Digital transformation in selected industries

By Dimitris Panopoulos*

The 2018 Digital Transformation Scoreboard survey focused on two industries – food and construction – that are essential to Europe’s economy and in which SMEs constitute a large share of added value and employment at EU level. 

Yet, and as illustrated by the survey/s results, these two industries are still lagging behind in terms of digital transformation.

Efforts still need to be made regarding the widespread deployment of digital tools and platforms and management capabilities in these industries. This is especially critical in light of the profound impact that the advent of digital technologies has already in these industries, which will only increase with the penetration of new and disruptive technologies. 

This article presents key insights into the impact of new digital technologies on these two industries and the directions needed to be taken to shape their different stakeholders’ response to emerging digital challenges and opportunities faced by their leaders.

The omnipresence of digital technologies: an opportunity for EU companies

The digital age and the omnipresence of digital interactions and connectedness open doors to a multitude of business opportunities for European companies. According to the results of the survey, 89.3% of companies state that they are fully aware of the new prospects brought about by the digital revolution.

A further breakdown of this result by industry reveals that 91.3% of business leaders in the construction industry say they are aware of the potential of digital technologies, while in the food industry the awareness rate is slightly lower at 88%, indicating that the construction industry is more ready to engage in its digital transformation.

EU companies perceive new digital technologies as an opportunity and not a threat

Digital transformation does not happen on its own. Being aware of the benefits of digital technologies is not enough and cannot serve as an indication of a firm’s ability to transform digital opportunities into concrete results.

The survey results show that 87% of companies in the construction industry state that they have already seen positive outcomes through digital technologies, while the share is slightly lower in the food industry (81%).

 

Although it is impossible to determine whether these positive outcomes were generated by adopting one or more of the nine key technologies discussed in the relevant research or by adopting other technologies, this observation provides evidence as to the ability of European businesses in these two industries to take full advantage of the opportunities offered by digital technologies by translating them into tangible results. 

A slow digital adoption pace

The results of the 2018 survey show that the pace of digital adoption processes differs significantly across the two industries studied.

In the food and construction industries, European businesses aware of the importance of the digital economy have integrated specific digital technologies at different and variable rates, ranging from 1.7% in 3D printing to 42.4% in social media for the food industry, and from 9.5% in 3D printing to 31% in big data and analytics in the construction industry.

Digital transformation affects different functions in different industries

The adoption of digital technologies affects different business functions within companies. In general, CRM, operational marketing, and quality assurance are the most affected functions in the food industry, while in the construction industry these functions are mainly project management, IT programming, CRM, and operational marketing. 

These functions are not only oriented towards manufacturing and supply within businesses, but also towards their marketing strategies. Therefore, the digital transformation of businesses in these two industries affects not only key functions related to the demand side of the industry (e.g. CRM, operational marketing), but also key functions related to the supply side (e.g. IT programming and project management).

Different industries have different needs for digital technologies

Both the food and the construction industries have different needs in terms of key digital technologies, and the level of digital adoption depends greatly on these needs. 

The adoption of social media, cloud technologies, big data and analytics and the Internet of things is progressing rapidly, with between 25% and 45% of companies in the construction industry adopting these technologies, while in the case of the food industry, the key digital technologies adopted by more than 20% of the companies are social media, big data and analytics, and robotic and automated machinery. 

These differences in the adoption of key digital technologies indicate that different needs are prioritised in each industry. For instance, the need for robotic and automated machinery is higher in the food sector than in the construction sector due to the nature of the production processes in this industry. 

Interestingly, both industries adopt social media technologies at a high rate, which may imply that there is a greater need to engage with customers than to improve production processes; while on the contrary, in both industries, 3D printing technology is only adopted by a low percentage of firms in each industry, with a slight larger share in the construction industry.

Availability of digital skills

The lack of digital skills in the job market across Europe no longer seems to be an insurmountable obstacle to the uptake of digital technologies by the industry. It is common to see that even though only a fraction of companies have access to the right skills needed to engage in digital transformation, they can often outsource their digital work (e.g. produce a digital strategy and ensure its implementation), and therefore still access the appropriate skills required by the digital economy.

Digital skills are currently often perceived as assets with increased specific characteristics, and access is usually granted through outsourcing processes. As the digital transformation of the European industry advances over time, we can expect to observe insourcing trends, provided that the EU continues its efforts to implement policies and initiatives aiming at making it easier to upskill, reskill and train the population.

“It is not difficult to find people who have the digital profile we need. In addition, if some applications require more advanced digital skills, we can outsource them”. Emmanouil Karpadakis, Marketing Manager at Terra Creta (olive oil producing company, Greece)

“We are currently thinking about developing a digital strategy for our company. We are now looking to hire somebody who would lead us in our digital transformation, but we haven/t found this person yet as he/she should have not only expertise in digital technologies and strategies but also deep knowledge of our industry.” Dimitar Grigorov, Sales Director at EME AD(electric fitting elements and tool equipment producing company, Bulgaria)