In 1955, the process of harvesting corn was labour intensive and led to small yields that took 3 months to harvest an acre of field. Fast-forward to 2024, farmers can do this in just 2 hours. Consultancy firm Accenture helped pioneer IoT technologies in farming, utilising AI and machine learning to monitor crop health, soil moisture and weather conditions in synergy to optimise harvests. Such work has led to labour costs falling 70% while crop yields rose 15% (Guide, 2024).
In a landscape dominated by the glitz and glamour of new AI and technological advancements, it’s easy to disregard the importance of the so-called traditional industries. But the reality is that without such industries, economies would cease to exist. The development of manufacturing and agriculture is every bit as important as developing new sectors. It was Peter Drucker who said, "The best way to predict the future is to create it." For traditional industries to survive they must innovate. But how do we create the future? Digital transformation consulting has emerged as a pivotal force in helping these sectors adopt new technologies and streamline their processes. Consulting from PwC, BCG and others have allowed firms to iterate processes to continue their linear progression of growth. Without such consulting, the landscape of our economies would be very different today.
Traditional industries refer to those who still rely on conventional methods of production, distribution, and management of physical goods/services. They contrast their younger more innovative counterparts in the tech and energy sectors.
It’s a tale as old as time, new technologies are discovered which spell the end of industries, leading to mass unemployment. From the industrial revolution in the 1700s century to IT automation in the 2000s, it’s natural to assume that developments in technology lead to the demise of our traditional sectors. But the reality is much different. What we see is a constant evolution of traditional sectors, leveraging innovations to survive and grow bigger and better. 75% of the companies listed as Fortune 500 companies operate in ‘traditional sectors.’ This begs the question; how have legacy industries survived this long, and who's been helping them? To do this it’s easier to look at a few examples within each industry.
Manufacturing is an integral industry in the economy, after all, everything we use from our phones to the cars we use comes from manufacturing plants. The industry has already taken great strides in using technology to speed up processes, with companies such as Tesla claiming 95% of production is already automated. However, there is always room for improvement, with manufacturing leading the way in global spending on digital transformation, a figure that reached $2.3bn in 2023.
A notable example of this would be McKinsey’s role in implementing Industry 4.0 technology across manufacturing plants for the industrial powerhouse Siemens. Industry 4.0 is an innovative approach to manufacturing that combines new technologies such as AI, IoT, and large data sets to provide real-time feedback to production processes, ensuring swift adjustments that maximise outputs (Behrendt et al., 2021). The best way to understand 4.0 would be to think of a smart home. A traditional 20th-century home would contain standard appliances (stove, fridge, TV) in dissonance. Now imagine a modern home where lights, temperature and entertainment are interlinked and can be controlled from the ease of your phone. To understand why 4.0 was so transformative, we need to look at the performance of Siemens products ex-ante and ex-post. Beforehand, manufacturing units operated with limited interconnectivity. Machines functioned in isolation, leading to inefficiencies and communication gaps. Alongside this, data regarding unit performance was manually recorded, which meant that equipment maintenance was based on breakdowns rather than predictions, often leading to unnecessary breakdowns. The implementation of new technologies allowed Siemens to guide the manufacturing sector into a new age of technology. The employment of digital twins allowed Simen’s to create a virtual copy of physical products, allowing for closer monitoring of performance and breakdowns. This is optimised by embedding sensors and IoT devices within appliances to receive metrics such as temperature, pressure, vibration, and other operational parameters (Andrews, 2020).
Mckinsey’s role in advising Siemens was crucial. Though Siemens did have an AI sector, the breadth of knowledge and integration across all their divisions was lacking until Mckinsey stepped in. The consultants’ plethora of tech experts paired with their experience in helping corporations implement AI technologies meant their guidance was needed to help Siemens evolve and grasp market share before competitors caught up. The proposed solutions enhanced product efficiency by 20% and reduced production costs by 15%.
(Arisal, 2018)
Healthcare accounts for 10% of GDP globally, with superpowers such as the USA spending up to $4.3 trillion on healthcare. Hence investment in this sector is imperative to improve patient care, faster diagnoses and more accessible medicine. 97% of healthcare execs believe advances in technology are more reliable than socio-economic policy dictating long-term strategy. In general consultants and healthcare have a strong relationship with the COVID-19 pandemic yielding just over £500 million with contracts awarded to 35 consulting firms.
A particular sector of healthcare that has exploited the tech revolution is telemedicine. In the UK alone there is currently a 2 million backlog of patients waiting to be seen for diseases. Since the pandemic, the industry has leveraged the rise of video chats to appeal to a new market that could ease pressures on the public sector.
Telemedicine refers to the delivery of healthcare services through digital platforms, enabling remote consultations, diagnosis, and treatment via video calls, phone calls, or messaging. This technology has gained prominence due to its convenience, accessibility, and ability to reduce the burden on traditional healthcare facilities.
Telemedicine services include virtual doctor visits, remote monitoring of chronic and terminal conditions, prescription management, and follow-up care. During the COVID-19 pandemic, telemedicine usage surged, with a study by McKinsey & Company indicating that telemedicine adoption grew from 11% of patients in 2019 to over 46% in 2020. (The impact on the workforce and organisations, 2020).
The telemedicine industry, valued at approximately $70 billion in 2021, is projected to grow significantly, with estimates suggesting it could reach $250 billion by 2028. This growth is driven by increasing patient demand for convenient healthcare solutions and advancements in digital health technologies. Supporters of telemedicine have praised its role in improving bed flow and allowing doctors to see priority patients who need appointments as a matter of urgency. (Rapid response to surging demand, 2024).
