DTI Digital-Engineering201806122 V07

Digital Engineering
The new growth engine

for discrete manufacturers
Digital By Capgemini Digital Transformation Institute

Transformation
Institute
1
Executive Summary • In parallel, manufacturers need to reboot current
approaches to legacy product innovation and development
using a consistent source of information running across the
Digital technologies are reshaping the manufacturing
product lifecycle – from engineering to manufacturing to
landscape. Product-based business models are being
services. Around 60 % of manufacturers are struggling to
disrupted by service-based business models, new skills are
ensure “digital continuity” throughout the whole lifecycle.
needed in a world of smart products, and innovation
Similarly, despite being responsible for 58% of global
success depends on the effectiveness of a company’s open
research and development spend in 2017, less than one-in-
ecosystem.
five (19%) of discrete manufacturers featured in the Forbes’
list of the most innovative companies 2018, highlighting the
This research examines how manufacturers are balancing
‘anchor’ effect of legacy products and the need to rethink
two different but complementary priorities: using digital to
current approaches to product and services innovation and
get legacy products to market quicker while investing in
engineering.
new smart products to capitalize on the servitization
opportunity (deriving revenues from services).
• Manufacturers have responded enthusiastically to
The key findings are:
new technologies and are already rebalancing their IT
• We estimate that the size of the smart, connected products investments accordingly. Around 50% of manufacturers aim
prize globally will be $519 billion to $685 billion by 2020. to spend more than 100 million euros in Product Lifecycle
Manufacturers estimate that close to 50% of their products Management (PLM) platforms and digital solutions in
will be smart and connected by 2020, a 32 percentage point the next three years, while the proportion of IT budget
increase from 2014. In fact, 18% say that they plan to stop earmarked for maintaining legacy systems has dropped
manufacturing products altogether and move to a pure significantly, declining from 76% in 2014 to 55% in 2017.
service-based business model.
• While digital investment has increased significantly since
• To capitalize on new service-driven opportunities, 2014, few manufacturers have been able to scale their
manufacturers will need to improve their digital capabilities. efforts. Manufacturers are struggling to tap data from
Companies will need to add non-physical skills – such as products and customers to drive innovation. Only a quarter
data, IT and software competencies to their traditional of manufacturers are using data to deliver actionable
physical skills base: non-physical capabilities are expected insights for product innovation. In terms of new product
to grow up to about 50 % by 2020. Outside hires will not development, only two in five of manufacturers indicated
fill the digital talent gap completely, which means that they are using AI technologies to analyse customer data.
organizations will need to invest in digital training, tools
and new collaborative ways of working for their existing • Overall, few companies are making significant progress in
employees. transforming their approach to innovation and engineering.
Only 21% of manufacturers are at an advanced stage,
An extended digital ecosystem will also be critical to with close to a third still only running pilots. The use of
design and provide new end-to-end services. Our research model-based system engineering, data continuity, and
shows that 54% of organizations have instituted programs virtual simulation within the industry is low; only 16% of
to foster collaboration with start-ups, third parties and organizations are fully implementing Digital Twins* while
suppliers. However, less than a third have leveraged such 45% are not beyond the pilot stage.
programs to co-develop products and services.
• We have identified a group of companies that have
successfully transformed engineering and product
innovation. They display a number of characteristics that
represent best practices: they have a concrete digital vision
and roadmap, make better use of the partner ecosystem,
invest more in digital technologies, recruit talent in digital
skill-sets, and create a culture of experimentation and
agility.
* Digital Twin is the digital representation of the “current state” of

a manufactured product or system at any given point in time.
2 Digital Engineering: The new growth engine for discrete manufacturers

Introduction
Does pioneering manufacturer Local Motors provide a glimpse In this environment, traditional approaches to product
into the future of manufacturing engineering? The firm, only innovation and engineering – how manufacturers move
founded in 2007, has co-designed multiple vehicles using from discovery and innovation to product release – need to
the largest community of car designers and engineers in the change and meet the realities of a digitized environment. To
world. Rally-Fighter – its first vehicle – was designed by 2,900 understand how leading manufacturers are approaching this
community members from 100 countries. transformation, we surveyed over 1,000 senior executives of
large, discrete manufacturing organizations around the world.
This example illustrates how digital technologies are reshaping Drawing on the views of executives from across discrete
the manufacturing landscape. manufacturing segments – including industrial manufacturing,
aerospace and defense, medical devices, and high-tech – the
Even as discrete manufacturers are grappling with how to report examines four areas:
accelerate speed to market and develop mass customization
capabilities, newer challenges emerge in the areas of product 1. Why transforming product innovation and engineering
innovation and development. As products become more is critical
complex and increasingly comprise software, new engineering 2. How manufacturers are transforming this
capabilities are required. Product-based business models critical capability
are changing as services become a major source of value. 3. What can be learnt from successful organizations
Product innovation has evolved from being closed-loop to an 4. How to overcome key challenges on the road
open ecosystem, requiring firms to explore different ways of to transformation.
collaboration, both internally and externally.
3
Transforming product innovation
and engineering – why it matters
In our research, a majority of manufacturers acknowledge that • Accelerating time-to-market of legacy products by ensuring
sustaining and growing their core business while finding new there is data-sharing and continuity across the product
sources of revenue growth is a constant challenge (See Figure lifecycle and through continuous product innovation and
1). These organizations are attempting to balance two very development.
different but complementary priorities: • Investing in smart, connected products to move away from
transactional product sales to services and product-as-a-
service models.
Figure 1: Share of manufacturers agreeing that they face twin challenge of continuous product development and
developing new services
Global Average 66%
Aerospace and Defense 76%
Automotive and Transportation 68%
Industrial Manufacturing 66%
High Tech (Semiconductor/Electronics) 65%
Medical devices 62%
Industrial and agricultural equipment 58%
Source: Capgemini Digital Transformation Institute, Digital Engineering Survey, April–May 2018 (N = 1013).
In most sectors, organizations will still need to juggle both 1. Reboot approaches to product innovation and
priorities. Despite initiatives to grow their connected products development recognizing that:
portfolio, their traditional products continue to be the main –– Current legacy approaches are not ensuring digital
revenue driver. However, the opportunity to create new continuity across the life cycle and are not delivering an
sources of value from connected devices makes the shift to a innovation return on investment levels.
service centric model an imperative. –– Numerous discontinuities are still remaining along the
development cycle:
Delivering against these twin priorities requires significant • “Inside Engineering,” between the various disciplines
change. Organizations will need to focus on two areas:: • “Inside the Company”: Engineering – Manufacturing
engineering – Manufacturing – Aftersales
• “Outside the Company”: Company – Suppliers

