March 2024Dentsu Consumer Navigator:Generative AI 2024|Navigator|Navigatordentsu Consumer Navigator Generative AI 2024About this studyThe survey was conducted by dentsu via Toluna,an online research panel.Administered on March 6th,2024.Distributed among a random sample of 1,000 U.S.respondents 18 years of age or older.Controls for nationally representative weighting across age,gender,region,race and ethnicity(using the latest publicly available U.S.Census numbers).Contents0101Top Consumer Insights02Gen AI Adoption Is Growing03Doubt Shadows The Future04Gen AI Can Boost Marketing05Implications for Marketersdentsu Consumer Navigator Generative AI 2024Compared to 2023,use of gen AI has grown significantly.A whopping 40%of our survey respondents are“Avid Users,”those who report using gen AI tools at least weekly.These users tend to be younger and more diverse.Currently,it appears gen AI is more widely adopted for professional work than personal tasks.Users view generative AI as a co-pilot.A majority of users think generative AI enhances their work,but acknowledge they often need to adjust the output.Top use cases include answering queries,summarizing information,improving writing,and kickstarting brainstorming.Despite more exposure than 2023,skepticism and concern remain.This is unsurprisingly most evident among Casual and Non-users of generative AI;however,interestingly,Gen Z also exhibits a healthy dose of skepticism.Embarking on their education and entering the workforce as generative AI matures,its clear the young generation is grappling with the implications.01dentsu Consumer Navigator Generative AI 2024Concern about telling fake from real has exploded since 2023.Respondents who are concerned“it will become harder to tell whats fake from whats real grew 13-percentage points since last year.This finding comes amid an epidemic of misinformation in an election year and dystopian“deep fake”technology.Consumers support brands using AI,but most do not yet prefer it.Our survey finds that 60%of consumers support brands using generative AI to design products and services.However,fewer(41%)agree:I prefer brands that use AI to design products and services over ones that do not.Millennials are most likely to prefer brands using AI(57%).Brands have a mandate to use AI responsibly and transparently.Our survey finds that 78%of consumers agree that brands should ensure existing biases are not propagated by the AI-based applications they leverage.And 81lieve brands should disclose to consumers when content is AI-generated.Top Consumer InsightsGen AI Gen AI Adoption Is Adoption Is GrowingGrowing|Navigator|Navigator02dentsu Consumer Navigator Generative AI 2024One year after the viral launch of Open AIs ChatGPT,generative Artificial Intelligence(AI)is as top-of-mind as ever and increasingly top of the list on marketers agendas.Our survey takes the pulse of consumer adoption of gen AI,what type of tasks they are using gen AI tools for,and how they feel about the current capabilities of the technology.dentsu Consumer Navigator Generative AI 20246Since last year,generative AI has grown from an experiment to a mainstay.The share of consumers who feel they completely understand generative AI jumped 12-percentage points since ChatGPTs viral release in March 2023.Those who have never heard of gen AI decreased 7-points.21!&33!%6%6%How Consumers Currently Feel About Generative AI20232024Completely understand what it is and how it works.Somewhat understand what it is and how it works.I have heard of it but thats it.I have never heard of it. 12 pts-7 ptsdentsu Consumer Navigator Generative AI 20247As gen AI matures,excitement grows,but so does fear and skepticism.As the average consumer becomes more familiar with generative AI,we see both positive and negative emotions growing.Consistent with last year,consumers are curious above all else and few feel ambivalent.45E550011 EE885533$%CuriousSkepticalExcitedHopefulFearfulConfusedAmbivalentHow Consumers Currently Feel About Generative AI20232024 4 pts 5 pts 3 ptsdentsu Consumer Navigator Generative AI 20248Gen Z is most curious,Millennials most excited,and Boomers most skeptical.But notably,Gen Z also over-indexes for skepticism,confusion,and fear.Clearly the youngest generation is grappling with what developments in generative AI will mean for their future.56VAA66)(SSEE882222!DDFF&33%CuriousSkepticalHopefulExcitedConfusedFearfulAmbivalentHow Generations Feel About the Current State of Generative AIGen ZMillennialsGen XBoomers42Bntsu Consumer Navigator Generative AI 20249Who are the users and non-users of generative AI?Avid Gen AI Users*Casual Gen AI Users*Non-Users*40%of survey respondents40%of survey respondentsUse gen AI tools at least weekly.Use gen AI tools at least weekly.Feel