Equipment manufacturers can capture new value and revenue from the technological transformation impacting the industry, according to a new report developed using input from members of the Association of Equipment Manufacturers and insights from AEM’s database of end users.

The international consulting firm McKinsey & Company conducted the research with AEM throughout 2017, and compiled its findings in this report. The research centered on the unprecedented rise of machine data, advancing computing power and the growing interconnectedness of machinery using Internet of Things (IoT) technology.

“These factors are driving a pace of change that we’ve never seen before,” says Kevin Laczkowski, senior partner at McKinsey & Company. “That was really the basis for launching this effort. We wanted to figure out how the construction and agriculture sectors, and OEMs in particular, could get ahead of all these trends that are really reshaping the landscape.”

By surveying more than 1,400 North American users of heavy equipment, McKinsey compiled a list of insights designed to help manufacturers better meet the technology needs and expectations of construction contractors and farmers. Among their findings:

  • Most business owners who use heavy equipment are interested in many of the different types of technology that are expected to be available in the next five years.
  • Construction contractors expressed the most interest in technologies involving predictive maintenance, remote monitoring and operator guidance, in addition to online markets for parts and accessories.
  • Farmers are most interested in technologies including GPS auto steering and the variable application of inputs.
  • Most contractors and farmers expect to convert less than a third of their fleets to fully autonomous or fully electric technology in the next 10 years.

The report also outlines several areas of concern that manufacturers should pay attention to, according to McKinsey & Co. senior partner Asutosh Padhi. These include:

  • The impact that online marketplaces for parts and accessories will have on revenue for dealerships and their traditional business model.
  • A noted reluctance among equipment users to share machine data with manufacturers, unless manufacturers demonstrate a clear value in sharing data, are transparent about how it is used and address privacy concerns.
  • A willingness to turn to technology providers outside the traditional equipment manufacturing industry for features like IoT connectivity, machine learning and GPS mapping.  

“OEMS should be concerned but not panicked about these findings,” Padhi says. “OEMs still have the ability to be the natural providers of these new technologies, provided they’re able to innovate the core service offerings and more importantly move quickly on the software services and Internet of Things.”

The report concludes with five recommendations to help manufacturers maintain their position as the top providers of cutting edge construction and agriculture equipment. Readers can view the full report at the McKinsey & Co. website, and AEM will be sharing copies of the report with leadership teams at its member companies in the weeks ahead.

“The insights from this research will give manufacturers a competitive edge in the evolving field of construction and agriculture technologies that are hitting the market,” says AEM President Dennis Slater. “I’m glad we were able to partner with McKinsey to bring these new findings to our members.”

Laczkowski will present the research findings in-person at AEM’s Thinking Forward event on May 8 in Chicago. The event is free to AEM members, and will also include a discussion on the Maker Movement and a tour of mHub’s fabrication labs and microfactory.

“This research project is an excellent complement to the other efforts AEM is undertaking through our Thinking Forward initiative, which is now in its second year of helping equip our members to thrive in an evolving marketplace,” says AEM Vice President of Marketing and Communications Nicole Hallada.

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