Digital transformation in manufacturing: A comprehensive guide

In a world where industries are reshaped overnight by technological breakthroughs, manufacturing stands at the crossroads of innovation and disruption. The race to adapt has never been more urgent. Digital transformation in manufacturing has become the key to survival and success.

For manufacturers, the stakes are high. Market shocks and rapid advancements can upend entire sectors in the blink of an eye. The companies that thrive in this volatile landscape aren’t just reacting to change –  they’re driving it. Trailblazers leverage cutting-edge digital technologies to transform bold ideas into groundbreaking realities, setting themselves apart as leaders in an increasingly competitive world.

But keeping pace with this shift is no small feat. The journey to digital transformation in manufacturing demands more than just adopting new tools – it requires a fundamental rethinking of processes, strategies, and mindsets. By harnessing innovative technologies and data-driven strategies, manufacturers have the power to revolutionise their workflows, streamline operations, and unlock unprecedented value. Digital transformation doesn’t just boost productivity – it redefines how the industry innovates, creating opportunities to spark creativity and drive growth like never before.

This comprehensive guide explores the essence of digital transformation, its necessity, benefits, challenges and future trends, providing manufacturers with insights to navigate and thrive in today’s unpredictable landscape.

Uncover the challenges, benefits and future trends. Keen to know how digital transformation will impact manufacturers?  Come with us and find out.

What is digital transformation in manufacturing?

Definition and key concepts

Digital transformation in manufacturing refers to the integration of digital technologies across the manufacturing business lifecycle. Principally, it’s about increasing efficiency and reducing risk by swapping out analogue or paper-based processes for slicker, digital ones that generate data for ongoing process improvement. The ultimate purpose of digital transformation is to enhance the way manufacturers operate to deliver greater value to customers.

Critically, digital transformation does not just refer to the production ecosystem. Digital transformation across operational cycles, for example with the adoption of a new quality management system (QMS) means manufacturers can improve every aspect of their operations from goods-in to goods-out. Successful transformation is not just about adopting new technologies – it involves a cultural shift and requires organisations to continually challenge the status quo, experiment and get comfortable with failure.

At Hexagon, we believe that there are three essential pillars of digital transformation. These are are data, empowered people and flexible production. Discover more about how to use these pillars as guiding principles to shape your digital transformation.

Read more about how digital transformation in manufacturing is reshaping the industry in this article from whatfix.

Data and digital transformation

Data is the first and most important pillar of digital transformation. It’s the bit that takes us from analog to digital. Everything we are planning, everything we are looking to improve, the innovation we are working towards, all hinges on data.

Data is the tool we need to act. It is the insight and the connecting fabric. With a complete and connected system in place, data can empower people and equipment with insights, driving the coordination of the entire factory ecosystem.

However, data challenges are rife within manufacturing. A huge 98% of manufacturers report facing at least one challenge with their data.

The biggest challenge from a data perspective are silos. An abundance of task specific software generates insight nobody ever connects. Other common data challenges include inaccurate data, out-of-date data, incomplete data as well as difficulty accessing, sharing or extracting insights from data.

If you’re keen to get ahead with data, learn how to solve the 7 most common data challenges in this blog post.

Key elements of digital transformation

Digital transformation is built upon a foundation of essential components that drive technological innovation and operational efficiency.

At its core, it involves fully transitioning from analogue systems to digital ones, embracing a software-driven approach to operations, processes, and services. Among the key elements enabling this transformation are advanced data analytics, the Internet of Things (IoT), artificial intelligence (AI), and automation. These technologies work together to enhance decision-making, optimise production processes and improve overall efficiency.

Explore the core aspects of digital transformation in more detail with this blog post on shaping a digital factory.

The importance of technology integration

The integration of technologies such as the Internet of Things (IoT), cloud computing and advanced robotics enables manufacturers to connect machines, systems and processes, creating a more cohesive and efficient production environment. This connectivity allows for real-time monitoring and optimisation of manufacturing operations.

Traditional manufacturing differs significantly from digital processes, relying on manual methods and isolated systems that cause inefficiencies and delays. Digital transformation in manufacturing should be built on the foundation of a connected ecosystem where data flows seamlessly across departments and connected workers are empowered. This enables agile responses to market changes and customer demands. This shift not only enhances operational agility, it spurs innovation, allowing manufacturers to create new products and services that address evolving market needs.

In today’s manufacturing environment, technology facilitates real-time data collection and analysis. Smart factories employ sensors and connected devices to monitor equipment performance, predict maintenance needs and refine supply chain management, boosting productivity and supporting sustainability by minimising waste and energy use.

Role of data analytics and connectivity

Data analytics are a powerful catalyst in digital transformation, turning raw information into strategic insights that accelerate decision-making.