excited,curious,hopeful.Feel excited,curious,hopeful.OverOver-index male(59%).index male(59%).OverOver-index Millennials(46%)and Gen index Millennials(46%)and Gen Z(24%).Z(24%).OverOver-index Hispanic(22%)and index Hispanic(22%)and Black/AA(21%).Black/AA(21%).20%of survey respondents20%of survey respondentsUse gen AI tools monthly or less often.Use gen AI tools monthly or less often.Feel curious,skeptical,excited.Feel curious,skeptical,excited.50/50 M/F.50/50 M/F.OverOver-index Gen Z(27%).index Gen Z(27%).OverOver-index Hispanic(21%)and index Hispanic(21%)and Black/AA(18%).Black/AA(18%).40%of survey respondents40%of survey respondentsHave never used gen AI tools.Have never used gen AI tools.Feel skeptical,curious,fearful.Feel skeptical,curious,fearful.OverOver-index female(58%).index female(58%).OverOver-index Boomers(39%)index Boomers(39%)and Gen X(29%).and Gen X(29%).OverOver-index white(79%).index white(79%).*Avid Gen AI Users are defined as respondents who report using generative AI at least weekly.*Casual Gen AI Users are defined as respondents who report using generative AI monthly or less often.*Non-users defined as respondents who report never using generative AI for any reason.dentsu Consumer Navigator Generative AI 202410Generative AI is more frequently used professionally than for personal reasons.Among employed respondents,30%say they use generative AI tools DAILY in a professional setting.Comparatively,just under 1 in 5 gen pop respondents use gen AI tools daily for personal reasons.190! %9%872%Gen Pop:In mypersonal life.Employedrespondents:In myprofessional life.Frequency of Using Generative AI Tools In The Following SettingsDailyWeeklyMonthlyLess oftenNeverOverlap:32%of respondents use gen AI personally and professionally at least monthly.dentsu Consumer Navigator Generative AI 202411If generative AI has any impact on peoples personal lives,they say its positive.Unsurprisingly,Avid users of the technology are most likely to say the impact is positive.Notably,Non-users do not see gen AI as having a negative impact,most say it has little to no impact on their personal lives right now.45ExxDDFFHHss%9%9%4%4%7%7%Gen.Pop.Avid Gen AI UsersCasual Gen AI UsersNon-UsersCurrent Impact of Gen AI On Consumers Personal LifePositiveNeutralNegative45%Of US consumers say generative AI has a positive impact*on their personal life right now.*Impact could stem from respondents own actions,friends or coworkers actions,their employers actions or from perceived cultural shifts at large.dentsu Consumer Navigator Generative AI 202412Over half predict that positive impact will continue over the next 12 months.Interestingly,the share of respondents who predict a positive impact over the next 12 months is higher across all cohorts than the corresponding share who say impact is currently positive,indicating optimism.53SWW$6666VV%4%4%9%9 %Gen.Pop.Avid Gen AI UsersCasual Gen AI UsersNon-UsersAnticipated Impact of Gen AI On Consumers Personal Life Over the Next 12 MonthsPositiveNeutralNegative53%Of US consumers say generative AI will have a positive impact*on their personal over next 12 mos.*Impact could stem from respondents own actions,friends or coworkers actions,their employers actions or from perceived cultural shifts at large.dentsu Consumer Navigator Generative AI 202413Over half of workers feel generative AI positively impacts their professional life.Currently,it appears the impact of generative AI on professional life is more positive than the impact on peoples personal lives.Again,Avid users are most likely to say so,while Non-users say there is no impact.57WDD55CCgg%8%8%3%3%Gen.Pop.Avid Gen AI UsersCasual Gen AI UsersNon-UsersCurrent Impact of Gen AI On Employees Professional LifePositiveNeutralNegative57%Of employed respondents say generative AI has a positive impact*on their professional life right now.*Impact could stem from respondents own actions,friends or coworkers actions,their employers actions or from perceived cultural shifts at large.dentsu Consumer Navigator Generative AI 202414Slightly more predict that positive impact will continue over the next 12 months.Again,it is interesting that the share of Casual and Non-users who predict a positive impact over the next 12 months is higher than the corresponding share who say impact is currently positive.Workers hold optimism for gen AIs adoption.60TT$0033aa%5%5%Gen.Pop.Avid Gen AI UsersCasual Gen AI UsersNon-UsersAnticipated Impact of Gen AI On Employees Professional Life Over the Next 12 MonthsPositiveNeutralNegative60%Of employed respondents say generative AI will have a positive impact*on their professional life over next 12 mos.