The automation industry is facing a variety of global challenges. While the demand for automation products and solutions is constantly rising, more and more companies from North America and Europe are facing increasing competition from Asia. At first glance, primarily the customers are benefiting from lower prices for the desired products. Many companies in the automation industry are therefore asking themselves which strategic initiatives they should prioritize to be successful in the medium and long term. How can companies ensure their competitiveness? And how can they differentiate themselves from the competition in the automation industry? Which levers promise the most significant influence on revenue and profitability? Which regional markets are desirable for revenue growth and investments in new production facilities? Do companies see their unique selling point more in their products or services? Which role does Artificial Intelligence play in the future of the automation industry?
Key insight #01
Expanding offering of value adding services is key aspect to grow in the future
The strengthening of especially pre-sales and sales service activities promise the greatest lever for revenue growth. In addition to the service expansion developing new industry applications is especially relevant for drive technology and electrical component companies, leveraging the potential of vertical integration.
What are the main measures to ensure top line growth?
Service
Continous product innovation
New industry application
Key insight #02
India takes place 3 directly after the home markets in terms of promising production locations
The companies have selected per majority their home region as the most important locations for their production investments. European companies invest in US and Canada, Eastern Europe, India, and China in addition. North America located companies focus additionally on Middle and South America, Southern and Eastern Europe do not play a role at all. China takes on average place 5.
Investments in production facilities – HQ in NA (light blue) and HQ in EU (dark blue)
US & Canada
Western Europe
India
Key insight #03
Family-owned companies are the most conservatives in terms of profitability, but still significantly above double digits!
Double digit target margins are considered necessary to further finance growth and business transformation activities. Private equity-owned companies have very ambitious margin goals while family-owned businesses are operating significantly more conservative. Family-owned companies are more likely to focus on improved long-term resilience.
What are the target profitability margins, by ownership structure?
| Privat equity-owned | Publicly-listed | Privately-owned | Family-owned |
Key insight #04
Process efficiency and process automation by far the most promising profitability driver
Increased efficiency and automation in all processes will drive profitability. Reduced manual effort and concentration on value-add activities also driving down the need for skilled labor. Economies of scale through bundling and or focusing of activities and or product variants is vital to increase competitiveness, especially smaller and mi sized companies can often gain from bunding and focusing. In recent years, the cost of materials and transport has risen massively. Measures to reduce costs, such as identifying new suppliers or optimizing deliveries, are therefore important for stabilizing profit margins and increasing profitability.
What are the main measures to ensure increased profitability?
| Process efficiency and automation | Economies of scale | Supply Chain optimization |
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Daniel Kittelberger
Johannes Weinrich