–– Combining hardware and software (IT) development 1. Reboot needed – legacy approaches are
cycles and configuration management is a not delivering an innovation return
fast-growing issue
–– Product development IT landscape must evolve R&D lacks teeth: Manufacturing is the world’s stand-out R&D
progressively within a “run-to-build” journey to take full contributor – in 2017, the industry was responsible for 58%
advantage of new/enhanced PLM solutions and new of global R&D spend.1 Despite this R&D commitment, only
digital technologies 19% of discrete manufacturers feature in Forbes’s list of the
–– “Digital twins” (the complete digital documentation most innovative companies.2 This dichotomy highlights the
for every individual product) will drive manufacturing need to rethink current approaches to product innovation and
performance to the next level engineering.
2. Build the capabilities needed to capitalize on servitization There is little data-sharing or “digital continuity” across
opportunity: the product lifecycle: A unique, authoritative and consistent
–– Smart, connected products are transforming competition stream of information running across the product life cycle
from products to services – from engineering to manufacturing and then to services
–– Open, extended ecosystems will be crucial to provide – is critical to optimize innovation and accelerate product
new value-added products and end-to-end services development.
–– Usage data (from smart, connected products)
and customer feedback (from social/professional However, current engineering processes do not support
networks) will fuel innovation and new product/ seamless data sharing across functions. Lack of integration
service development between legacy systems restricts effective mining of data
for product development and improvement. Limited view
of product utilization limits manufacturers’ ability to quickly
respond to market demands. In our research, we found that
six out ten organizations are unable to synchronize different
functions’ activities early in the design and development stage
(See Figure 2). Around the same number of organizations also
find it difficult to create, access, and reuse information on how
a product was designed, manufactured, and serviced.
Figure 2: Key challenges in maintaining digital continutiy
59% 57% 57%
Not able to secure the Product development and Not able to adequately create,
involvement of manufacturing engineering function faces capture, share and reuse
teams or customer service early in problems in discovering and knowledge across functions
the product development process collecting the needs of all
stakeholders
5
Manufacturers expect close to
50% of their products to be
smart and connected by 2020
2. Capitalizing on the servitization opportunity require enhanced capabilities
Our research shows that manufacturers expect close to 50% of their products to be smart and connected products by 2020. This
would represent a dramatic increase: in 2014, that figure was just 15% (see Figure 3).
Figure 3: Percentage of products that are smart, connected
47%
Product Portfolio (%)
35%
15%
2014 2017 2020

The size of the connected products prize: $519 billion to $685 billion
by 2020
Using a conservative scenario, our estimate is that smart, connected products will add $518.9 billion or
6.63% to manufacturing value-added in our surveyed countries.
In an optimistic scenario, where manufacturers accelerate their smart, connected product efforts, it
would potentially add up to $685.6 billion to manufacturing value added in 2020. This would amount to
8.76% of manufacturing value-added in the nine surveyed countries.
Factors used for estimation Conservative Optimistic

Estimate Estimate
A. % Smart, connected products in the portfolio -2017 35% 35%

(From survey)
B. % Smart, connected products in the portfolio -2020 51% 67%

(From Survey)
C. Incremental revenue increase for every 1% increase in 0.47 0.51

smart, connected products over three years (2017-
2020) (analysis from survey data)
D. Cumulative revenue growth rate for manufacturing 7.52% 16.22%

from smart, connected products. (2017–2020)
(B – A) x C
E. Estimated CAGR for incremental revenue from smart, 2.45% 5.14%

connected products (derived from D)
F. Total incremental value added to manufacturing due $518.6 billion $ 685.6 billion2
to smart, connected products, 2017–2020 ($6.891 x D)
G. Average annual contribution (2017–2020) $172.9 billion $ 228.5 billion

F/3
H. As a % of manufacturing (value added) for survey 6.63% 8.76%

countries (2020) (F/$7.823 x 100)
1 Manufacturing GDP is $6.895 Trillion for survey countries as per world bank estimates of 2017.
2 We have capped the growth rate to 3.21% which is the global GDP growth rate of 2016 as incremental value added to manufacturing from
smart, connected products cannot exceed demand growth.
3 Manufacturing Value Added is estimated at $7.82 Trillion for 2020 using World Bank estimates for 2016 and world GPD growth rate of 3.21%
for 2016
7
Smart, connected products offer a significant opportunity To make the services model work, manufacturers need to
(see “The size of the connected products prize: $519 billion to fundamentally rethink how products are designed, developed,
$685 billion by 2020”). Close to one in five manufacturers plan and controlled. Two areas will be key:
to embrace this opportunity wholeheartedly, with 18% saying
they plan to abandon products and move to a pure service- Firstly, as products shift to being software-driven,
based business model. Around half (54%) plan to continue manufacturers must adapt to the demands of frequent
to sell products as well as additional services (see Figure upgrade cycles – a common phenomenon in the software
4). “We want to bring value to the market by shifting our world. Our research shows that manufacturers consider the
business model toward service-based and cloud-connected role of software and IT in products as one of the top three
architectures. It is a key way to differentiate our value factors impacting on their businesses (see Figure 5).
proposition in the market of pure hardware players,” says
Antoine Destribats, Vice President – Industrial Operations at
Schneider Electric.
Figure 4: What are your ambitions with relation to smart, connected products over the next 3 years?
Stop selling products and shift

to a service-based business
18%
Continuing to sell
54% products as well as
additional services
27%
Continue to sell
legacy products
Source: Capgemini Digital Transformation Institute, Digital Engineering Survey, April–May 2018 (N= 1013). Percentages may not total
100 due to rounding
Figure 5: Top 3 trends affecting businesses of manufacturing firms
1 Maintaining digital continuity
2 Software and IT as an integral part of products
3 Shift from product to service-based business models

