What’s Holding Manufacturers Back from Investing in Digital Transformation?

The journey toward digital transformation is fraught with challenges for manufacturers.

“Given the huge investments manufacturers are making, the stakes are extremely high,” according to MIT Sloan Management Review. The right talent—with the necessary skills and knowledge—may also be slowing down investments.

Sikich and Manufacturing Dive recently surveyed leading industrial companies on the state of their digital transformation and the other factors holding them back from accelerating their journeys.

What’s Holding Back Manufacturers’ Digital Transformation?

Digital transformation offers tremendous potential for manufacturers to enhance efficiency, drive innovation, and achieve sustainable growth.

But Sikich and Manufacturing Dive found:

• 35% of executives name security concerns and cyber risks a primary roadblock to digital transformation.
• 48% lack a unified IT strategy.
• 47% faced challenges with interoperability.

One in four manufacturers say competitive pressures and market fluctuations keep them focused on anything but their own digital transformation.

Overcoming these hurdles will take an effort.

Barriers to Digital Transformation

Security Threats and Cyber Risks

One of the most significant barriers to digital transformation in manufacturing is the heightened risk of security threats and IT vulnerabilities. As manufacturers integrate more connected devices, sensors and systems into their operations, they also expand their attack surface.

Cybersecurity breaches can result in substantial financial losses, operational disruptions and damage to the corporate reputation. Many manufacturing systems were not originally designed with cybersecurity in mind, making them susceptible to attacks. To mitigate these risks, manufacturers must invest in robust cybersecurity measures, including regular vulnerability assessments, employee training, and the implementation of advanced security technologies.

Interoperability

Legacy IT systems have held back digital evolution. McKinsey predicted this nearly a half decade ago, forecasting that manufacturers could only achieve Industry 4.0 by upgrading up to 50% of their legacy tools.

The issue, according to our recent survey, is integration. Three of five executives surveyed say their engineering systems should (but may not) play well with the latest AI-driven tech tools, for example.

A retired manufacturing business and IT leader, Joe Piombino, told us: “Integration of engineering systems with ERP and MES as a key desire is spot on. In my experience, this is a critical requirement in ‘engineer-to-order’ environments, the importance of which is not always recognized.”

The Information Technology & Innovation Foundation (ITIF) recently touched on this issue as a sticking point for manufacturers seeking digital transformation:

“Machinery will need to be upgraded or replaced to accommodate IoT sensors and actuators, and new software and high-performance computing platforms will be needed to support advanced modeling and simulation as well as AI and analytics to leverage data to design and manufacture products more cost-effectively and sustainably. This imperative will become all the more pressing as existing U.S. manufacturing plants and equipment continues to age.”

The ability to quickly integrate new technologies allows manufacturers to stay agile and competitive in a rapidly changing market. At the same time, extending the life and functionality of legacy systems maximizes return on investment.

Lack of a Unified IT Strategy

The lack of a unified IT strategy can hinder digital transformation due to:

• Siloed systems. When disparate systems don’t communicate with each other, it prevents the integration of data – critical to digital transformation.
• Inefficient resource allocation. A team that doesn’t move in the same direction will result in duplication of efforts and wasted time, energy and budget.
• Security risks. Vulnerabilities appear when measures are inconsistent across an organization.
• Change management challenges. With no unified IT strategy, teams are often not on the same page – or are often working toward different goals, making change more difficult.

A Perfect Mix of Old and New

Sikich can help manufacturing companies achieve balance. Our experienced team can help you break down the barriers to digital transformation. Some of the key strategies include:

• Enabling different systems to communicate effectively.
• Ensuring that data formats and structures are consistent across systems. This may involve transforming legacy data to fit new formats.
• Establishing mechanisms for real-time data synchronization, which is critical for accurate decision-making and process control.
• Designing new technologies modularly so they can easily integrate with existing systems. This approach allows for incremental upgrades and reduces disruption.
• Creating flexible interfaces to connect with a range of legacy systems, ensuring broad compatibility.
• Implementing secure methods to protect sensitive information from cyber threats.
• Ensuring that legacy and new systems comply with industry standards and regulations to maintain quality and legal compliance.
• Developing scalable solutions, allowing for expansion and upgrades.
• Considering future technological trends and ensuring the framework can adapt to new advancements.

Talk with our team today about your digital transformation goals.