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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 disruption at scale, from technology and trade to skills and sustainability. 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 significant opportunities are rarely simple to realize. We surveyed 700 leaders of companies in six Industrial sub-sectors and across four major geographic regions to assemble a more complete picture of disruption, growth and future opportunity — identifying those organizations that are best positioned to capitalize on change, and strategies to thrive through disruption.

Based on these findings, we’ve also developed 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.
Author

Dr. Nikolaus Reinhuber has more than 25 years' experience in cross-border transactions and is the Global Chair of the Industrials, Manufacturing and Transportation (IMT) industry group in Baker McKenzie’s office in Frankfurt. Clients have described him as "statesmanlike, with real interpersonal skills, who strikes the right note at 3 a.m. and gets the deal to the finish line" as well as "excellent work and extremely strong dedication" (JUVE 2014/2015). Before joining Baker McKenzie in 2008, he served as an M&A and corporate partner with Freshfields Bruckhaus Deringer, where he also held a global management position. Dr. Reinhuber has also acted as a supervisory board member of listed companies and advised them on their IPOs.