The role of IT has extended to a broader set of functions. Head of Department, Product Development and Production,
“A few years ago, IT was an independent department,” said Thales. But conventional approaches to data aggregation,
Gunter Beitinger, vice president of Manufacturing at Siemens. sharing and analysis are inadequate to extract the full value
“Now, we see IT running through all our functions – product from data. For example, in a typical manufacturing set-up, the
development, quality management, production, maintenance, responsibility of storing and analyzing data usually lies with
business excellence. In fact, we now have more people on individual functions, with very little data sharing between
board with IT knowledge in our departments than ever different departments. In our research, we found that 56%
before.” of organizations say they do not have a culture of data-driven
decision making (see Figure 6).
Secondly, manufacturers need to capitalize on the data
generated by connected products if they want to sell services.
“We are constantly working on a goal to collect and use all
the data that we have to help us take the critical business
decisions of selling new services,” says a senior executive,
Figure 6: Share of manufactures who agree they do not have a data driven culture.
Global Average 56%
Aerospace and Defense 61%
Medical devices 60%
High Tech (Semiconductor/Electronics) 58%
Automotive and Transportation 57%
Industrial and agricultural equipment 54%
Industrial Manufacturing and Automation 53%
9
How manufacturers are transforming
product innovation and engineering
Few organizations are at an advanced stage when it comes to transforming innovation and engineering. Most are at an early
stage – with close to a third still running pilots – and only 21% characterize themselves as being at an advanced stage in the
journey (see Figure 7).
Figure 7: Current state of transformation of product development and engineering function
Building a roadmap for

transformation
Advanced stages of
transforming
21% 16%
31%
32%
Initial stages of
Running small
transforming
scale pilots
And, regardless of where they are in their transformation Priority 1 – Using digital tools and
journey, all manufacturers are showing uneven progress in methodologies for legacy products
addressing two priorities: using digital tools/methodologies
to accelerate and secure the development of legacy Using PLM (product lifecycle management) platforms and
products and building critical services and product-as- technologies – such as digital twin, augmented reality,
a-service capabilities. and virtual reality – can make the product development
process more efficient and cost effective. Manufacturers are
responding enthusiastically to this and are rebalancing their IT
investments. Around 50% aim to spend more than 100 million
euros in PLM platforms and digital solutions, while we found
that the proportion of IT budget earmarked for maintaining
legacy systems has dropped significantly (from 76% in 2014 to
55% in 2017).

However, when we take a closer look at usage of different system engineering, data continuity, and virtual simulation
digital technologies, we find that this enthusiasm for digital – is low (see Figure 8). In addition, only 16% have fully
investments is not necessarily translating into real progress. implemented digital twin, with 45% not beyond pilot stage
For example, very few manufacturers are using all the features (see Figure 9).
of a PLM platform at scale. Except for collaborative product
development, the use of features – such as model-based
Figure 8: PLM Features and tools used by manufacturing organisations at scale
Collaborative product development 54%
Data continuity along with enabling tools

20%
like Digital mock-up, Digital Twins
End-to-end PLM
Model-based system engineering 10%
Virtual simulation (mono and 10%

multi-disciplines)
Accelerating platforming and 7%

reuse of components
Figure 9: Different stages of Digital Twin implementation by manufacturers
Still thinking
about it
Fully implemented
5%
16% PoC
12%
28% Pilot
Implemented in 39%
selected sites
11
Manufacturers also lacked the capability of using AI suggests that lot of manufacturers are losing out on the
technologies for product development and evaluation. For opportunity to use AI technologies for making appropriate
example, only around two out five manufacturers use it to design specifications and for product innovation (see Figure 10).
analyze customer communication in social media channels
and contact centers for new product development. This
Figure 10: Organizations leveraging artificial intelligence in the following areas
37%
25%
19%
9% 9%
New product Incremental Product Product Product

development product evaluation launching security
development
56% of manufacturers agree

Priority 2 - Developing servitization capabilities
Manufacturers are struggling to tap data from

they do not have a data driven products and customers to drive innovation
culture Usage data from connected products – as well as customer
feedback from social channels – is increasingly replacing
traditional market surveys and fueling product and service
innovation. “We collect various types of usage data ranging
from the duration of use to the frequency of usage. This gives
us data to analyze product performance and enables us to
develop the next generation of products or services,” said
Jan Willem Ruisch, head of Product Management at Signify
(formerly Philips Lighting). However, our research finds that
only a quarter are using data to deliver actionable insights for
product innovation (see Figure 11).

Figure 11: What best represents your organization’s use of data generated from smart, connected products?
Using data to Assessing the types of

deliver actionable data that will be useful
insights for product
innovation 25% 17%
27% Currently using

product data,
however, it is largely
unstructured
Early stages of 31%

predicting future
product behavior
Source: Capgemini Digital Transformation Institute, Digital Engineering Survey, April–May 2018 (N = 1013)
“We collect various types

of usage data ranging from
the duration of use to the
frequency of usage. This
gives us data to analyze
product performance and
enables us to develop
the next generation of
products
or services,”
Jan Willem Ruisch, head of
Product Management at Signify
(formerly Philips Lighting)
13
Few organizations are routinely co-developing “Suppliers have access to our PLM
products with ecosystem partners
system, with more information
As they deliver the services business model, manufacturers than they traditionally have got
are working with an extended partner ecosystem to co-create
products and services, including start-ups (see Figure 12). through the drawings and CAD
models.”
“We work with our suppliers – right from the design initiative
Magnus Dahlen,
stage with transparency,” says Magnus Dahlen, senior director
of Engineering at Autoliv. “Suppliers have access to our
Senior Director of Engineering at Autoliv
PLM system, with more information than they traditionally
have got through the drawings and CAD models. Such close
collaboration has helped a lot in early detection of design
issues.”
Our research shows that most organizations (54%) have

instituted programs to foster collaboration with start-ups,
third parties, and suppliers (see Figure 13). However, less than
a third have used this sort of program to co-develop products
with the partner ecosystem.
Figure 12: Breakdown of partners that manufacturers are working with to drive collaboration
Cloud / Infra providers 72%
IT vendors/ESN 70%
Software vendors 68%
Start-ups 36%
Telco Operators 32%
Third-party manufacturers 23%

Figure 13: Different stages of implementation of a formal program to partner with external ecosystem
Still thinking
about it
Fully implemented 7%
15% PoC
13%
26%
Pilot
Implemented in 39%
selected product lines
or geographies
Need to shift talent focus to non-physical skills

