Expense Reduction Analyst – Survey on SMEs Vision for the ...€¦ · Vision for the future: Are you ready for Industry 4.0? Finding sources of funding and securing new business

Vision for the future: Are you ready for Industry 4.0? Finding sources of funding and securing new business opportunities

Expense Reduction Analyst – Survey on SMEs

02

Imprint Expense Reduction AnalystsSuite 24, 40 Churchill square, Kings Hill, West Malling, Kent, ME19 4YU, U.K.

Telephone: +44 1732 52 58 56Fax: +44 1732 52 58 50

[email protected]

Contact:Paolo Massimilla

Authors:Thomas LöwerKlaus Jeschke

Concept and Design:Counterpart GmbH

Copyright:E R Associates (Europe) Ltd.

Nominal Fee: 390,– EUR

Content 02 Content and imprint

03 Foreword

04 Study results

06 Methodology and information about the sample

08 Industry 4.0: Significant impact across the entire company

09 Everyone talks about Industry 4.0. But who deals strategically with Industry 4.0?

10 4th industrial revolution and opportunities

03

Foreword Successful companies are always trend-setters. They are the first to spot, un-derstand and implement new technologies. After seeing over the past decade the internet become an integral part of working life, now the entire value chain is being digitalised. The keyword here is Industry 4.0.

The present survey shows however that the vast majority of businesses has not yet understood what is behind Industry 4.0. Many have no idea what it means, and hardly any business has started to effectively drive Industry 4.0 processes forward. It is quite significant that one in three companies cannot allocate areas of responsibilities in-house. Here Industry 4.0 has not even reached strategic level – not to mention operational implementation.

It is evident from investment priorities that companies focusing on the future are always a step ahead. In our survey, decision-makers who concentrate on the implementation of Industry 4.0, confirm that budget resources are alloca-ted above average not only in this area but also in research and development. These businesses bet heavily on the future and seek opportunities to position themselves more clearly and more successfully within the competitive envi-ronment.

New technologies are always associated with investments. Industry 4.0 in particular represents a structural change for companies that needs to be fun-ded. Sources of funding must be found and exploited. As a result a third of those funds have been gained through cost management. This means that this tool is much more significant than for instance investment resources fi-nanced by credit. For companies that currently lack the financial resources for investments towards Industry 4.0, the message is clear. There is actually some money available – it just needs to be identified and converted. This is where management and people making decisions on finance need to set the right priorities so that the company itself does not miss the boat because of a lack of financial resources, and falls behind the competition.

I hope you will enjoy reading the results of the survey and that you will find some suggestions to, as a trend-setter, effectively implement Industry 4.0 in your company.

With best regardsFred Marfleet

The vast majority of businesses has not yet understood what is behind Industry 4.0.

04

Study results Understanding digitalisation as key factor and opportunityThe opportunities of digitalisation – the global business world digitalised and inter-con-nected with fully automated manufacture and industry sectors - are in 2015 still being underestimated by SMEs. Only around a third of respondents – regardless of their level of knowledge – perceive to be exposed to increased competition due to digitalisation. Therefore, companies that now recognise the way to digitalisation move quickly forward and invest in smart, networked production have a great opportunity of taking a pioneering role to ensure the success and sustainability of the company.

Fig. 1 – Statement agreement: competitive pressure

My company will be more vulnerable and have to face more competitive pressure through digitalisation (in %)

Agree completely

Agree slightly

Neutral

Disagree to a certain extent

Disagree completely

Don’t know

© Expense Reduction Analysts

Industrie 4.0 – A vision for the future, starting today40% of the companies surveyed consider Industry 4.0 as one of their investment priori-ties. Therefore, for companies that have a clear idea of Industry 4.0, it is one of the highest investment priorities (65%). Those familiar with Industry 4.0 also expect to have to invest some 67% or even the majority of investments in the digitalisation i.e. in the factory of the future. Other fields of investments mentioned are research and development (54%) and diversification (45%). Companies with a clear idea of Industry 4.0 consider Industry 4.0 and R&D as the main investment priorities, since intensive collaboration is required between IT and R&D.

Cost savings funding the 4th industrial revolutionNew technologies are always associated with investments. Industry 4.0 in particular repre-sents a structural change for the company that requires funding. This is where a third of the funds come from savings gained through cost management programmes. This means that cost management is here more important than for instance credit-financed investment funds. Besides the reinvestment of profits and cost savings, the other potential tools hardly play any role for the majority of companies surveyed.

Besides R&D companies consider Industry 4.0 as one of their investment priorities.