Imagine a world where manufacturers can anticipate maintenance needs before they arise, ensuring uninterrupted production and efficiency. By harnessing the vast potential of big data, they not only predict but also perfect, optimising supply chain logistics and elevating product quality to new heights.

Connectivity, powered by IoT devices, allows us to create a seamless, circular communication flow spanning departments and teams, unifying the entire manufacturing value chain.

Role of Artificial Intelligence (AI)

Artificial intelligence (AI) is one of the most transformative elements of digital transformation. It offers the potential to reshape how manufacturers operate, innovate and deliver value. At its core, AI enables machines and systems to analyse historical and real-time data to forecast future trends, behaviours and outcomes recognising patterns, and making decisions with minimal human intervention.

In a matter of minutes, AI is able to cross reference multiple complex datasets spotting patterns and making intelligent recommendations that would have taken people months or years to correctly analyse.

AI is more than a tool for efficiency. It’s a driver of innovation, enabling organisations to develop smarter products, shape more personal customer experiences and adapt quickly to changing market conditions. In manufacturing, AI is driving advanced diagnostics, quality control, and automated inventory management. As a cornerstone of digital transformation, AI improves efficiency, and unlocks new opportunities for growth, differentiation, and long-term success.

In Hexagon’s 2025 Advanced Manufacturing Report, we found that leaders in AI adoption were experiencing benefits that spanned their business. 90% think AI offers a commercial advantage with 49% of manufacturers reporting that AI has already given them a competitive edge. High AI adopters are also significantly less likely (23%) to report lack of agility as a business challenge than low AI users (40%).

AI also plays a critical role in natural language processing (NLP). It enables technologies like chatbots, virtual assistants, and sentiment analysis tools that enhance customer engagement and streamline communication.

Why manufacturers need digital transformation

Agility is a top concern for manufacturers right now with worries about everything from global shocks to the pace of disruption.

If you’re facing a wave, you have limited options. You can try to survive it, ducking underneath and hoping another wave doesn’t come. Or you can ride it, using the energy of the wave for your own gains.

To ride the wave, manufacturers need digital transformation – it’s essential for staying competitive, efficient and customer-focused. By leveraging advanced technologies, manufacturers optimise their operations and empower their people to achieve more, giving lift to collaboration, creativity and innovation across the organisation.

• Staying competitive in a global market– in a globalised economy, manufacturers face intense competition. Digital transformation allows companies to innovate faster, reduce costs, and improve product quality, thereby maintaining a competitive advantage.
• Enhancing operational efficiency – digital tools streamline operations, reduce waste, and optimise resource utilisation. Automation and real-time data analysis help manufacturers improve efficiency and reduce downtime, leading to significant cost savings.
• Responding to changing customer demands – today’s consumers demand personalised products and faster delivery times. Digital transformation enables manufacturers to be more agile, adapting quickly to market changes and customer preferences.
• Empowering people to achieve more – by equipping teams with advanced tools and actionable data, digital transformation enables employees to work smarter, not harder. It accelerates innovation, improves decision-making and creates a more engaged and productive workforce.

Key benefits of digital transformation in manufacturing

Constant change and fierce competition are commonplace across multiple manufacturing industries, and manufacturers must leverage every advantage to stay ahead. Digital transformation offers a suite of benefits that empower manufacturers to harness change as an opportunity rather than a challenge. By integrating advanced technologies, manufacturers can achieve unprecedented levels of agility, efficiency, quality and innovation, with seamless collaboration and connected data, empowering and orchestrating all aspects of performance across the factory ecosystem.

Using change to your advantage– agility is the biggest single benefit of digital transformation. It enables manufacturers to respond swiftly to market needs, fast-track new innovations into production, and pivot quickly in the face of disruptions. By turning change into an opportunity, manufacturers can maintain a competitive edge and thrive in dynamic environments.

Increased productivity and efficiency

Automation and data-driven decision-making lead to higher productivity and efficiency. Machines can operate continuously with minimal human intervention. Predictive maintenance reduces unexpected breakdowns, ensuring smoother operations and significant cost savings.

Delivering superior quality

Digital transformation empowers manufacturers to achieve greater quality control at every stage of production. Advanced analytics and monitoring tools ensure defects are minimised. Technologies like digital twins allow for testing and refinement before physical production begins. The result is consistently higher-quality products and stronger customer satisfaction.

Driving innovation

Innovation is crucial for staying relevant, and digital transformation accelerates it. Digital insights and generative tools can augment everything from product design to reimagining the manufacturing process. By staying at the leading edge of innovation, manufacturers can avoid the risk of disruption and explore new possibilities.

Greater supply chain transparency

Real-time data provides manufacturers with end-to-end visibility of their supply chains. This transparency improves coordination with suppliers and customers. This allows for more agile responses to disruptions and ensuring a more resilient supply chain.