• As Figure 15 shows, 45% of manufacturers have created
The prevalence of tech in products is disrupting the traditional a new independent unit focused on developing smart
talent mix. For example, in 2014, non-physical skills – such as and connected product. For example, Autoliv – a leading
HMI design, data analytics, AI, apps design, and cybersecurity – auto safety system manufacturer – span off its electronics
formed 20% of the talent portfolio. In 2017, that stands at 34% business segment to create a new, independent publicly
and manufacturers expect it to increase to 47% by 2020 (See traded company. The unit is focused on the opportunities
Figure 14). offered by connected and autonomous cars. The new
entity’s offering will include safety electronics, sensors,
Structure and culture key to meeting priorities and software for active safety, advanced driver assistance
systems (ADAS), and autonomous driving (AD) as well as
To accelerate progress against these two priorities, advanced brake control solutions.3
manufacturers are changing their organization structure and
evolving their culture. Deciding on a separate entity versus persisting with the
existing business model is a critical tradeoff. While a spin-off
Revamping traditional organization structures is complex and takes time, it has clear advantages over the
unified approach. A separate entity focuses the organization
Manufacturers are changing their organization structures and its capabilities on delivering the connected products
to drive both investments in new services and continuous strategy. In addition, the difficult changes required during
improvement of legacy products: product innovation and engineering transformation may be
harder to implement in a business-as-usual environment.
15
Figure 14: Talent breakdown between physical and non-physical skills
20%
34% 47%
81% 66%
53%
2014 2017 2020
Non-physical skills such as HMI design, data analytics, AI, apps design, cybersecurity
Physical/mechanical design skills
Percentages may not total 100 due to rounding
Figure 15: Breakdown of options manufacturers are exploring to restructure their organization
Create a separate
Concurrently operate 45% independent entity to
under the existing develop smart connected
business model 55% products and services
Creating a culture of innovation and agility problems. We found that only around two out of ten
organizations prioritize an open innovation strategy to
Innovation thrives on new thinking and experimentation. An leverage both internal and external partners to scale up ideas
innovation lab can create an environment where this sort of (See Figure 16).
creativity flourishes. But in our survey, we found that less than
a third of manufacturers have put in place a lab network across To be able to fully explore the potential of open innovation
their geographic footprint (see Figure 16). strategies, organizations will need to put the right model
in place to support sharing and protection of intellectual
By adopting an open innovation strategy, organizations property (IP) in the eco system. An IP model that appropriates
are able to secure support from its supplier community, value for each ecosystem partner is critical in driving
academics, or even its customers to solve key research successful collaborative product design and innovation
initiatives.

Figure 16: Breakdown of actions manufacturers are taking to promote innovation culture
5%
26%
30% No lab or focal point
for product and
16%
design innovation
23% Open innovation strategy
to leverage internal and
external networks 5%
appropriately to scale up
ideas rapidly
23%
Local lab or space

dedicated to product
development and
26%
innovation
Although lab(s) is in 16%

place, product innovation
is carried out across the
organization
30%
Network of labs located in
different geographies dedicated to
product development and
innovation
45% of manufacturers
are exploring to restructure
their organization by
creating a separate
independent entity to
develop connected products
17
Learning from leading organizations
To understand what levers manufacturers need to pull to transform, we identified a cross section of companies that have made
a success of transformation (see “Who are the successful companies? ”). These leading organizations constitute only 10% of the
survey sample.
A closer look at the initiatives favored by successful companies versus the less successful reveals key differences. Successful
organizations:
• Create a compelling digital vision and have a roadmap to monitor progress

• Value the contribution of their partner ecosystem as they collaborate to drive value
• Invest in, and deploy, new and emerging digital technologies
• Recognize the importance of digital skills in engineering transformation and are disrupting the talent mix
• Evolve their culture to driving transformation and support experimentation and agility.

Who are the successful organizations?
We classified this cohort based on self-assessment of performance across four areas:
• They have a higher percentage of smart and connected products portfolio (Figure 17)
Figure 17: Composition of smart, connected products in porfolio mix (incremental change in 2017 over 2014)
25% 20% 20%
Successful Organizations The Rest Global Average
• They derive higher incremental revenues from smart, connected products (Figure 18).
Figure 18: Revenue from smart, connected products (incremental change in 2017 over 2014)
14%
9% 9%
19
• They have mastered the use of data generated from smart, connected products (Figure 19)
Figure 19: Utilization of data from smart connected products to build actionable insights
93%
17% 24%
• They maintain digital continuity across product life cycle (Figure 20).
Figure 20: Digital continuity and coordination among various facets
97% 98% 99%
59% 62% 62% 65% 60% 64%
Co-ordinate various disciplines of Co-ordinate various functions Co-ordinate the different stages
engineering of product development

Successful organizations have a vision and roadmap for product innovation and engineering
We found that 92% of successful organizations have not only created a digital vision, but also have a roadmap to monitor
progress. We noticed a stark difference in priorities between the successful and the rest. For instance, 28% of the rest want to
continue to sell legacy products in the next few years, but this drops to 17% for successful organizations (see Figure 21).
Figure 21: Successful Organizations have a clear vision and ensure to communicate these ambitions
92% 95%
72%
63% 62%
53%
28%
17%
Created a digital vision Communicated Continue to sell Hybrid

and a detailed roadmap digital ambition at all legacy products business-model with
levels, functions and products and
business units services
Successful Organizations The Rest
92% of successful
organizations have not only
created a digital vision, but
also have a roadmap to
monitor progress
21
Successful organizations make better have an open innovation strategy to tap into their external
use of the partner ecosystem network (see Figure 22).
• They back their strategy with effective program
These organizations value the contribution of their partner management: 95% of successful organization constantly
ecosystem and are set up to collaborate and drive value. While track the progress of external collaboration initiatives (see
87% of successful organizations said they are prepared for an Figure 22).
open and collaborative ecosystem, this drops to 66% for the
rest (see Figure 22). There are number of reasons why they are Ecosystem partners play a leading role for successful
well prepared: organizations, with 90% acknowledging that partners
contributed significantly to the overall value of product/
• They provide the right environment for external partners to services portfolio. This compares to 49% for the rest of
contribute. We found that 86% of successful organizations the organizations.
have a formal program for external collaboration compared
to 51% for the rest. And 60% of successful organizations
Figure 22: Successful Organizations are more collaborative with their external environment
95%
86% 87%
65% 66%
60%
51%
19%
Open innovation strategy Instituted a formal We have KPIs to Prepared for an

to leverage external program to partner measure the progress open and
ecosystem with the external of our external collaborative
ecosystem collaboration ecosystem
initiatives
Successful organizations invest more in digital tools organizations are using digital twin capabilities at scale,
while only 13% of the rest are. Successful organizations are
Successful organizations are likely to invest more in digital also ahead in terms of deploying and using IoT platforms
technologies. For instance, as a percentage of revenue, they for generating new service-based revenues and providing
have apportioned a higher budget to spend on end-to-end feedback to the product design and development process (see
PLM platforms and digital solutions in the next three years – Figure 24).
10% more than the rest (see Figure 23).
In 2017, Airbus launched an IoT platform – Skywise – that
Our results indicate that the successful organizations are centralizes datasets sourced from both aircraft, maintenance,
also using a variety of digital technologies at scale compared and information systems. The platform is hosted on a secure
to the rest of the sample. For example, 45% of successful cloud infrastructure and comes with advanced predictive

Figure 23: Investment in end-to-end PLM and digital solutions as a percentage of revenue
3.8%
10%
3.5%
The Rest Successful