Industry 4.0 Experts

Industry 4.0 unknowing

TotalIndustry 4.0 Interested

11

20

2423

21

1

17

2328

8

13 11 10

21

2325

1567

26

22

26

127

05

Fig. 3 – Financial instruments proportional allocation: important role and very important role

How do you plan future investments? How important are the following tools? (in %)

Fig. 2 – Investment priorities and needs

In which areas are your investment priorities, if you had additional financial resources? (in %)

Industry 4.0

Reseach & Development/ Innovations

Recruitment/Search for Talents

Increasing Company’s Capital Ratio

Diversification, i.e. Entering new markets

New Foundation i.e. of a subsidiary

No Comments

650 5 10 15 20 25 30 35 40 45 50 55 60

6526

1140

35

30

25

20

15

10

5

0

35

30

25

20

15

10

5

0

Profits/Depreciation 34 Cost Savings

31

Leasing14

7Leasing

4Venture Capital

5Public funding 3Contracting

1Issuing of shares

1Issuing of bonds

Industry 4.0 Experts Industry 4.0 Interested Industry 4.0 unknowing Total © Expense Reduction Analysts

5450

4851

3828

1830

1815

1216

4536

4241

1114

1513

816

2815


06

Structural characteristic of the sampleThe underlying sample of this survey comprises SMEs of various sizes and from diffe-rent industries. As shown in Fig. 04b, the sector of machines and plant engineering, the largest group, represents 40%, followed by companies from the consumer goods industry with 18%, and the financial services sector with 12%. Within the companies surveyed, top management people made 63% of the respondents.

Methodology and information about the sample Methodological approachTo carry out the study, the chosen methodological approach was that of an online survey, conducted over a period from May 19th to August 27th 2015. Overall 302 companies took part in the survey. Companies from Germany, Spain, Italy, Finland, Switzerland, Belgium, The Netherlands, Norway and Austria were interviewed.

Fig. 04a, Participants per Country (in %)

Germany

Spain

Italy

Finland

Switzerland

Belgium

Netherlands

Norway

Austria

Other

0 5 10 15 20 25 30 35 40 45

30

16

14

9

4

3

3

3

3

15

07

Fig. 04b, Participants per Industry (in %)

Mechanical engineering / plant engineering

Chemical industry

Logistics

Banks / Insurance / Financial services

Health sector / Pharmaceutical industry

Retail / Consumer Goods

Public sector / Not-for-Profit (NPO)

Other

0 5 10 15 20 25 30 35 40 45

40

7

6

12

5

18

5

7

Fig. 04d, Participants per Company Size (in %)

0 5 10 15 20 25 30 35 40 45

Up to 99 Employees

100 – 249 Employees



Above 1,000 Employees

39

21

17

11

12

Fig. 04c, Participants per role (in %)

Member of the Board / Director / CEO

CFO

Head Procurement / Head Logistics

Head of Division / Department

Employee

Assistant to Management

Other role

0 5 10 15 20 25 30 35 40 45

45

13

6

4

11

3

18

08

Industry 4.0: A significant impact across the entire company Digitalisation will not only change productionThe vast majority of respondents believe that digitalisation will not only change production, but all the divisions of the company will be changed permanently. Industry 4.0 will bring structural changes within the company, with rapid developments in the area of digitalisation. Therefore many features are embedded in digital components, and can be controlled by i.e. iPhone or software. The more respondents are engaged in the implementation of Industry 4.0, the greater is the agreement with the statement that all company divisions will be permanently changed (over 90%). This development is expected in particular in the consumer goods sector, where over 62% of respondents agree with this statement.

Fig. 05, Statement agreement: All areas of the company will be affected by the change

The digitalisation will not only change the products but all areas of companies. (in %)

Agree completely

Agree slightly

Neutral


Disagree completly

Don’t know


6129

5

1

39

45

94

28

38

15

6

46

4

36

9

13

12 2

32

11

Fig. 07, Knowledge of Industry 4.0

How familiar are you with the concept of Industry 4.0? (in %)

Very clear idea

Clear idea

No clear idea

No idea at all

First time I hear about it

No Comment


3930

8

Digitalisation plays an important role

28

42

16 4

Digitalisation plays an average role

26

3113

Digitalisation plays a small role/is not important

35

33

9

Total

5157

1

10

2

23

1

1111

Fig. 06, Statement agreement: All areas of the company will be affected by the change (per Industry)

The digitalisation will not only change the products but all areas of companies. (in %)

41

36

4

Manufactoring Industry

62

30

4

Consumer Goods/Retail

45

39

7

Other

46

4

36

9

Total

2 22

4

13

4 4

1 2

3 Agree completely

Agree slightly

Neutral


Disagree completly

Don’t know



Industry 4.0 unknowing

TotalIndustry 4.0 Interested

09

Everyone talks about Industry 4.0. but who deals strategically with Industry 4.0? Industry 4.0 must be a top priority!Since Industry 4.0 has yet no strategic significance in a third of companies surveyed, it is not clear where the responsibility within the organisation should lie in the first place. In-terdisciplinary project groups – i.e. the groups that have the operational responsibility for Industry 4.0 – are only in place in 14% of companies. Interestingly, Germany is doing far below average compared with other European countries. In Finland, the responsibility lies within interdisciplinary Industry 4.0 teams. Only very few companies (3%) have given the total strategic professional responsibility to their respective production managers.

However, a total of 54% of companies surveyed reported that, in their opinion, the strate-gic planning of digitalisation should be the responsibility of the management or the board of directors. Even if they have some trouble clearly understanding Industry 4.0 (see Fig. 06), successful entrepreneurs find themselves significantly bound to drive ahead and push with the digitalisation processes. The digitalisation of the whole value chain must be in the fore-ground for the management. Therefore not only a better monitoring of the overall process can be ensured, but also Industry 4.0 offers an opportunity to develop brand new business models and to define the corporate strategy.