Seamless collaboration

Digital transformation breaks down silos creating seamless collaboration across teams and departments. By enabling better communication and data sharing, manufacturers can enhance teamwork, streamline decision-making and boost overall productivity.

The current status – part analogue, part digital

In the past, manufacturing relied entirely on analogue processes, with limited data and manual systems driving operations. Today, the goal is full digitalisation. We need an interconnected ecosystem where every element of the value chain generates and utilises data seamlessly. However, many manufacturers find themselves caught between these two worlds, with one foot in the analogue past and the other in the digital future. This state of partial digitalisation creates significant challenges, leaving gaps and blind spots that hinder progress.

When systems are only partially digitised, data becomes fragmented and disconnected. Machines, software, and management tools may generate valuable information, but without a fully integrated digital ecosystem, these data streams remain isolated. This lack of connectivity limits the ability to gain meaningful insights, identify root causes of issues, or optimise processes holistically. In fact, the combination of analogue practices and siloed digital tools often creates more hiding places for inefficiencies and quality issues. It creates blind spots that are harder to find and address than ever before.

Partial digitalisation also restricts collaboration. Without a unified flow of data, teams across departments or locations cannot easily share insights. To truly transform, manufacturers must move beyond this halfway point, bridging the gap between analogue and digital to create a fully connected, data-driven environment. Only then can they eliminate blind spots, uncover hidden opportunities, and make better, faster decisions to drive innovation and growth.

Adopting an incremental approach to digital transformation

Legacy technology can present significant challenges when it comes to modernising manufacturing operations. Many manufacturers are working with equipment and infrastructure that still have years – if not decades – of operational life left to offer. The question then becomes: how do you embrace digitalisation without discarding valuable assets? The answer lies in a phased approach to digital transformation. Such an approach allows manufacturers to modernise incrementally while maximising the value of their existing investments.

One effective tactic is retrofitting existing machines with sensors, connectivity modules, or other IoT-enabled devices. These cost-effective solutions allow legacy equipment to generate data and integrate into digital ecosystems, bridging the gap between analogue and digital. This extends the life of existing assets and enables real-time data collection, which can be used to optimise processes and improve decision-making.

A phased approach ensures that digital transformation happens gradually, balancing short-term returns with long-term goals. By modernising incrementally, manufacturers can create a hybrid environment. One where old and new technologies work together seamlessly, maximising the value of existing infrastructure while building toward a fully digitised future.

A recent article from MIT Sloane argues that manufacturers should adopt a phased approach to digital transformation. This helps to effectively manage complexity, mitigate risks, and ensure sustainable progress in integrating new technologies into their operations. You can take a read of the article here.

Successful digital transformation: Real-world examples

In today’s competitive landscape, manufacturers are leveraging digital transformation to boost productivity and operational efficiency.

Digital twins and simulation technologies are among the most impactful innovations driving this change. By creating virtual replicas of physical assets, manufacturers can simulate production processes, anticipate disruptions, and optimise performance without interrupting operations. A major automotive company employed digital twins to enhance assembly line efficiency. This reduced downtime and improved resource allocation, demonstrating the immense benefits of this approach.

The integration of IoT and smart technologies is further transforming manufacturing. Smart sensors and connected devices collect real-time data, enabling manufacturers to monitor equipment health and proactively predict maintenance needs.

The Hexagon approach: Putting data to work

At Hexagon, we believe that data is one of the most valuable assets in manufacturing, and unlocking its full potential is key to driving transformation. Yet, many manufacturers face challenges when data remains siloed or fragmented, limiting visibility and stifling innovation.

Hexagon’s approach focuses on centralising, integrating, and mining data to create actionable insights that optimise operations. This is how we enhance decision-making, and fuel innovation. By connecting disparate data sources, we help manufacturers complete the picture of their operations. This helos to uncover hidden inefficiencies, and open up opportunities for smarter, more agile processes.

For Hexagon, data is the cornerstone of digital transformation. When harnessed correctly, it informs every stage of the manufacturing lifecycle. Accurate, timely data enables manufacturers to fine-tune operations, eliminate inefficiencies, and address weaknesses. Hexagon’s advanced technologies, including artificial intelligence (AI) and machine learning (ML), help manufacturers unlock deeper insights. They identify patterns, make recommendations, and enable continuous improvement throughout the product lifecycle.

Hexagon’s approach to putting data to work begins with unifying legacy processes. From there we build a connected, data-driven ecosystem tailored to each manufacturer’s unique needs. Our phased approach ensures that manufacturers can start small – focusing on immediate priorities – before scaling successes across the organisation. With the right strategy, tools, and culture in place, Hexagon transforms data from a static resource into a driver of innovation and long-term growth.

Check out our how-to guide which outlines the key steps to putting data to work across your manufacturing ecosystem here.