Source page: McKinsey & Company
Commentary
Sky’s the limit
Cloud | Digital | Manufacturing
September 1, 2023 – In facing challenges such as inflation, talent shortages, and higher energy costs, machinery and equipment manufacturers could look to digital and cloud solutions for help. According to senior partners Dorothee Herring and Rafael Westinner and coauthors, implementing organization-wide digitalization with cloud applications and a suite of digital tools could improve a machinery manufacturer’s EBIT by as much as five to eight percentage points. Automations, improvements in data analysis, and more can increase efficiencies and free up employees to focus on higher-level improvements that lead to further savings and product innovations.
To read the article, see “Boosting machinery sector profitability via cloud-aided digitalization,” August 11, 2023.
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Visual form
Waterfall-style margin bridge. It shows how cloud-enhanced digital transformation changes a typical machinery and equipment manufacturer’s profit structure.
Layout / body structure
The chart reads left to right from the baseline value through cost and expense categories and ends at EBIT. The black baseline sits at the start, and the transformed values then step across the cost structure toward the final uplift range.
What is being compared
It compares a baseline machinery-and-equipment manufacturer income structure with the value after cloud-enhanced digital transformation across revenue, cost of goods sold, selling, general and administrative expenses, R and D, other operating expenses, and EBIT.
Measurement system
The baseline revenue is indexed to 100, and the outcome is shown as a percentage-point EBIT uplift and cost savings range. The chart is about operating-structure change rather than volume growth over time.
Visible structure inside the graphic
The chart uses a bridge or step-through layout, where each expense bucket sits in sequence and contributes to the final EBIT outcome. That makes the source of margin improvement visible as a chain of category-level changes rather than one single aggregate number.
Main takeaway from the visual
Cloud-enabled digital transformation affects multiple parts of the income statement at once, and the combined effect can materially lift EBIT. The visual is built to show that the result comes from distributed operating improvements, not only one isolated savings lever.
Key standout values or extremes
The title highlights the main payoff: a potential average EBIT uplift of five to eight percentage points and cost savings of 5 to 20 percent. The anchor value of 100 baseline revenue also helps frame the size of the downstream margin shift.
Controls / sequence, when applicable
This is a static chart image with no in-chart controls to operate.
Companion media, when applicable
There is no separate companion audio or video; the chart image is the full visual on this page.