Skip to content
Northern Powerhouse European Union

How can industrial companies respond to the challenge of digitalisation?

A new insight report suggests that businesses must become agile, reconsider their business model and consider financial planning in order to embrace digitalisation.

A new report from McKinsey and Company recommends strategies from industrial executives on how traditional manufacturing and engineering firms can respond to the challenge of Industrial Digitalisation. 

The report, which surveyed over 300 executives from industrial sectors including automotive and aerospace, identified three challenges which businesses must overcome: understanding and embracing new technologies; a change to the core principles of the industrial sectors and a new approach to business modelling and talent acquisition. 

New technologies

Those questioned highlighted five considerations which could impact business performance: connectivity-driven business models, AI, the Internet of Things, electrification and cybersecurity. However, many identified a gap between potential impact and business readiness. 

The research found that start-ups considered themselves more prepared than established firms and felt better equipped to adapt. 

The changing landscape

The research found that industrial firms need greater understanding of the speed of change, more collaborative approaches and a change to the workforce. This could see revenue shift from products to new streams such as servitization and software, competitors to win business coming from start-ups or the tech sector, and an impact on staff who currently perform processes which could be automated.

Business model and collaboration

Contributors suggested that more connected business models would become more important, with pay-per-use, data-monitization, and subscription models emerging as the more prominent models.

Participants also suggested that collaboration will be key, with successful businesses forming an ecosystem of manufacturers, suppliers and service providers. This could include working with competitors. 


In the US, the automotive sector alone requires over 100,000 software engineers by 2030 to cope with the increased complexity of vehicle software. One contributor said: 

“We have to change from a mechanical-gear-cutting company to a technical and analytical company."

Respondants agreed that businesses need to be agile in order to meet these challenges, and be bold in their financial planning to manage it, and consider business culture as the biggest challenge itself. One executive said: 

“The issue is not the organizational model; the issue is people and mind-sets."

Read the report summary on McKinsey and Company's website, or download the full report here

Share this post