Will the lure of the past jeopardize the future of Industrials?

Industrials are braced for yet another revolution. At the beginning of a new decade, the sector is experiencing change at scale, from technology and trade to skills, sustainability and global health. Many of these market shifts are having a positive impact — placing Industrial companies at the forefront of dynamic developments and exciting innovations. Smart homes, autonomous vehicles, artificial intelligence, "circular" manufacturing and more, represent the future of society as well as industry.

But some will create significant commercial challenges and continuity issues in the immediate future – more business disruption than innovative disruptor. COVID-19 is already impacting Industrials around the world. In China there is uncertainty as to when production lines and factories will reopen in affected regions and how to manage congestion and backlog to imports and exports. Globally, construction companies have noted a lack of access to skilled personnel and contractors are at risk as the resultant delays will affect the time taken to complete projects. There are also examples of automotive plants and facilities being requisitioned for the production of respirators to treat COVID-19 patients.

Now more than ever Industrials’ ability to adapt to the rapidly changing environment will determine future success. Based on the views of 700 company leaders in six Industrial sub-sectors and across four major geographic regions, Baker McKenzie has identified those organizations that are best positioned to capitalize on change, and strategies to thrive through disruption.

The Baker McKenzie Industrial Change Barometer — an assessment of Industrials’ readiness for change — highlights both pockets of excellence and urgent areas to address. As Industrial organizations continue to understand and explore disruptive forces, and plan their response, we believe this report can be a guide to legal and commercial complexity and best practice. 

 

 

Key findings

  • Leaders of the largest Industrial companies are concerned about maintaining and protecting business performance in the face of disruption, struggle to balance innovation with core strengths, and lack agency over the direction of future change.
  • Increasing trade volatility, skills shortages and more stringent environmental mandates, as well as all-encompassing digitalization, are merging to put the long-term performance of the sector at risk
  • While high performing industrial organizations are positioning themselves for transformation, most of those in the sector are cautious. Many report concern that taking bold action could mean costly failure, and lack the talent and the structure to build and commercialize new revenue streams. As a result, some are slow to change.
  • Captains of industry continue to rely on the strategies that have delivered in the past, rather than pursuing future-facing routes to success — taking comfort in the familiar and looking "back to the future" for reassurance on performance.
  • Tied by ageing assets, cumbersome global footprints and entrenched market and shareholder expectations, companies in the sector have further to go to become ‘future-proof’ than their counterparts in other sectors.
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