*Impact could stem from respondents own actions,friends or coworkers actions,their employers actions or from perceived cultural shifts at large.dentsu Consumer Navigator Generative AI 202415Users most often to turn generative AI with queries,despite risk of inaccuracies.Other top tasks include creative or improving writing and summarizing information.While fewer consumers have branched outside of text-based tasks,one-quarter say they turn to gen AI for conversation and companionship!58X6655442200&%#%2%2%Answering a question.Creating or improving writing.Summarizing information.Brainstorming ideas or starting a task.Creating or improving images.Getting personalized recommendations.Conducting data analysis.Having conversations and companionship.Creating or improving videos.Creating or improving music.Creating or improving coding.Other,please specifyTasks Users of Generative AI Have Turned To Tools To Completedentsu Consumer Navigator Generative AI 202416Generations are using generative AI for slightly different tasks.While answering a question is the most performed task across generations,Boomers primarily use gen AI tools this way(83%vs.23%for the next most popular task,getting recommendations).Younger generations are more varied in their tasks.Generational Users Who Use Gen AI to Perform the Following TasksTotalTotalGen ZGen ZMillennialsMillennialsGen XGen XBoomersBoomersAnswering a question(58%)Answering a question(56%)Answering a question(51%)Answering a question(56%)Answering a question(83%)Creating or improving writing(36%)Brainstorming ideas(43%)Creating or improving writing(46%)Summarizing information(35%)Getting personalized recommendations(23%)Summarizing information(35%)Creating or improving writing(38%)Creating or improving images(40%)Brainstorming ideas(33%)Summarizing information(20%)dentsu Consumer Navigator Generative AI 202417Users feel gen AI does a better job completing tasks than they would have alone.While sentiment is strong across all tasks,users feel AI does the best job on analysis and editing-related tasks.About 1 in 5 users feel AI does a worse job when it comes to select creativity,like imagery and music-related tasks,and companionship.91yyxx%9%9!%Conducting data analysis.Creating or improving videos.Creating or improving coding.Creating or improving writing.Answering a question.Summarizing information.Getting personalized recommendations.Brainstorming ideas or starting a task.Creating or improving images.Creating or improving music.Having conversations and companionship.Users of Generative AI on Gen AIs Performance Completing TasksAI did a better job than I would have alone.AI did a worse job than I would have alone.dentsu Consumer Navigator Generative AI 202418Yet,users report typically adjusting gen AIs output to a large or moderate extent.The biggest adjustments typically occur during multi-media creative work,such as creating or improving videos,images,and music.Its clear that while users appreciate the assistance of gen AI,they also recognize it is not perfect.3338866AA771133&%FFAA5577AA88DDDD77EE%Creating or improving videos.Creating or improving images.Creating or improving music.Creating or improving coding.Conducting data analysis.Getting personalized recommendations.Having conversations and companionship.Brainstorming ideas or starting a task.Creating or improving writing.Summarizing information.Answering a question.Users of Generative AI on the Extent They Typically Adjust Gen AIs Output During Tasks Large extentModerate extent79xwvtrqpidc%MOST ADJUSTEDLEAST ADJUSTEDdentsu Consumer Navigator Generative AI 202419Consumers trust gen AI to steer our education and businesses,but not our cars.There appears to be misplaced trust in gen AI tools to provide accurate information.Consumers least trust gen AI to steer autonomous driving,and to advise them on intimately personal matters,such as relationship or childcare advice and therapy.60YYXXVVSSIICCAA88&1166BBDDGGHHucationBusinessstrategyHolidayplanningFashiondesignFinancialadviceHealthcarediagnosisRelationshipadviceTherapy&counselingAutonomousdrivingChildcareadviceLevel of Trust or Distrust In Gen AI In the Following ScenariosTrustNeutralDistrustTRUSTTRUSTDISTRUSTDISTRUSTDoubt Doubt Shadows Shadows The FutureThe Future|Navigator|Navigator03dentsu Consumer Navigator Generative AI 2024Generative AI is spreading throughout our lives into some of the most important sectors from our jobs to our healthcare to personal and public transportation.As Americans think about implications of this proliferation on the future,our survey finds that they are both concerned about the potential of this new technology and excited.dentsu Consumer Navigator Generative AI 202421Over 8 in 10 consumers feel generative AI is“the future.”Sentiment is consistent with last years findings and strong across audience cohorts.83%Of US consumers say generative