Accenture has played a pivotal role in facilitating this rise. By helping healthcare organisations implement and scale telemedicine platforms, Accenture has supported numerous healthcare providers in integrating telehealth into their service offerings, streamlining operations, and enhancing patient engagement. Their expertise in technology integration and management has been crucial in driving the adoption of telemedicine. The next stage of this process will be to integrate telemedicine across all OECD nations and analyse how it can be implemented in low-income households. (Accenture, 2024).
(Goodyearchirpractor, 2024)
However, it is important to note that whilst consulting companies can improve public welfare with developments in technology, they’re ultimately working on behalf of big corporations and often have impaired ethical views. In 2021, McKinsey paid a $600 million settlement in the US for advising big Pharma clients to boost the opioid content of prescription drugs. Such negligence should also be considered when evaluating consultants' roles in growing legacy industries. (Julietwalker, 2021).
Expanding on this, there are several high-profile cases of technological advancements being detrimental to a company, an example of this being General Electric (GE). GE is a large industrial corporation with ties in the Aerospace, Healthcare and Energy sectors to name a few. Their main revenue comes from selling jet engines, turbines and medical devices. GE’s transformation followed a similar trend to Siemens. The idea was to implement an IoT system for their products, similarly utilising the digital twins framework to improve user experience. Mckinsey was hired to advise on the creation of “Predix” the name given to the GE software platform. Instantly the project posed numerous issues “Resources were spread too thin, project objectives were ill-matched to expertise, and timelines were rushed” is what one source said leading to merely incremental progress. GE eventually sold the digital asset marking the end to hundreds of jobs and a loss of $4bn (Panorama-consulting, 2020).
Such mistakes have severe consequences but fortunately are often isolated and contained before they have widespread effects. If we’re strictly looking from a technological viewpoint, the role of digital consultants is positive.
In conclusion, the transformation of traditional industries through technological innovation and consulting has been revolutionary. The shift from labour-intensive processes, like the three-month corn harvest of 1955, to today's highly efficient two-hour harvests exemplifies the impact of IoT, AI, and machine learning in agriculture. Accenture's role in these advancements has significantly reduced labour costs and boosted yields. Peter Drucker’s assertion that "the best way to predict the future is to create it" captures the essence of this transformation. Traditional industries must innovate to survive, and digital transformation consulting from firms like PwC and BCG has been crucial in sustaining economic growth. The manufacturing sector, with companies like Siemens embracing Industry 4.0 technologies under McKinsey's guidance, demonstrates this transformation. These advancements have optimised performance and positioned companies at the forefront of innovation. Similarly, healthcare has benefited from telemedicine, accelerated by the COVID-19 pandemic, with Accenture playing a key role in implementing these solutions. However, ethical considerations and potential pitfalls, such as McKinsey’s involvement in the opioid crisis and GE’s challenges in digital transformation, remind us that innovation must be approached responsibly. In summary, the journey of traditional industries through digital transformation highlights the power of innovation and the critical role of consulting. While challenges remain, the trajectory points towards a future where technology enhances productivity, efficiency, and public welfare. The continued success of traditional sectors depends on the thoughtful integration of new technologies, guided by digital transformation consultants. “This will be the greatest, most rapid acceleration in wealth and prosperity in human history…Over the next 10 years, AI will be the greatest force amplifier in history. That’s why it could enable a redistribution of power on a historical scale.” (Jennifer@Gealth, 2023).
References:
Kennedy, N. (2024). Smart Farming: IoT’s Role in Agriculture. [online] The Farming Insider. Available at: https://thefarminginsider.com/iot-in-smart-farming-agriculture/.
Behrendt, A., De Boer, E., Kasah, T., Koerber, B., Mohr, N. and Richter, G. (2021). Leveraging Industrial IoT and advanced technologies for digital transformation How to align business, organization, and technology to capture value at scale. [online] Available at: https://www.mckinsey.com/br/en/~/media/mckinsey/business%20functions/mckinsey %20digital/ou r%20insights/a%20manufacturers%20guide%20to%20generating%20value%20at%20 scale%20with% 20iiot/leveraging-industrial-iot-and-advanced-technologies-for-digital-transformation. pdf
Ohr, D.R.-C. (2020). Siemens: Leading Industrial Digitalization and Industry 4.0 | Siemens Blog | Siemens. [online] Available at: https://blog.siemens.com/2020/09/siemens-leading-industrial-digitalization-and-indust ry-4-0/.
www.accenture.com. (2024). Healthcare Consulting Services & Solutions | Accenture. [online] Available at: https://www.accenture.com/gb-en/industries/health
Rapid response to surging demand. (2024). Available at: https://www.accenture.com/content/dam/accenture/final/a-com-migration/pdf/pdf-160 /accenture rapid-response-to-surging-demand.pdf#zoom=40 [Accessed 29th July. 2024].
The impact on the workforce and organisations. (2020). Available at: https://www.mckinsey.com/~/media/McKinsey/Industries/Healthcare%20Systems%2 0and%20Services/Our%20Insights/Transforming%20healthcare%20with%20AI/Tran sforming-healthcare-with-AI.ash x.
Julietwalker (2021). Management consultancy in healthcare—time for some independent action? [online] The BMJ. Available at: https://blogs.bmj.com/bmj/2021/07/19/management-consultancy-in-healthcare-time-f or-some-inde pendent-action/. [Accessed 29th July. 2024].
Baumann, B. (2021). 4 Lessons Learned From The GE Digital Transformation Failure. [online] www.panorama-consulting.com. Available at: https://www.panorama-consulting.com/ge-digital-transformation-failure/.
Jennifer@Gealth (2023). AI Winners Revealed: 10 Notable Quotes from ‘The Coming Wave’. [online] Medium. Available at: https://medium.com/@jcgblue/ai-winners-revealed-10-notable-quotes-from-the-comin g-wave-36aa 9259b315
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