Organizations
Figure 24: Digital technologies implemented at scale by organizational category
52% 53%
47%
43% 45%
20%
14%
13%
Digital Twin Functional IoT Platforms Data continuity

simulation platforms along with enabling
for requirements tools like Digital
validations mock-ups
23
analytics capabilities, and aircraft connectivity. The platform Successful organizations build capabilities in new skill areas
serves two objectives:
Successful organizations have already begun to invest in the
• Making its customers’ operations more efficient and digital skillsets required for engineering transformation.
productive by reducing maintenance costs and preventing “We are pursuing improvements on all the man-machine
breakdowns. interfaces and the software technologies, which we believe is
• Feeding back into the design of the next generation of a key element to the future,” says a senior executive, Product
cabins and aircraft for the company.4 Development and Production, Thales. Training will be critical
to build key skills. “We assess the competencies of our staff
The platform has already been adopted by several airlines, very frequently and identify digital skills where we lack basic
including Delta, JetBlue, AirAsia, and Emirates. Some of the competency,” says Jan Willem Ruisch, senior director - head
early results are also encouraging. For instance, Emirates has of Product Management at Signify (formerly Philips Lighting).
seen a one percent improvement in operational reliability by “We have training programs to get them back on track or to
using the platform.5 get them where they want.”
Compared to the rest, successful organizations are more likely

to have the new skills needed for transformation (see Figure
25).
Figure 25: Breakdown of actions manufacturers are taking to promote innovation culture
88%
Product-based service development
60%
Apps design to digitalize 61%

development processes 48%
54%
Artificial intelligence
40%
68%
Data analytics
54%
73%
Data management
54%
72%
Cybersecurity
60%
73%
Connectivity and network management
52%
74%
Human-machine-interface (HMI) design
48%
71%
Embedded software design
46%

Successful organizations create a culture (see Figure 26). They are able to do this using tools and
of experimentation and agility empowering employees to contribute their ideas. For
example, at 3M, technical as well as non-technical employees
Successful organizations recognize the importance of culture are encouraged to come up with creative ideas during
in driving successful transformation and have focused on their normal working hours. Irrespective of departments,
cultivating agility, flexibility and innovation. For instance, employees are encouraged to devote up to 15% percent
almost all of them have a rapid product development process of their working hours to independent projects.6 Using this
based on customer feedback (see Figure 26). approach, the company creates a pool of practical ideas that
are then adequately resourced to develop into a commercial
As product lifecycles shrink with higher frequency of proposition. The company boasts of more than 100,000
product upgrades, rapid prototyping of new ideas is patents, many of which are attributed to its 15 percent
a necessity. Successful organizations also lead in their program.7
ability to experiment, develop and test prototypes quickly
Figure 26: Successful organizations are more innovative and agile compared to the rest
98% 95% 97%
62% 63%
61%
Tests and implements promising product Rapid and iterative product Adapts its structure
development ideas quickly as prototypes development process based on dynamically to market
using digital simulation tools customer feedback changes
25
How to overcome the challenges
on the road to transformation
Engineering transformation is a major endeavor and comes with significant challenges. “First, you must overcome the challenge
of balancing short-term priorities against long-term priorities,” explains a senior executive in a global medical devices company.
“Then you must clarify the goal of where you want to be. This needs to be followed by a detailed roadmap to get there. You also
need to find the people who can execute it. So, transforming engineering is not that easy actually.”
The transformation roadmap will vary depending on the maturity of individual organizations. But, in our research, we found that
manufacturers fell broadly into four camps:
1. The Front-Runners – 17%

2. Challengers – 16%
3. Pacers – 17%
4. Novices – 50%.
The transformation roadmap: defining the four groups

To understand the maturity of manufacturers as they tackle product innovation and engineering
transformation, we assessed them against six criteria. These represent core transformation capabilities
(such as software and IT capabilities) and transformation enablers (such as vision and leadership). The six
areas are:
• Digital ecosystem: working closely with start-ups and partners across boundaries, both around products
and services
• Vision, leadership and transformation plan: clearly articulating the transformation vision, getting
leadership backing, and communicating the vision across all levels of the organization
• Digital culture: having a digital culture of openness, experimentation, flexibility, agility, and collaboration
• Smart, connected products (software and IT capabilities): having the right set/balance of capabilities to
take full advantage of the smart, connected product and services revolution
• Digital continuity: using tools and methodologies to ensure digital continuity across the entire product
lifecycle
• Voice of product: being well equipped to take full advantage of usage data from smart, connected
products.
We found that high levels of maturity are rare. Only 17% of manufacturers – the Front-Runners – have made
substantial progress across all the six dimensions (see Figure 27 below). A large number of manufacturers
(50%) are Novices and have made little progress in terms of capabilities or transformation enablers. Refer
to the Appendix A at the end of the report for more on the segmentation approach and description of each
cohorts.

Figure 27: Performance on six dimensions of engineering transformation maturity
Digital Continuity
66%
43%
28% 65%
Digital Culture 66% 18% Smart, connected products
55% 32% 67% (Software and IT Capabilities)
26% 30%
18%
28%
56% 34%
66%
100% Voice of Products
94%
Vision, leadership and 95%
transformation plan 96%
54%
99%
75%
98%
Digital ecosystem
Front-runners
Challengers
Pacers
Novices
Below, we explore how each of the three categories can look to emulate the achievements of the most mature group – the
Front-Runners.
“Novices” need a clear vision, strong leadership capability, and a focus on bridging gaps in both technology and talent
Novices lag on multiple fronts: leadership capability to lead and execute transformation, tools to enable digital continuity,
and advanced analytics capability to make better use of product data. They also lack the talent in new digital technologies (AI,
cybersecurity, apps design) and the ability to build new service-based businesses models. Over half (51%) also admit that they
do not have clear transformation vision. In comparison, 97% of Front-Runners said that they have a digital vision with detailed
roadmap and clear milestones.
27
“Novices” will need to take the following steps:
• Establish a compelling vision that provides the

enterprise and its people with clear direction. For
example, the leading consumer electronics and home
appliances company in Asia, Haier, has set a vision to
transform itself from a traditional home appliances
manufacturer to a smart connected home solution
provider.8 Its vision is to turn an entire household in one
connected system,9 providing comprehensive solutions for
air, water, clothes care, security, voice control, health, and
information. In line with this ambition, Haier has developed
an IoT platform called U+ which manages communications
between consumers, third-party services, and all the
connected devices in the home, regardless of whether Haier
made them. The platform already supports more than 100
different brands of connected devices.10 To further advance
Novices will need to establish a this vision to external collaboration, Haier has setup the
compelling vision that provides the Haier Open Partnership Ecosystem (HOPE) program.11
enterprise with a clear direction • Ensure that their leaders strike a balance between
technology and operations knowhow, as well as
business and leadership acumen. Two-thirds admitted
that their leadership lack the capability to lead and execute
transformation initiatives. Strong understanding of IT –
particularly in the areas of agile development, DevOps
capabilities, digital twins, advanced PLM features, and IoT
platforms – will help leaders align technology initiatives to
transformation priorities. Equally important is to inspire a
culture of innovation and collaborate with a broader Make
investments in areas such digital twin, virtual simulation,
and IoT platforms to enable seamless digital continuity. As
demonstrated above, successful organizations are already
deriving a value from their digital technology investments.
• Make investments in areas such digital twin, virtual

simulation, and IoT platforms to enable seamless
digital continuity. As demonstrated above, successful
organizations are already deriving a value from their digital
technology investments.
• Address gaps in the IT/software skills needed for

smart, connected products development – 86% do
not have the sufficient availability for data management,
95% for app design, and 94% for artificial intelligence.
They will need to hire experts from outside in application
engineering, systems integration, data management,
AI, cybersecurity, and software design. But, hiring from
outside alone will not be enough to fill all the talent gaps
at once. Current employees will need training in new digital
technologies and tools and the new collaborative ways
of working.