AI is“the future:a big part of our lives in 10 years.”78xss%7%7 232024Gen ZMillennialsGen XBoomersAvid UsersCasual UsersNon-UsersOpinion On Whether Generative AI Is the Future Or A FadThe futureA faddentsu Consumer Navigator Generative AI 202422However,the share“excited”by that future is cut in half.As we found last year,consumers are divided on how they feel about the future of generative AI.While 46el“excited,”an increase of 7-percentage points since 2023,one-third continue to feel“concerned.”46%Of US consumers are“excited”for the future of generative AI.399FFVVbbAAvvFF) 66VV(SS2222$#&00 232024Gen ZMillennialsGen XBoomersAvid UsersCasual UsersNon-UsersFeelings Towards The Future of Gen AIExcitedNeutralConcerneddentsu Consumer Navigator Generative AI 202423Motivations behind consumer excitement have not changed much since last year.Excitement stems from tangible,day-to-day applications helping with daily tasks,improving accessibility,automating repetitive tasks as well as from broad promises aiding discovery of new innovations and advancing society.377663366%! 88886644#%It will help people with their daily tasksIt will improve accessibilityIt will automate repetitive tasksIt will help researchers discover new innovationsIt will advance societyIt will assist in creative tasksIt will lead to better customer experienceIt will lead to higher quality goodsIt will offer companionshipIt will create jobs for peopleNone of the aboveWhat Makes Consumers Excited About the Future of Gen AI20232024dentsu Consumer Navigator Generative AI 202424Reasons for concern have changed significantly primarily discerning whats fake.Respondents who are concerned by such development grew 13-percentage points since last year.Fear that AI will become more intelligent than humans also increased ( 5),while concern about poor customer experience declined(-4).355EE669977&( HHEE77665511$ %It will be hard to tell whats fake and whats real.It will take jobs from peopleIt will lead to new privacy threatsIt will reduce social bondsIt will have negative effects we cant foreseeIt will become more intelligent than humansIt will lead to poorer customer experienceIt will reinforce biasesIt will lead to lower quality goodsNone of the aboveWhat Makes Consumers Concerned About the Future of Gen AI20232024 13 pts 5 pts-4 ptsdentsu Consumer Navigator Generative AI 202425Consumers are divided on whether the effects of gen AI will be more positive or negative.However,slightly more( 5 points)believe“the positive effects outweigh the negative effects”compared to last year.Use of generative AI tools appears most likely to dictate sentiment,with Avid users more positive than less frequent users.51%Of US consumers say“the positive effects of gen AI will outweigh the negative effects.”46FQQSSWWQQBBddRR66TTIIGGCCIIXX66HHdd 232024Gen ZMillennialsGen XBoomersAvid UsersCasual UsersNon-UsersWhich Future-Focused Statement Will Come True?The positive effects of gen AI will outweigh the negative effects.The negative effects of gen AI will outweigh the positive effects.dentsu Consumer Navigator Generative AI 202426Slightly more consumers feel gen AI will“create more jobs than it destroys”than 2023.Despite an increase of 6-percentage points,that share remains at under half of respondents(44%).Millennials are the most optimistic generation,and Avid Gen AI Users are more optimistic about jobs than less frequent users.44%Of US consumers say“gen AI will create more jobs than it destroys.”388DDHHaaCC#ggBB#bbVVRR99WWww33XXww 232024Gen ZMillennialsGen XBoomersAvid UsersCasual UsersNon-UsersWhich Future-Focused Statement Will Come True?Gen AI will create more jobs than it destroys.Gen AI will destroy more jobs than it creates.Gen AI Can Gen AI Can Boost Boost MarketingMarketing|Navigator|Navigator04dentsu Consumer Navigator Generative AI 2024As companies begin to experiment with gen AI,they will want to ensure that the efforts they launch are in keeping with their overall marketing goals and align with consumer expectations.Our survey details what those expectations are,so marketers can be best set up to meet them.dentsu Consumer Navigator Generative AI 202428Consumers continue to support brands using generative AI to power products,services,and experiences.22! 9851!%8%8%9sign products or servicesCreate ads or contentOffer personalizedrecommendationsOffer customer servicesupportConsumer Support or Opposition of Brands Using Generative AI to:20232024202420232024202420232024202420232024202461YUSQS!