Article
Most industrial strategies were built for a world that no longer exists
Published
9 July 2026
Three pressures are shaping industrial competition towards 2040 â and AI is accelerating all of them. In this article, we take a closer look at them and how the companies that will lead to 2040 are not those who respond to each pressure most aggressively but those who see them as a single design challenge and build an organisation capable of holding all three at once.
Large industrial companies are not just facing one disruption but several cross-cutting pressures hitting all at once. The challenge is that most organisations still respond to them one by one: an AI initiative here, a services initiative there, a supply chain resilience project somewhere else.
Responding in this fragmented way made sense when trade was stable, talent gaps were manageable, energy prices were lower, and regulation moved slower. That is no longer the case. Geopolitics, technology developments, ageing workforces, a widening skill gap, and digitalisation are not arriving in sequence, but colliding. And so are the decisions they force on the project portfolio, on footprint, on commercial model, and on the operating backbone that holds it all together.
These collisions are reshaping industrial competition across three pressures:
- The game you are competing in has changed, and it is no longer purely economically driven. Geopolitics, the rise of technology-led competition from new markets, and the shift of the supply chain from cost line to strategic capability are rewriting where and how industrial companies win.
- Your customers will not be buying products, they will buy impact, moving from products to outcomes, from standard to configured, from linear to circular.
- The industrial backbone no longer fits the world it was built for, and factories, workforces, and the energy systems designed for the last era are misaligned with the next.
Across all three, AI runs as an accelerant rather than a separate pressure. It turns supply-network and footprint choices from reactive to predictive, flagging disruption and simulating alternatives before they bind. AI shortens learning curves and optimises production in increasingly automated factories, turning sensor data into decisions on cost, quality, and uptime. By tracking performance and emissions across complex value chains rather than on static spreadsheets, it makes outcome-based contracts and radical transparency workable in practice. It is also one of the few realistic ways to bridge the industrial skills gap, by capturing expert knowâhow and turning it into guidance and training for the next generation of operators and engineers.
In this article, we work through the three pressures shaping industrial competition towards 2040. Not as a checklist, but as a strategic challenge. Are you solving for each pressure and trend in isolation, or are you building an organisation that can compete across all of them?
Pressure 1: You are competing in a game thatâs changing
States are re-entering the industrial arena with force and capital, and geopolitical considerations are becoming a central factor in industrial decision-making. Trade tensions, export controls, industrial policy, data integrity concerns, and competition for critical materials are reshaping how companies invest, manufacture, and serve customers.
Rearmament is the most visible signal: NATO defence and security budgets are rising towards a target of 5% of GDP by 2035. Apart from weapons and ammunition, a meaningful share is aimed at resilience, critical infrastructure, and the industrial base. This will affect non-defence industries as well, as the same tools, power electronics, raw materials, and skilled people are being pulled towards defence demand, resulting in a tightening of shared supplier bases and labour markets.
More generally, factors such as access to customers, technologies, talent, capital, and critical materials are increasingly shaped by political developments and regional priorities. Companies that anticipate these shifts can shape their footprint and operating model proactively, while others risk being forced into reactive adjustments.
At the same time, the basis of global competition is shifting. Markets that once competed primarily on cost are now competing on technology advancement. China controls roughly 70â75% of global lithium-ion cell manufacturing, and battery pack prices in 2025 averaged ~$84/kWh in China, compared with ~50% higher costs in North America and Europe. This gap reflects manufacturing scale, supply-chain integration, technology maturity, and intense competition, not simply lower labour costs (Source: BloombergNEF (BNEF)). Similarly, global semiconductor manufacturing capacity is increasingly concentrated in a small number of East Asian economies, projected to account for almost 80% of global wafer fabrication capacity by 2030.
Figure 1. Global wafer fabrication share (Source: PwC, Semiconductor and Beyond: How the Semiconductor Industry Can Reinvent Itself for a Sustainable Future, 2026, p. 58)
For industrial companies, this changes the strategic challenge. Competing on operational efficiency alone will not be enough to protect margins or market share. Sustainable advantages will increasingly come from proprietary know-how, automation, digital capabilities, product innovation, and the ability to continuously improve faster than competitors.
The supply chain is becoming a strategic capability, not a cost line. The emerging industrial logic looks different, and the companies pulling ahead build for flexibility and foresight: regional production networks, diversified sourcing strategies, greater use of automation and AI, and real-time visibility across suppliers, operations, and customers. The goal is no longer simply to recover quickly when disruption occurs, but to anticipate change early and reposition before competitors can react. Alternative routings are simulated in hours rather than weeks. Demand signals surface across the network in real time. As uncertainty becomes a permanent feature of the industrial landscape, adaptability itself becomes a source of competitive advantage.