“Pacers” need to focus on building a partner ecosystem • Engage properly with partners and suppliers to drive
and a digital culture value from the partner ecosystem. We found that
only half of Pacers said external partners contributed
Pacers are making progress on several fronts: using digital significantly to their overall product and services portfolio.
technologies to promote digital continuity, making better For Front-Runners, it is 90%. Launching formal partner
use of product data, and building IT talent to support a smart, collaboration programs to better integrate suppliers and
connected products strategy. partners can drive better engagement.
However, they are lagging in terms of developing a digital For example, Samsung has recently launched an end-to-end
culture of innovation and agility – one of the critical pillars collaboration program – SAFE – to create design solution
for transformation. Only 60% implement and test innovative from conception to manufacturing. Through this program,
product ideas compared to 96% of Front-Runners. They are Samsung works with its customers (OEMs), semi-conductor
also not able to fully leverage the partner ecosystem for design companies and start-ups to deliver competitive and
product innovation and development. robust design solutions15.
A number of initiatives can help address this shortfall:
• Engage employees in the culture change journey.

Only 56% clearly communicate their digital vision to
employees compared to nearly all front-runners. Clearly
communicating on new ways of working and behaviors –
such as creative problem solving and design thinking – is
also vital.
The leading automotive manufacturer, Diamler, designed

a program called DigitalLife@Daimler to support its vision
of transforming from an automobile company to a mobility
services provider.12 The program aims to better engage its
employees and ignite an innovative and open culture in the
organization. This is done through a series of events, from
hackathons to roadshows. For example, Diamler organizes
workshops to create an environment where employees
from all over the organization can come together to
collectively brainstorm new products and services
ideas. The DigitalLife@Diamler program also promotes
collaboration and sharing of ideas among employees
though a social intranet platform.13
• Set up innovation labs to spark culture change.

For example, Caterpillar has set up a Data Innovation Labs
to engage university students to solve real problems. These
labs bring together resources from diverse fields such
as engineering, computer science, operations research,
and statistics, to drive innovative development through
advanced data analysis. The labs provide an innovative
agile project management and for university students to
collaborate with Caterpillar’s internal analytics team and
start-ups to execute projects.14
29
“Challengers” must develop talent and build on data • Build and retain the talent pool needed to exploit
competencies the opportunities presented by smart, connected
products. Expertise in software, systems integration, HMI,
Challengers are more likely to have a clear transformation data analytics, AI, and cyber security is a crucial driver of
vision and roadmap, and the leadership capability to execute transformation. Challengers can take inspiration from the
on it. They are also able to inject a culture of innovation and strategies of Front-Runners for bridging the skill gap:
collaboration as well as derive better value from their partner
ecosystem. –– Develop in-house talent by focusing on training and
development, which Front-Runners use for human-
However, their progress is slowed down by lack of digital machine interface design and data analytics
continuity, absence of digital skills to capitalize on servitization –– Add new talent through merger and acquisition, which
opportunities, and ability to optimally use data from smart, Front-Runners do for system engineering
connected products (only 12% of Challengers use data to build –– Involve start-ups where there is acute skills gap, which
actionable insights compared to 60% of Front-Runners). Front-Runners use for artificial intelligence and product-
based service development.
A number of steps will be critical:
• Build expertise in managing usage data to maximize

the revenue opportunities of a service-based business
model. Given the growing volume and complexity of
data, it is no longer feasible for each function, including
engineering, to build its own analytics capability to manage
data. Many companies are creating dedicated Centers of
Excellence for data analytics. These CoEs consolidate data
management and analytics and are responsible for making
insights available across functions. For example, Ford
created a centralized data science team called the Global
Data Insights and Analytics (GDIA) unit to drive optimized
data driven decision making across the organization – from
engineering to production to supply chain and customer
service. One of the core objective of the unit is to better
understand customers’ preferences and usage of connected
cars to guide future service-driven strategy16.

Research Methodology
Quantitative survey
We surveyed 1,000 senior executives from global manufacturing organizations across nine countries. Segments included
automotive and transportation, aerospace and defense, industrial manufacturing, industrial and agricultural equipment, high-
tech, and medical devices. Of the organizations, 62% had global revenues greater than $2 billion.
Split of manufacturing organizations by country
Italy
6%
India
10%
China
10% 40%
United States
Sweden 2%
4%
Netherlands
11%
Germany
9% 9%
France United Kingdom
Source: Capgemini Transformation Institute, Digital Engineering Survey, April–May 2018 (N = 1013). Percentages may not
total 100 due to rounding. 31
Split of manufacturing organizations by sector
Medical devices Automotive and

Transportation
6%
15%
Aerospace and
Defense
7%
High Tech
(Semiconductor/
Electronics), 30%
5% Industrial
37% Manufacturing
Industrial and
agricultural
equipment
Source: Capgemini Transformation Institute, Digital Engineering Survey, April–May 2018 (N = 1013).
Split of manufacturing organizations by revenues
More than $10

billion
8%
$5 billion - $10
billion $1 billion - $2
19% 38%
billion
34%
$2 billion - $5
billion
Source: Capgemini Transformation Institute, Digital Engineering Survey, April–May 2018 (N = 1013). Percentages may not total
100 due to rounding.
Focus Interviews
In addition to the quantitative survey, we held in-depth discussions with nine senior executives from leading companies
across the world. The aim was to understand the approach each organization took to engineering and product innovation
transformation, including their vision and objectives.

