What Digital Means in Asset-Intensive Industries

September 29, 2017

Contributor: Susan Moore

While industrial companies are leading the shift to digital, their CEOs see it differently.

Five years ago, conference presentations and articles about digital business mostly included only consumer-facing examples. Think internet connected refrigerators, banking apps and remote healthcare.

In fact, the top three industries leading Internet of Things (IoT) adoption are all asset-intensive industries: utilities, oil & gas and manufacturing.

“Digital is redefining how business is done in asset-intensive industries,” says Kristian Steenstrup, VP & Gartner Fellow. “For example, the shift to the fully autonomous mine, the digital oil field concept and integration of digital services in aviation are all well underway.”

Despite this, digital can be a hard sell for CIOs in these industries.

CEO priorities differ

Gartner’s 2017 CEO survey found that in industries that rely heavily on physical assets, plant and equipment to fulfil their mission, CEOs' priorities vary from the global average in three main ways.

  1. CEOs in asset-intensive enterprises rank asset utilization as a more dominant productivity metric than CEOs in other industries, who largely rely on revenue and profit metrics. CIOs can respond by investing in systems that deliver return on assets. Bolster projects related to equipment maintenance, reliability and equipment scheduling.
  2. CEOs in asset-intensive industries do not show the same level of interest in digital technologies like cloud and analytics as in other industries. As a result, CIOs will be more successful in promoting investment in ERP and automation capabilities to enhance productivity.
  3. CEOs of asset-intensive companies show more interest in investing in IT capabilities (traditional business systems) than in pure digital capabilities (connected assets and processes). While digital is ranked No. 1 as an investment, with 66% of CEOs stating they will increase it across all industries, asset-intensive industry CEOs rank digital as No. 4, with 59% stating they would increase investment in digital. Taking its place at No. 1 is IT, with 67% stating an intention to increase investment in IT.

“This makes digital a harder sell for CIOs to CEOs seeking productivity improvements,” Steenstrup says. “In these organizations, most CEOs prefer to ‘get the basics right,’ rather than prioritize the ‘digital first’ approach for productivity improvements that is so evident in other industries.”

CIOs in asset-intensive industries need to invest in systems that support asset utilization, promote the concepts of cloud and analytics to improve CEOs' trust in off-premises systems and fully address the fundamentals of IT delivery before venturing into new areas, as CEOs of asset-intensive industries have a conservative outlook. Tailor any promotion for digital innovation with the premise that it may fall on deaf ears. 

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