Taken together, these three forces are redrawing the competitive map:
- which markets will be heavily impacted by the geopolitical turn
- who can compete on technological edge rather than cost
- which players can move fast enough to hold their position when conditions shift
For many industrial businesses, the game has changed faster than the strategy has.
| If you lean into this pressure⊠| If you don't⊠|
| You treat industrial policy, security-driven demand, and critical-material access as one design problem, not three workstreams | You run separate responses and miss the decisions that sit between them |
| You concentrate capital where policy tailwind, cost position, and your own capability genuinely overlap | You find factories in the wrong places and fail to qualify for the subsidy programmes rivals build their economics around |
| You treat new-market players as a technology threat, not just a price one, and invest to defend the categories they target | You are caught off-guard by competitors who closed the technology gap while you still saw a cost problem |
| You build a supply chain that reconfigures fast, with AI-enabled visibility that surfaces disruption before it lands | You discover disruption through missed shipments, weeks after a faster rival has repositioned |
Question
Who in your organisation is responsible for spotting when a technology competitor, not a price competitor, is closing the gap in your core markets?
Pressure 2: Your customers are buying impact, not products
Customers are increasingly expecting products and solutions tailored to their specific operating environment, with a decreasing willingness to accept the higher cost, longer lead times, and implementation effort that traditionally come with customisation. The competitive challenge is therefore shifting from standardisation versus customisation to delivering both simultaneously. The competitive frontier is to deliver that fit at the lead time and cost of a standard product, which only works when products are built on modular architectures and configurable platforms rather than bespoke engineering. Companies still treating each customised order as a one-off project keep losing the speed and margin contest. The goal is not to customise, but to industrialise customisation so that tailored solutions can be delivered with the speed, reliability, and economics of a standard offering.
At the same time, customers are becoming less interested in owning assets and more interested in securing outcomes. This changes how value is captured. Companies are moving beyond one-time product sales towards recurring models tied to performance, availability, or output. In these models, suppliers assume a greater share of operational risk in exchange for a larger share of lifecycle value. The proof points are no longer experimental: Rolls-Royce charges airlines per flight hour instead of per engine, Kaeser sells compressed air by volume rather than the compressor, and Hilti manages tool fleets on subscription. The transition is not simply a price change; it requires deliberate reshaping of the portfolio, capabilities, and risk model. Not every product is suitable for outcome-based delivery, and not every customer wants it. The winners will be those that identify where they can credibly own outcomes and where traditional transactional models remain the better choice.
What further strengthens outcome-based models is circularity shifting from a sustainability initiative to a strategic business capability. As critical materials become more concentrated, regulated, and geopolitically exposed, companies are reassessing how value is created across the entire lifecycle of a product. The challenge is most visible in sectors dependent on critical materials and advanced materials, where processing capacity is heavily concentrated and supply disruptions can rapidly affect cost and availability. The same concentration dynamic seen in batteries and semiconductors holds for raw materials: China refines 60â90% of key transition minerals, including 85% of rare earths and 90% of graphite anode material, and produces more than half of global crude steel, creating a strategic dependency that extends across industrial value chains. In this environment, take-back programmes, remanufacturing, refurbishment, and material recovery are no longer primarily environmental measures; they are mechanisms for securing supply, reducing input volatility, and capturing value that would otherwise be lost at end-of-life. Regulation is reinforcing the same direction, where increasing requirements for traceability, repairability, and product-level transparency are making circular design a prerequisite for market access in many industries.
Figure 2. Global concentration of critical minerals and steel processing (Source: International Energy Agency (IEA), Global Critical Minerals Outlook 2025; World Steel Association (worldsteel), 2025)
Taken together, these trends reflect a broader shift in what customers value. They increasingly expect solutions tailored to their needs, pay for results rather than assets, and demand products that remain valuable throughout their lifecycle.
For industrial companies, this means that competitive advantage is moving beyond the product itself. The challenge is no longer simply building better equipment, but designing business models, portfolios, and operating models that deliver measurable customer impact over time. The winners will not necessarily have the best products, but will be the companies that create the most value before, during, and after the sale.
| If you lean into this pressure⊠| If you don't⊠|
| You industrialise customisation, delivering bespoke fit at standard speed and margin through modular platforms and a digital thread | You win customisation deals on speed you cannot sustain, eroding margin on every bespoke order |
| Your revenue becomes recurring and performance-linked, priced for the value and risk you actually carry | You stay a product seller while customers move to buying outcomes |
| You build the portfolio around positions where you can price risk and capture lifecycle value, including reuse and remanufacturing | You learn too late that your service line is mostly warranty cost, and end-of-life value belongs to rivals |
| You treat transparency on performance, emissions, and material flows as a commercial asset, ahead of the regulation that will require it | You stay exposed to mineral price spikes, export controls, and ESPR rules you then scramble to meet |
Question
For how many of your products could you actually price and carry the outcome â and how many are you still selling as products because that's how you have always sold them?
