Manufacturing pivots to service as Industrial AI accelerates transformation and sustainability gains prominence

A new study reveals that manufacturing is shifting towards service-led growth, driven by advances in Industrial AI, sustainability efforts, and evolving customer expectations, signalling a transformative era for the sector.

A recent global study by IFS, in collaboration with Accenture, has revealed a fundamental shift in the manufacturing sector, where service is rapidly becoming a strategic engine for profit and growth rather than remaining a mere support function. The...

“State of Service 2025: Manufacturing Transformation Report,” based on insights from 800 senior manufacturing leaders, highlights that servitization—a business model that integrates services with products—is viewed by nearly 40% of respondents as central to their long-term growth strategies. This evolution is underpinned by advances in Industrial AI, sustainability efforts, and changing customer expectations, which are collectively transforming how manufacturers compete, operate, and create value.

The report underscores that manufacturing is currently in a state of transition driven by rapid technological advancements and the need to meet evolving client demands. Most manufacturers, about 63%, are prioritising investments in cloud infrastructure and emerging technologies such as artificial intelligence, the Internet of Things, and augmented reality to fuel future growth. However, despite nearly all manufacturers using AI in service delivery, there is a significant gap in scaling AI across all operations. Almost three-quarters of manufacturers have yet to embed AI widely beyond pilot projects, revealing barriers including data quality issues, governance challenges, cybersecurity concerns, and difficulties integrating AI with legacy systems. Accelerating AI adoption and operational modernisation is crucial for manufacturers to maintain competitiveness as services become core revenue drivers.

Mark Moffat, CEO of IFS, commented on this transformation: “Manufacturing is undergoing a defining transformation. Service has evolved from a support function into a core profit engine, with 94% of manufacturers reporting that new service models are already impacting operations. Industrial AI and sustainability are now central to delivering smarter, faster, and more personalised service.” Gert Müller, EMEA Intelligent Asset Management Lead at Accenture, further elaborated: “Service has reached a tipping point: it is no longer a support function but the front line of competitive advantage. With Industrial AI maturing rapidly, manufacturers can anticipate needs, personalise experiences, and extend service value like never before.”

Industrial AI not only drives predictive maintenance and real-time decision-making but also supports operational technology intelligence that enables autonomous factory processes. According to industry insights from Microsoft, AI assists frontline workers by automating repetitive tasks and delivering precise information at the point of need, enhancing productivity and accelerating workforce upskilling. AI-powered applications, including generative AI tools, help create work orders from unstructured data and efficiently manage service resources, particularly valuable in high-demand environments. These capabilities are pivotal in reshaping manufacturing’s operational and customer service paradigms.

The evolution toward service-driven manufacturing also demands substantial workforce reskilling. The report highlights that 98% of manufacturers face labour shortages, intensifying the need for developing internal capabilities. Companies are increasingly implementing training academies, e-learning, academic collaborations, and selective automation not merely to fill roles but to prepare employees for a digital, service-centric future.

Sustainability emerges as a prominent priority in this transformation. Nearly all manufacturers consider it strategic, and a majority are actively tracking emissions associated with service activities, some doing so in real-time. Practices consistent with the circular economy, such as refurbishing components, optimising delivery routes, and employing predictive maintenance, are increasingly embedded into service models to reduce waste and extend asset lifecycles. This aligns manufacturing profitability with environmental responsibility, a dual imperative in today’s industrial landscape.

Yet, challenges remain, particularly regarding supply chain resilience. Despite wide recognition of disruptions over the past year, only about a third of manufacturers express strong confidence in their supply chain robustness. This indicates significant opportunities remain to improve risk management through enhanced planning, scenario modelling, and local sourcing strategies.

Complementing the findings of the IFS report, AVEVA—a leader in industrial AI solutions—demonstrates how AI-driven technologies can drive substantial efficiency and sustainability gains across the industrial lifecycle, with case studies showing significant savings and improved asset availability through predictive analytics. Meanwhile, practical examples like SMART Modular Technologies in Malaysia illustrate how AI-powered robotics and quality inspection tools are elevating manufacturing standards and operational predictability, showcasing how digital transformation is taking hold globally.

In sum, the manufacturing sector is redefining itself through a paradigm where service innovation, bolstered by Industrial AI and sustainable practices, is central to future competitiveness. Those manufacturers able to overcome integration challenges, invest in workforce transformation, and embed sustainability will likely lead the next era of industrial growth. The insights from the IFS and Accenture study serve as a call to action for manufacturers to swiftly embrace these shifts or risk falling behind in an increasingly service-driven market landscape.

Source: Noah Wire Services