ROI on AI investments could take up to 5 years, 56% of manufacturing CEOs say

Cyberattacks and other threats are leading global manufacturing CEOs to fall behind on innovation, according to a KPMG report.

Understanding digital transformation in manufacturing

Manufacturers worldwide are looking to digital transformation projects and technologies like artificial intelligence (AI) to increase efficiencies and avoid disruption from industry newcomers. However, only two-thirds of global manufacturing CEOs said they are confident that their companies are keeping pace with technology disruption and innovation, according to a Monday report from KPMG. And 34% said they are struggling to keep pace with innovation at all.

KPMG surveyed 299 global manufacturing CEOs, and another 73 from the US. The report found significant differences between the US's reported innovation tactics and the rest of the world. Only 23% of US CEOs said they feel lead times to achieve significant progress on transformation seem "overwhelming," compared to 71% of global CEOs. And 85% of US CEOs said their organizations are actively disrupting their sector, compared to 53% of those globally.

"Manufacturers are facing an unprecedented convergence of tech-driven change," Doug Gates, KPMG's global chair of manufacturing, said in a press release. "While some CEOs are expressing greater confidence in their innovation journey, it's clear all CEOs recognize a failure to adopt and implement new technologies will leave their organizations at a competitive disadvantage."

SEE: IT leader's guide to achieving digital transformation (Tech Pro Research)

Manufacturers are increasingly adopting collaborative robots to work alongside humans to increase efficiency, according to a 2017 report from ABI Research: At that time, 13% of manufacturing companies had collaborative systems in operation, and another 15% said they plan to have these collaborative robots at work within the next year.

However, it may be some time before companies see the ROI on these investments, according to the KPMG report: 56% of global CEOs expect it will take between three to five years to see a significant ROI on AI systems, compared to 34% of US CEOs.

Workers should not fear for their job just yet. Many experts predict that robots will continue to complement human workers, and free their time to perform higher-level tasks, rather than completely replace them. However, some reports predict that half of low-skilled US jobs are at risk of being replaced by automation in the future.

In terms of general digital transformation efforts, 59% of global CEOs said they expect it will take one to three years to see a significant ROI on those projects, compared to 40% of US CEOs, according to the report.

When asked about the greatest risk to their organizations' growth, the majority (63%) of US CEOs cited operational risks, while the majority of global CEOs (55%) cited a return to territorialism (such as the US renegotiating NAFTA, and the UK leaving the EU).

More US CEOs (47%) fear that a cyberattack will stunt their company's growth than do their global peers (37%). When it comes to being a victim of a cyberattack, 63% of US CEOs said they feel it's a case of "when," rather than "if," compared to just 45% of global CEOs, the report found.

"Beyond the challenges of keeping pace with the various 'clockspeeds' of innovation, uncertainty abounds - whether that be regulatory, political or economic in nature," Brian Heckler, KPMG's national sector leader for industrial manufacturing, said in the release. "To succeed in this i4.0 manufacturing environment, CEOs must remain agile and determined in a landscape where the rules governing the industry are evolving."

The big takeaways for tech leaders:

  • 56% of global CEOs said they expect it will take between three to five years to see a significant ROI on AI systems, compared to 34% of US CEOs. -- KPMG, 2018
  • More than 9 in 10 US manufacturing CEOs said they are confident their companies are keeping pace with technology disruptions and innovation. -- KPMG, 2018

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