Pressure 3: The industrial backbone is breaking under new realities
Digital industrialisation is accelerating the tension between competing companies. A small group of frontrunners is already running physical AI in operations, advanced robotics, and software-defined production at scale, while most industrial companies are still trying to close the distance to the frontier that is itself moving too fast for them. The gap between those two groups is not static; it is compounding, and for most companies the binding constraint will partly be knowing what the technology can do, but more importantly having the capability to adopt it when the moment is right.
The strategic question is therefore not whether to lead the frontier, but whether you can systematically absorb the technology when it becomes commercially viable. The companies that succeed will build internal capability to scan, assess, and deploy, not chase every new wave. A âspeedy secondâ model is not a compromise; it is likely to become the only scalable response for most companies.
Meanwhile, the same digital industrialisation that demands a new strategic approach is colliding with a second constraint: an energy system that cannot keep up with what the industrialisation requires. AI compute, electrification of industry, and the net-zero transition are simultaneously pulling on the same grid â and the grid was not built to accommodate all three at once.
The World Economic Forum estimates that AI alone will match general-purpose electricity demand by 2040 â and then continue to outpace it with ever-expanding need. That single statistic reframes the conversation: electricity stops being a utility line item and becomes a strategic input on a par with capital, labour, and raw materials.
Figure 3. Data centre energy demand, current and forecasted (Source: DNV, Global Energy Transition Outlook 2025 - âForecast AI Electricity Demand Growth to 2060â)
The bottleneck is not generation alone; it is the physical infrastructure that moves and transforms power. Power-transformer lead times reached 120-plus weeks in 2025, with high-voltage equipment closer to 150. Prices have risen sharply, and deficits are projected to ease only modestly through 2030 (Source: woodmac.com).
The consequence for industrial companies is concrete and immediate: where you can locate new capacity and whether you can secure reliable power there at viable cost is no longer a facilities question, but a footprint-design question, and it sits at the centre of any credible strategy for the next decade.
Energy is a hard physical constraint, and talent is becoming the equivalent human constraint, tightening at the same time. As automation removes repeatable, low-variability tasks, the remaining work becomes more complex and experience-based and increasingly depends on the very workforce that is becoming scarce, particularly in the EU, the US, and China.
The demographics are not a forecast; they are arithmetic. By 2040, more than 25% of the population in both the EU and China will be over 65, whereas the US sits around 22%.
Figure 4. Population projections 2024â2040 (Source: Implement Consulting Group visualisation based on UN DESA data)
This creates a structural tension that connects back to trends 7 and 8 (digital industrialisation and the energy constraint): the need for automation rises at the exact moment when the people with the skills required to run and improve complex systems are retiring and leaving the workforce. What used to be a cost and efficiency question is becoming a continuity question. The capabilities required from large parts of the workforce will also change as physical AI and agentic setups become standard in organisations.
The implication is that AI, automation, and workforce need to be treated as one integrated strategy, focused on preserving and transferring critical knowledge. Automation should be deliberately prioritised where it reduces dependency on scarce skills, enabling a sustainable workforce with the right capabilities. The companies that manage this â and start to prepare for it already today â will be the ones building for the future reality instead of the one they are leaving behind.
| If you lean into this pressure⊠| If you don't⊠|
| You treat power availability as a footprint-design input on a par with capital and labour | You commit capacity where you cannot secure reliable power at viable cost |
| You build internal capability to adopt maturing technologies at the right moment, not chase the frontier | You either fall behind the frontier or burn capital chasing every wave |
| You manage AI, automation, and workforce as one strategy, protecting continuity where skills are scarcest | You face structural shortages in exactly the roles that keep complex systems running |
| You design resilience into the network â geographically, operationally, and materially | You arrive too late to redesign, when constraints have already become binding |
Question
When the technology you have been waiting for finally becomes viable, is your organisation built to absorb it, or will you discover you no longer have the people who could?
Three programmes do not make a strategy
Each of these three pressures is already on the radar in most large industrial companies. The uncomfortable truth is that they are rarely on the same radar. They are owned by different teams, governed by different KPIs, and managed on different time horizons. And the most consequential decisions sit precisely at their intersections.
- A footprint move that looks attractive on geopolitical grounds may prove unworkable given grid constraints and local talent availability.
- An outcome-based service model unravels if it cannot deliver and prove the performance it has committed to across complex value chains.
- A portfolio shift towards energy-transition technologies can leave you exposed if your supply network and operating backbone are not resilient enough to support it.
The companies that will lead to 2040 are not the ones that respond to each pressure most aggressively. They are the ones that see them as a single design challenge and build an organisation capable of holding all three at once. And that is a different kind of leadership task than most industrial companies are currently organised for. Most industrial strategies were built for a world that will have ceased to exist come 2040. The question is whether you are rebuilding yours for the one that is arriving.
