Digitalization Across End Markets and Verticals: Leaders and Laggards

Digitalization can take many forms and involves a wide range of foundational technologies such as digital twins, digital thread software, hardware virtualization, various forms of Artificial Intelligence (AI), robotics and automation, a wide spectrum of wide area and short-range wireless connectivity, sensors, and myriad design and operations software solutions. Below is a short overview of how verticals are both similar and different with regard to their digitalization strategies.

• Commonalities:
  • Common Underlying Digitalization Technologies: Ultimately, almost all foundational horizontal digitalization technologies will end up being adopted by all verticals, with Generative Artificial Intelligence (Gen AI) being a good example of a technology with adoption accelerating across all verticals; hardware virtualization is now also being implemented across most verticals ranging from virtual Programmable Logic Controllers (PLCs) in manufacturing to virtual energy substations (see ABI Insight “Hardware Virtualization Gaining Momentum Across Verticals, but Adoption Barriers Remain”).
  • Similar Use Cases and Objectives: These range from automation to remote operation, software-defined approaches, cost savings to increase competitiveness, and time to market requirements.
  • Common Drivers and Barriers: Common drivers such as sustainability requirements are mandating the adoption of automated reporting and underlying digitalization needs. Another common driver is the increasing lack of experienced technicians amid the baby boomer exit, resulting in a rush to deploy Gen AI as human amplification of less experienced employees. Common barriers include the lack of understanding of the benefits of technology and, of course, financing constraints.
• Differences:
  • Adoption Speeds: The rate at which digitalization is adopted is very much linked to asset lifecycles (from 10 years for vehicles to 30+ years for energy substations and buildings), varying degrees of prevailing conservative attitudes, and/or inflexible regulation such as in the energy sector.
  • Vertical Specificities: Technology implementations are subject to different requirements in terms of safety and reliability very specific to each vertical; for example, the automotive vertical is subject to very extensive and complex functional safety testing and regulation, which mandates optimized hardware and software approaches such as redundancy and failsafe operation.
  • Technology Optimization and Customization: Taking the example of AI, horizontal capabilities such as Gen AI and Agentic AI are typically enhanced with vertical-specific capabilities, either through enhanced training (to make language models understand industry-specific jargon) or via dedicated AI models for simulating vertical-specific assets (e.g., the Industrial AI concept launched by Siemens at Hannover Messe 2025). The same holds for digital twins, which range from Three-Dimensional (3D) geometrical modeling of buildings to the simulation of the physics involved in processing manufacturing. Finally, sensors are optimized for each vertical, as is the case for automotive radar and Light Detection and Ranging (LiDAR) sensors.

Below, in chronological order (in terms of first adoption), is a high-level summary of the digitalization strategies of key verticals:

• Automotive (15 years): The automotive sector was one of the first verticals to adopt AI (sensor machine vision and driverless operation) and hardware centralization and virtualization (cockpit and safety functionality running on common hardware); it was also among the first to acknowledge the importance of cybersecurity. While the first fleet aftermarket telematics systems were adopted by commercial vehicles, passenger vehicles continue to lead in embedded digital technology. Key automotive technology vendors: Qualcomm, NVIDIA, Mobileye.
• Smart Cities and Commercial Buildings (10 + years): While smart city technologies such as digital twins, adaptive traffic management, and new forms of mobility have been developed and trialed for over 10 years, widespread implementation continues being delayed by a combination of lack of public funding and long decision and slow upgrade cycles. While the commercial building segment is driven by regulation around energy efficiency and safety for newly designed and constructed buildings, retrofitting the large installed base of older buildings represents a big challenge in terms of feasibility and cost amid a large need for transforming office buildings into new retail and residential housing spaces. Recently, data centers have become the single most important building category. Key building technology vendors: JCI, Siemens SI, Schneider Electric, Dassault Syst?mes.
• Manufacturing (5 years): The Industrial sector was relatively late in embracing digital transformation, but has been the fastest growing segment in the past 5 years, adopting a wide range of technologies ranging from 5G private networks to product and production line design and management software (Product Lifecycle Management (PLM), Manufacturing Execution System (MES), Application Lifecycle Management (ALM), etc.), as well as software-defined automation (PLC virtualization). Reshoring trends in the wake of geopolitical shifts are expected to further fuel factory digitalization in the future. In terms of digital maturity, most companies have now moved to the tech implementation stage of actively evaluating suppliers and planning deployments. Key manufacturing technology vendors: Siemens DI, Dassault Syst?mes, AVEVA (Schneider Electric), Rockwell Automation.
• Energy (2 years): The energy sector is coming late to the digitalization table, but is now catching up by adopting new concepts such as virtual substations and a wide range of grid management software suites that will be critical to maintain the resilience, flexibility, and reliability of increasingly distributed, complex, and unpredictable energy networks as a result of the ongoing energy transition toward renewables. Key energy technology vendors: Schneider Electric, Siemens SI, GE Vernova, ABB, Hitachi Energy.

While almost all verticals by now have established solid digitalization strategies, with laggards catching up to the leaders, there is still a huge disparity within the verticals themselves, with larger brands being far ahead of smaller operations that are hampered by smaller budgets and lower levels of awareness and understanding of the potential of new technologies. Going forward, it will be critical for vendors to develop adequate solutions and consultancy services, including after-sales support across the entire company size spectrum. Recent examples include the formation of the Accenture Siemens Business Group announced at Hannover Messe 2025 and the strategic collaboration between Amazon Web Services (AWS) and Capgemini.

Valuable learnings can be derived from how various verticals have gone about their digitalization journeys:

• Don’t Be Left Behind: Digitalization adoption is accelerating even in traditionally lagging markets like energy. It is critical to innovate early and optimize frequently. For lagging verticals, it needs to be a top boardroom priority. The cost of failing to embrace digitalization is huge for companies in terms of missing out on cost savings and losing their competitive edge.
• Avoid Operating in Isolation by Adopting Best Practices from Other Verticals: Some companies in other verticals will have gone through the same technology selection and implementation processes and issues. Identifying successful use cases providing clear benefits and avoiding known implementation hurdles are just some of the learnings new entrants need to prioritize and take advantage of to accelerate their own adoption cycles.

• Keep Innovating: Digitalization is not a one-off project, but a continuous effort to upgrade systems toward ever higher forms of digitalization and automation by adopting new generations of technologies. Being first might be good to acquire first-mover competitive advantages, but this is ultimately about completing a marathon with upgradeability and scalability as key enablers.
• For Technology Vendors: Leverage horizontal technological capabilities through advanced vertical customization; develop in-depth vertical expertise in-house.