Appendix A
Engineering and product innovation transformation maturity

We assessed maturity against six criteria. These represent core transformation capabilities (such as IT
capabilities) and transformation enablers (such as vision and leadership).
The six areas are:
• Digital ecosystem: working closely with start-ups and partners across boundaries, both around products
and services
• Vision, leadership and transformation plan: clearly articulating the transformation vision, getting
leadership backing and communicating the vision across all levels of the organization
• Digital Culture: having a digital culture of openness, experimentation, flexibility, agility, and collaboration
• Smart, connected products (software and IT capabilities): having the right set/balance of capabilities to
take full advantage of the smart, connected product and services revolution.
• Digital continuity: using tools and methodologies to ensure digital continuity across the entire product
lifecycle
• Voice of product: well equipped to take full advantage of “usage data” from smart, connected products.
This assessment segments organizations into four groups, ranging from “Front-Runners” to “Novices.”
Product innovation and engineering transformation maturity matrix
High 16% 17%
Low 50% 17%
Low Transformation enablers High
Novices Pacers Front-Runners Challengers
33
Detailed description of each of the four groups are as below:
• Front-Runners: Only 17% of companies are what we call Front-Runners, which are those firms that score high on core
transformation capabilities and transformation enablers. They are at an advanced stage in building data capabilities,
narrowing digital talent gaps, and creating efficient processes. Front-Runners also have a strong foundation of vision,
leadership and culture.
• Pacers score well on transformation enablers but fall short on transformation capabilities. Their lower scale of digital
technologies and data usage and higher levels of digital discontinuity limits the progress on transformation.
• Challengers score high on transformation capabilities but fall short on transformation enablers. This group has progressed on
using digital technologies in engineering and product innovation and maintaining digital continuity across various functions
and engineering disciplines. However, this effort lacks a clear vision, leadership, digital culture traits and a partner ecosystem
to progress meaningfully in their transformation journey.
• Novices score low on both transformation enablers and transformation capabilities.

References
1. Statista, “Percentage of global R&D spending by industry.”
2. For a measure on innovation we have used the Forbes list of The World’s Most Innovative Companies.
This list has two major criteria for selection: 1. A minimum of seven years of public financial data should be
available; 2. More than USD $10 billion of market capital.
3. Autoliv Press Release, “Autoliv Today Announced That Their New Electronics Spin-off Company Will be Named
Veoneer,” February 2018.
4. Airbus website, “Airbus’ open aviation data platform Skywise continues to gain market traction,” February 2018.
5. Forbes, “Airbus Gets A Step Closer To The Holy Grail Of Big Data And Plane Connectivity,” July 2017.
6. 3M Website, “Century of Innovation Book.”
7. 3M Press Release, “3M Celebrates Innovation Milestone: Receives 100,000th Patent,” May 2014.
8. Haier Website, “Zhang Ruimin Discusses IoT and Life X.0,” January 2018,
9. The Economist, “Haier and Higher,” October 2013.
10. Brand Channel “Haier Unveils Its Vision for the Connected Smart Home,” March 2018
11. London School of Economics and Political Science – Case study, “Aiming Haier,” May 2017.
12. Daimler website, “DigitalLife@Daimler – Digital Transformation.”
13. Daimler Blog, “DigitalLife netWorkCamp: How Daimler works in a digital future.”
14. Caterpillar Website, “Data Innovation Lab.”
15. Samsung website, “Samsung Strengthens its Foundry Customer Support with New SAFE™ Foundry Ecosystem
Program.” January 2018
16. ZDNet, “How Ford democratizes the use of data throughout the enterprise,” June 2017.
35
About the Authors
Jean-Pierre Petit Jerome Buvat

Group leader for Digital Manufacturing, Capgemini Global Head of Research and Head,
[email protected] Capgemini Digital Transformation Institute
Jean-Pierre is the Capgemini Group leader for [email protected]
Digital Manufacturing. He earlier managed the Jerome is head of Capgemini’s Digital
Manufacturing, Distribution, Retail and Energy- Transformation Institute. He works closely
Utilities sectors and was nominated deputy Chief with industry leaders and academics to help
Executive Officer of our technology Services in organizations understand the nature and impact of
France, in January 2013. He was appointed Chief digital disruptions.
Executive Officer of Sogeti High Tech in 2015. His
main mission was to develop the Sogeti High Tech
Engineering and digital manufacturing presence
within large companies. Jean-Pierre Petit is a
SUPELEC graduate and started his career in 1984 as Udo Lange
a consultant within Andersen Consulting. He joined
Vice President, Engineering & Product Excellence
the Sagem Group in 1993 heading the R&D and cable
[email protected]
manufacturing activities.
Udo is the head of Engineering & Product Excellence
(EPX). With more than 18 years of consulting and
5 years of industry-experience he is together
with his team supporting clients in realizing the
Digital Transformation in Engineering in discrete
Pascal Brosset
manufacturing industries. Leveraging technologies
EVP-CTO, Digital Manufacturing like PLM, AR/VR, IoT, Analytics we support clients
[email protected] to improve efficiency and innovation speed while
Pascal BROSSET is the global CTO and North realizing the Digital Twin and introducing agile
America leader for Capgemini’s Digital development methodologies.
Manufacturing services. He has 30 years of
experience including a seven-year stint as a Group
CTO with Schneider Electric and ten years with SAP
AG as a Chief Strategy Officer. At Capgemini, Pascal
is responsible for orchestrating and developing the
company’s strategy and portfolio of solutions for Michel Guiga
the Industry 4.0/IIoT/Digital Manufacturing market Vice-President, Engineering & Technology,
and organizing the go-to market for the related Capgemini Consulting
solutions. [email protected]
Michel Guiga oversees the development of the
automotive sector at Capgemini Consulting France.
He has, in particular, an extensive experience of
engineering and digital solutions for R&D.
Jacques Bacry
Vice President, PLM Group Leader
[email protected]
Jacques Bacry has more than 30 years of Dana Nickerson
international experience in digital transformations, Director, PLM North America
research, service and consulting. His specialty [email protected]
is software factory implementation, PLM
architecture and solution, 3D virtualization and Dana is a director at Capgemini leading the North
Artificial Intelligence. He is also credited as one America PLM team. As one of the pioneers of CAD/
of the inventors of the V5 architecture of the CAM software, Mr. Nickerson recognized that
object model and features platform of CATIA. At companies needed way to build CAD models into
Capgemini Jacques leads PLM division of Digital assemblies. This lead to his journey as one of the
Manufacturing TLI and helps in PLM strategy and early PLM architects and developed many of the
Business Development. Prior to Capgemini, Jacques PLM strategies used by companies for large scale
headed Keonys Group as CEO which is a spin off PLM deployment. He is an entrepreneur of several
from Dassault Systèmes. His education incudes startups, been an IT and Engineering Director
graduation in Computer Science from university, and management consultant. He developed a
specialized in Artificial Intelligence. unique approach to transitioning PLM into digital
realization. His digital realization projects have
generated billions of dollars in free cash flow.
Alexandre Capone Kunal Kar
Senior Manager Manager, Capgemini Digital Transformation
[email protected] Institute
Alexandre is a recent addition to the Capgemini [email protected]
Industry 4.0, Digital Manufacturing, PLM and Kunal is a manager at Capgemini’s Digital
AI Team. Previously at Tesla, he has played an transformation institute. He tracks the impact of
important role in driving Digital Manufacturing digital technologies on the financial sector and helps
and PLM implementation using the 3DExperience clients on their digital transformation journey.
platform.
With over twenty years of being involved in all

