The manufacturing industry isn’t what it used to be. Data-driven companies, use of AI in manufacturing, digital self-service – these are just some examples of digital disruptors turning the industry on its head.
And yet, many CEOs still see digital transformation as just an efficiency play. A way to trim operational costs rather than a strategic measure to drive growth and customer loyalty. So they decide not to invest, and instead maintain and build upon their legacy systems.
Germany’s economic struggles, in large part due to a long-standing reluctance to invest in innovation, show just how wrong their view is. A 2023 report from the German Economic Institute highlighted that companies failing to embrace digitalization and automation have suffered from declining productivity, supply chain inefficiencies, and increased competition from more agile international players.
For CEOs, the lesson is clear: delaying digital investment actively erodes market position and long-term profitability. And in this article, we’ll explore how doing nothing, costs you more than you think.
Here is what we’ll cover:
Direct Monetary Loss
Here’s the truth: outdated, legacy systems hurt your bottom line. Plain and simple, they make your costs go up, and your revenue go down.
Higher operational costs are one of the most obvious culprits. Manual order entries, disconnected inventory tracking, and customer data silos require teams to spend hours on tasks that, with modern digital platforms, they could do in a couple of clicks.
On the other hand, technical debt – the cost of maintaining outdated technology – grows as legacy systems require frequent fixes, patches, and workarounds. Over time, your IT teams have to divert more and more time on trying to get these systems to work properly, instead of focusing on driving innovation.
Legacy systems also cause revenue losses since they aren’t agile enough to seize new opportunities and adapt to changing market demands. Your order management system can’t cope with a sudden surge in demand? The competition is more than happy to fill that gap.
Another way old systems hurt your revenue is through a lack of coordination. When operations, sales, and marketing teams fail to align due to disconnected systems, collaboration becomes challenging leading to wasted business opportunities. How can sales upsell or cross-sell a product, if they have no idea what the customer values, or how they use the products they already purchased?
The result is a disjointed organization that struggles to deliver value, losing market share to more agile competitors. This is something we’ll cover in more detail in the following section.
Lost Market Share
The longer you resist change, the more you keep the door open for competitors. The simple truth is that the status quo is lowering barriers to entry, resulting in an overcrowded market. And those leveraging digital technologies will get the biggest piece of the pie – leaving outdated companies in the dust.
Take Siemens, a European manufacturing leader that tackled the challenges of modernizing legacy systems head-on. Their open, cloud-based IoT operating system, MindSphere, connects machines and data in real time, enabling predictive maintenance and reducing costly downtime. This way, Siemens not only transformed its own manufacturing capabilities but also created a completely new revenue stream by selling these solutions to fellow manufacturers.
While Siemens leads with data-driven decision-making, companies that still rely on outdated systems are facing a fragmented view of their business. Market trends, customer behavior changes, operational inefficiencies – all of these insights require an end-to-end integration of various systems and access to high-quality data.
As a result, companies who have not invested in their digital infrastructure are often blind to shifting market opportunities – resulting in big market share losses. And it’s not just customers jumping ship – top talent, eager to work where innovation thrives, often moves toward businesses that prioritize technology.
Weaker Customer Relationships
Let’s be honest – your B2B buyers now expect Amazon-level experiences. They want speed, flexibility, and personalization. This is confirmed in a recent McKinsey report that says 66% of B2B buyers now prefer remote or self-service interactions over traditional sales processes.
If your systems can’t support this level of experience, your customers are walking away. Not immediately, but slowly, as these little annoyances compound and erode trust and loyalty. In the end, you are left with a permanently damaged brand reputation as a company that’s difficult to work with.
Let’s say a loyal customer tries to reorder bolts they purchased last year, but the system doesn’t save past orders. That means the customer has to spend hours searching for product codes and calling support, only to receive the wrong item due to miscommunication. Frustrated, they’ll turn to a competitor whose system offers a simple reordering feature and probably warn others to steer clear.
On the flip side, businesses that invest in accessible, intuitive customer portals are building rock-solid relationships. Digital self-service tools that empower buyers to manage their accounts, order supplies, or customize products provide a smooth, frictionless experience.
The longer you wait, the worse this gap becomes, and the harder it is to recover lost customers.
Security and Regulatory Risks
Think of legacy solutions as houses with outdated locks – easy pickings for criminals to break into. These systems are not built to deal with the scale and sophistication of modern cybersecurity threats. This puts sensitive customer data, intellectual property, and even daily operations at risk.
Cybersecurity threats present a great danger for manufacturing businesses, best illustrated by the 2019 ransomware attack on Norsk Hydro, a global aluminum manufacturer. Hackers exploited vulnerabilities in the company’s IT systems, encrypting critical data and halting operations across 40 countries. The attack forced Norsk Hydro to switch to manual operations, costing them an estimated £45 million.
Then there’s compliance. Regulations are tightening, particularly in manufacturing and supply chain industries. Whether it’s adhering to GDPR, ISO, or local trade laws, outdated systems require constant manual interventions to meet these standards. One breach or oversight could mean fines and reputational damage.
The Time to Act is Now
The writing is on the wall. Business as usual may feel safe in the short term, but it’s pulling you further into a hole that’sincreasingly hard to climb out of. Every day spent ignoring these challenges is another day of falling behind competitors who are reinventing how they operate and deliver value.
To get started, download our Digital Self-Service as a Central Point of a Digital Relationship whitepaper. Learn how you can meet today’s challenges head-on and develop a roadmap to not only remain competitive but lead in your market.
It’s time to take action – because doing nothing is no longer an option.
