Industrial leaders should assess the impact of these and other geopolitical scenarios on their own businesses. Then they must identify and implement strategic actions to not only reduce risk, but to thrive — regardless of which scenario the actual future most closely resembles. Each firm will have its own priorities, though EY teams believe the following foundational “no regrets” moves are critical for every manufacturer:
1. Enhance scenario-planning capabilities
All firms should actively embed geopolitical scenario development in all corporate strategy exercises and focus on identifying opportunities (customers, pricing, M&A) as well as risks. However, this is particularly critical in the industrial sector, where output is often high value, large-scale, complex and resource-intensive.
Scenario development should include identification of early warning indicators — election outcomes, policy rhetoric, military spending, etc. — that can be monitored for signs of which future may be emerging.
2. Invest in the business of customer experience
Industrial firms need to place the customer at the beginning of their value chains — not the end — by aligning customer strategies and priority areas with their own. If geopolitical developments generate rapid demand shifts and operational complexities for customers, engagement platforms that increase the ease of doing business and transparency will be key differentiators.
Frictionless, consumer-style e-commerce platforms will be critical for commodities. Custom products and systems will require digital platforms that enable intelligent search, consultative selling and visibility of pricing and availability to drive increased customer revenues and reduced cost-to-serve.
3. Drive operational resiliency
The complexity of many industrial businesses means there are many potential avenues for increasing resiliency. They may include avoiding single sources of supply, increasing sustainability and circularity, establishing their own renewable power generation infrastructure, and harnessing data to optimize working capital and pricing execution. Firms should prioritize cost-efficient actions to maximize agility in the face of large-scale supply-and-demand fluctuations.
4. Create a differentiated employee value proposition
Geopolitical upheaval and uncertainty will only worsen the industrial sector’s existing recruiting and retention issues. Leaders must build a work culture that creates employee connections while also using data-driven insights into compensation, benefits and new ways of working to prevent this most critical resource from being depleted over time — or overnight.
5. Accelerate digitalization
Digitalization does not always rise to the top of manufacturers’ priority investments lists, but it is essential for long-term cost and market advantages. It also underpins numerous aspects of our other “no regrets” moves. Frictionless online selling, real-time supply chain monitoring, digital twin-enabled assessments of production and ecosystem vulnerabilities — without comprehensive digital transformation, none of these are possible.
In some geopolitical scenarios, your future may also depend on having selected digital suppliers and partners who will not suddenly be cut off by sanctions or other government intervention — so it is critical to assess potential new relationships as part of regular scenario planning exercises.