Successful ent-repreneurs find themselves sig-nificantly bound to drive ahead and push with the digitalisation processes.

100

Fig. 08 – Organisational assignment of responsibilities (Breakdown per country)

In your company, who is taking care of the Industry 4.0 topic? (in %)

Germany

Finland

Italy

Spain

Other

Total

0 10 20 30 40 50 60 70 80 90

Member of Board/CEO

Chief Finance Officer (CFO)

Chief Information Officer (CIO)

Chief Procurement Officer (CPO)

Production Manager

Interdisciplinary Group

No comment


44 7 9 1 7 6 27

21 36 184 21

24 7 505 14

17 25 21227

35 295 13

32 296 15

8

1

1

4

3

12

14

Well over half of the participants have no clear idea of what is behind the notion of Indus-try 4.0. Even companies for which digitalisation is of great significance have, with almost 50 % of all businesses surveyed, no clear idea of what Industry 4.0 is.

10

4th Industrial revolution and opportunities Far-reaching impact for companies and marketsThe survey shows that German companies in particular plan to achieve with Industry 4.0 projects higher productivity (60%), innovative business models (47%) and a better control of the value chain (59%). People with intensive knowledge about Industry 4.0 appreciate the opportunities of digitalisation – especially for new corporate concepts and business models – by up to 7 times more than people who confess having no insight into Industry 4.0.

0 10 20 30 40 50 60 70 80 90 100

Higher Productivity

Better control of value-added chain

Innovative business models

Higher customer loyalty

Better coordination of production stages

Greater added-value

Diversification Opportunities

Cost Reduction

Expansion of the product portfolio

19 719 13438

16 6 126 348

12 5 486 425

19 336 20 8 14

19 7 327 242

11 4 4611 325

22 8 1422 232

20 5 335 235

14 11 476 22

20 12 1413 535

20 7 323 443

6 15 498 517

22 10 1418 630

21 10 227 733

17 6 466 520

520 16 1314 32

21 13 219 540

9 11 489 518

23 1513 332

21 10 224 439

12 12 495 22

526 17 1411 27

26 16 213 736

21 17 465 38

25 17 1410 826

28 14 314 635

11 15 458 615

All


Industry 4.0 Unknowing

All



All



All



All



All



All



All



All



Fig. 09 – Opportunities through Industry 4.0

Which opportunities in Industry 4.0 do you see for your company? (in %)

Very big Big Medium Small Very small Don’t know © Expense Reduction Analysts

14

11

The feeding changes in the production environment, brought by Industry 4.0, will bring far-reaching consequences to businesses and markets. Therefore, companies which quickly push forward the way towards digitalisation and invest in the smart factory have great chances to take a pioneering role in their industry and actively build their future success. Cost savings in particular play a significant – if not very significant – role in the funding of Industry 4.0 projects. Cost reduction programmes (47%) are, in addition to the rein-vestment of profits (48%), the main financial tool to fund the investments required and to provide the crucial resources for changes and advancements to implement Industry 4.0 projects. Companies are thus planning to fund necessary investments from cost reductions by up to 31%.

Furthermore, the survey shows that respondents faced with issues they do not under-stand, feel uncomfortable and identify risks with Industry 4.0. In addition to the technical challenges such as the dependency of function reliability (53%), the interface definition (52%) or the data security (49%), the availability of expertise and staff (47%) are rated as the biggest obstacles.

Cost savings in par-ticular play a signi-ficant – if not very significant – role in the funding of Indus-try 4.0 projects

Very big Big Medium Small Very small Don’t know © Expense Reduction Analysts

Fig. 10 – Risks through Industry 4.0

What risks do you see in Industry 4.0 for your company? (in %)

Dependency on well-operating functionality

Compatibility of Interfaces

Data protection

Know-how/Staff

Increasing competition

High investment capital

Public Infrastructure

Loss of competitiveness due to lack of investment funds

14 24 1139 12

39 24 10 113

17 32 27 10 3

33 31 8 1 1215

12

13

16

15

8 29 31 17 3

8

7

19 28 25 9

20 33 19 7

28 36 15 1

0 10 20 30 40 50 60 70 80 90 100

13

12

4

About Expense Reduction Analysts Established in 1992, Expense Reduction Analysts is a cost management consultancy focused on delivering improved business performance to clients of all sizes in both the private and public sectors. Operating in over 25 countries, Expense Reduction Analysts' 700 consultants provide deep industry expertise in a wide variety of expense categories, such as waste management, insurance, transport, marketing costs, bank charges, fleet management, telecommunica-tions and many others.

Expense Reduction Analysts' clients include thousands of mid-sized companies and many well-known names.

To find out more, visit www.expensereduction.com

Paolo MassimillaHead of European Marketing+44 1732 52 58 [email protected]

Documents

Expense Reduction Analyst – Survey on SMEs Vision for the ...€¦ · Vision for the future: Are you ready for Industry 4.0? Finding sources of funding and securing new business