aspects of the Engineering and Manufacturing
processes, Alexandre continues to share his vision
of the symbiotic relationship of each step of the
process from concept to product delivery.
Sumit Cherian
Senior Consultant, Capgemini Digital Transformation
Institute
[email protected]
Sumit is a senior consultant at Capgemini’s Digital
Transformation Institute. He is an avid follower of
industry innovations and how digital technologies
disrupt the business landscape.
The authors would like to especially thank Subrahmanyam KVJ and Shahul Nath from the Capgemini Digital Transformation
Institute for their contribution to this report. The authors would also like to thank Shashank Hegde and Vivek Jain from
Capgemini Consulting India, Jörg Wahler and René Piper from Capgemini Consulting Germany, Nils Svensson and Daniel
Granlycke from Capgemini Sweden, Ram Walvekar, Atul R Kurani and Ashutosh Pavaskar from Capgemini India, Paul Saunders
and Nigel Thomas from Capgemini UK, Nicolas Croue, Roshan Gya, Yann Germain and Frank Pacou from Capgemini France.
Digital Transformation Institute

The Digital Transformation Institute is Capgemini’s in-house think-tank on all things
digital. The Institute publishes research on the impact of digital technologies on large
Digital traditional businesses. The team draws on the worldwide network of Capgemini
experts and works closely with academic and technology partners. The Institute has
Transformation dedicated research centers in the United Kingdom, United States and India.
Institute
[email protected]
37
Discover more about our recent research on digital transformation
Cybersecurity: The New Automotive Smart Factories: Unlocking the

Source of Competitive Putting automotive manufacturers business value of IoT
Advantage for Retailers in the digitalindustrial revolution in operations
driving seat
Digital Transformation Turning AI into concrete Smart Factories: How can

Review 11: Artificial value: the successful manufacturers realize the
Intelligence Decoded implementers’ toolkit potential of digital industrial
revolution
The Digital Utility Plant: Going Big: Why Seizing the GDPR Advantage:
Unlocking value from the Companies Need to From mandate to high-value
digitization of production Focus on Operational opportunity
Analytics

For more information, please contact:
Global
Pascal Brosset
[email protected]
Jacques Bacry
[email protected]
Markus Rossmann
[email protected]
UK North America
Guy Williamson Oz Dealy

[email protected] [email protected]
Nigel Thomas Netherlands

[email protected]
Han Konings
[email protected]
France
Pradipto Basu
Nicolas Croue [email protected]
[email protected]
Italy
Yves Pelissier
[email protected] Michaela Cotich
[email protected]
Spain
Nordics
David Oliva
[email protected] Daniel Granlykke
[email protected]
Juan Cogolludo
[email protected] Håkan Erander
[email protected]
Germany
Jochen Bechtold
[email protected]
Simon Pilhar
[email protected]
39
About
Capgemini
A global leader in consulting, technology services and digital
transformation, Capgemini is at the forefront of innovation to
address the entire breadth of clients’ opportunities in the evolving
world of cloud, digital and platforms. Building on its strong 50-year
heritage and deep industry-specific expertise, Capgemini enables
organizations to realize their business ambitions through an array
of services from strategy to operations. Capgemini is driven by
the conviction that the business value of technology comes from
and through people. It is a multicultural company of 200,000 team
members in over 40 countries. The Group reported 2017 global
revenues of EUR 12.8 billion.
Visit us at
www.capgemini.com
MACS CS AP 20180622
The information contained in this document is proprietary. ©2018 Capgemini.

All rights reserved.

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Digital Engineering

The new growth engine

Digital By Capgemini Digital Transformation Institute

* Digital Twin is the digital representation of the “current state” of

2 Digital Engineering: The new growth engine for discrete manufacturers

Global Average 66%

Aerospace and Defense 76%

Automotive and Transportation 68%

Industrial Manufacturing 66%

High Tech (Semiconductor/Electronics) 65%

Medical devices 62%

Industrial and agricultural equipment 58%

4 Digital Engineering: The new growth engine for discrete manufacturers

Figure 2: Key challenges in maintaining digital continutiy

59% 57% 57%

2. Capitalizing on the servitization opportunity require enhanced capabilities

Figure 3: Percentage of products that are smart, connected

2014 2017 2020

6 Digital Engineering: The new growth engine for discrete manufacturers

Factors used for estimation Conservative Optimistic

A. % Smart, connected products in the portfolio -2017 35% 35%

B. % Smart, connected products in the portfolio -2020 51% 67%

C. Incremental revenue increase for every 1% increase in 0.47 0.51

D. Cumulative revenue growth rate for manufacturing 7.52% 16.22%

E. Estimated CAGR for incremental revenue from smart, 2.45% 5.14%

G. Average annual contribution (2017–2020) $172.9 billion $ 228.5 billion

H. As a % of manufacturing (value added) for survey 6.63% 8.76%

Stop selling products and shift

Figure 5: Top 3 trends affecting businesses of manufacturing firms

1 Maintaining digital continuity

2 Software and IT as an integral part of products

3 Shift from product to service-based business models

8 Digital Engineering: The new growth engine for discrete manufacturers

Global Average 56%

Aerospace and Defense 61%

Medical devices 60%

High Tech (Semiconductor/Electronics) 58%

Automotive and Transportation 57%

Industrial and agricultural equipment 54%

Industrial Manufacturing and Automation 53%

Figure 7: Current state of transformation of product development and engineering function

Building a roadmap for

10 Digital Engineering: The new growth engine for discrete manufacturers

Figure 8: PLM Features and tools used by manufacturing organisations at scale

Collaborative product development 54%

Data continuity along with enabling tools

Model-based system engineering 10%

Virtual simulation (mono and 10%

Accelerating platforming and 7%

Figure 9: Different stages of Digital Twin implementation by manufacturers

Figure 10: Organizations leveraging artificial intelligence in the following areas

New product Incremental Product Product Product

56% of manufacturers agree

Manufacturers are struggling to tap data from

12 Digital Engineering: The new growth engine for discrete manufacturers

Using data to Assessing the types of

27% Currently using

Early stages of 31%

“We collect various types