Industrials

Keeping Businesses & People Moving

Drivers of Change

Industrials includes companies that provide industrial and commercial equipment and services, transportation, and distribution. The sector spans a wide range of areas including construction and farm machinery, automobiles, airlines, railroads, and waste management. All these areas are impacted to some degree by social, political, technological, economic and environmental influences. Of the five, technological change is having the most widespread and profound impact.

Automation, big data, artificial intelligence, machine learning and many other digital innovations are redefining the way products and services are created and delivered, as well as how producers and customers interact and labor markets evolve. Population growth is creating pressures on space, transportation, food and agriculture, and there are countless material needs that depend on industrial efficiency.

Key developments are taking place in the automobile and transportation sectors, where autonomous and electric vehicles, artificial intelligence and greater connectivity are certain to have far-reaching effects. Similarly, in manufacturing and machinery, the growth of automation and the relentless pace of digital innovation is transforming traditional patterns of supply and demand.

smart machine arm

Worldwide, industrials are undergoing a period of intense and rapid change. Today’s industrial revolution is founded on digital technology and requires continuous investment and R&D to ensure businesses remain competitive and relevant. Those who stand still will see their businesses eroded by more agile competitors.

Opportunities

The growth of big data and the rise of new and connected technologies, from artificial intelligence and machine learning through to robotics and the internet of things, is the biggest opportunity for those who can respond quickly to a changing marketplace and invest in the right physical and digital assets.

Firms that harness the latest data and digital techniques can improve process and supply-chain efficiency.

Firms that harness the latest data and digital techniques can improve process and supply-chain efficiency and focus more clearly on customer needs. This is likely to achieve gains in market share and produce better margins. Transportation is a growth industry for those who can develop a transportation-as-a-service approach, explore all the possibilities offered by autonomous cars and vehicle electrification, and reap the benefits of vehicle connectivity to create added value from internet-of-things data platforms. In agriculture, precision farming and smart techniques will help to maximize yields, while predictive maintenance is among the developments that will benefit equipment and machinery sectors.

Threats

Environmental pollution and climate change are ever-present concerns, as is the threat from cyberattacks.

New regulationsare always a challenge. Industrials must ensure their practices are compliant and transparent, which is increasingly onerous due to globalization and the growing connectivity between systems and supply chains. While technological progress is an imperative, companies must ensure they invest in the right areas and innovate in appropriate ways.

Remaining relevant and competitive requires the right strategic vision and technology choices. For example, original equipment manufacturers may make bad decisions that have widespread repercussions. Environmental pollution and climate change are ever-present concerns, as is the threat from cyberattacks. Data and system security will remain a priority as technology evolves.

Strategic Imperatives for Success

Success depends on delivering what the market needs when it needs it and how it needs it – and of course at an acceptable margin. More than ever that requires appropriate technology to stay competitive or, ideally, one step ahead of the competition. Businesses that are not technologically agile and forward-looking, that lack a long-term strategic vision, will see their markets wither or disappear altogether.

Continued investment and R&D is fundamental to exploit the benefits of everything from big data to artificial intelligence and robotics. At the same time, cost control must be balanced with innovation and capital expenditure. Other considerations for industrials include urbanization and demographic changes such as population growth and people living longer, all of which must inform business planning. Collaboration is also a necessity, as businesses must form partnerships and consider mergers and acquisitions to achieve greater market strength and the right strategic direction.

Industrials: Up Close

Common trends can be seen across geographies and sectors, with technological progress a key success factor in the run up to 2025 and beyond.

Stay Informed

From insight to action, the path to the future starts here. Subscribe for further outlooks from our RBC Imagine platform, and explore our latest thinking on the pivotal ideas of tomorrow.