most recently its trial of the National Retraining Scheme in Liverpool, in my opinion that does not go far enough.