$()42%OpposeNeutralSupportSupport for brands using AI to power products,services,and experiences runs across audience cohorts except grumpy Boomers.Shopping Habits Through Exclusivity&Convenience:Consumer Sentiment Studydentsu Consumer Navigator Generative AI 202477w)63cYYUUTTssggiiWWTTTTDDPP5544ccffWWXXWWTTIIHH%Create ads or contentDesign products or servicesOffer personalizedrecommendationsOffer customer service support2024-Support of Brands Using Generative AI to:Gen ZMillennialsGen XBoomersMenWomen71q%Millennials are the most supportive generation.And men are more enthusiastic than women.Sentiment is similar to last years findings.dentsu Consumer Navigator Generative AI 202430Consumers see the most potential for gen AI in tech,advertising,and shopping&retail.However,fewer consumers feel the net impact*of generative AI on technology and shopping&retail will be positive compared to last year,declining 9-and 7-percentage points,respectively.Companies will need to roll out AI purposefully.0 0%TechnologyAdvertisingShopping&retailEntertainmentTravelHealthcareFashionAutomotiveFood&restaurantsFinance/bankingCustomer serviceArts&cultureBeauty&groomingSportsPerceived Net*Impact of Gen AI on the Following Industries48H5500)(&$!%*Net Impact is calculated by subtracting the share of respondents who answer that the impact of gen AI will be negative from the share who answer that the impact will be negative,for the following industries.%Change YoY%Change YoY-9 2-7-8 4-5-2 3 6- 62024202357W337777$11#%4%4ntsu Consumer Navigator Generative AI 202431Despite their appetite,consumers dont want AI at the expense of human jobs.This sentiment is remarkably consistent year over year and across cohorts.The consistency is even more interesting given the varied sentiment among respondents about whether AI will“create more jobs than it destroys.”74%Of US consumers say“Brands should limit their adoption of gen AI to protect human jobs.”72rttgguurryyuuppss(&33%(!%00 232024Gen ZMillennialsGen XBoomersAvid UsersCasual UsersNon-UsersViews on Limiting Use of Gen AI To Protect Human Jobs Brands SHOULD do this.Brands SHOULD NOT do this.dentsu Consumer Navigator Generative AI 202432Consumers expect brands to disclose when generative AI is involved.Consumers appear especially sensitive to disclosure when interacting with branded content that has been created using generative AI.This may be related to heightened concern about discerning what is“real vs.fake”as AI becomes prevalent.80%Brands should disclose to consumers that a serviceservice is delivered using gen AI.80%Brands should disclose to consumers when they are having interactionsinteractions powered by gen AI.81%Brands should disclose to consumers if branded contentbranded content was created with gen AI.74%Brands should disclose to consumers if a productproduct was designed with gen AI. 2 YoY 6 YoY 6 YoY 1 YoY 2 YoYdentsu Consumer Navigator Generative AI 202433Consumers believe the development of gen AI should be closely managed,and brands have a key role to play in encouraging dataset quality and bias reduction.78%AGREE:“It should be required that the datasets generative AI tools are trained on are reviewed for bias and inaccuracies.”78%AGREE:“Brands should ensure that existing biases are not propagated by the AI-based applications they leverage.”81%AGREE:“We must keep a close eye on the development of generative AI,so it doesnt get out of control.”dentsu Consumer Navigator Generative AI 202434For a select share of consumers,the use of AI by brands drives preference and even a willingness to pay a premium.Sentiment has not changed significantly compared to last year.40%AGREE:I prefer brands that use AI use AI in their customer experience in their customer experience over ones that do not.41%AGREE:I prefer brands that use AI use AI to design products and services to design products and services over ones that do not.35%AGREE:I am willing to pay morewilling to pay more for products and services that are designed with AI.Millennials are most likely to choose and pay more for brands that use AI.Fewer than half of all other cohorts agree.Sentiment is consistent with last years findings.Shopping Habits Through Exclusivity&Convenience:Consumer Sentiment Studydentsu Consumer Navigator Generative AI 202477w544DCC88XXVV8844! IIGG88223311%I prefer brands that use AI to design productsand services over ones that do not.I prefer brands that use AI in their customerexperience over ones that do not.I am willing to pay more for products andservices that are designed with AI.%Who Agree with the Following Statements:Gen ZMillennialsGen XBoomersMenWomen57Wntsu Consumer Navigator Generative AI 2024Implications for MarketersPromote efforts of augmentation vs.automation.Promote efforts of augmentation vs.automation.As consumers crave AI-driven experiences while advocating for the preservation of human jobs,companies face a delicate balance.Promoting gen AI investments can enhance brand image,yet these investments must add to rather than replace human interaction.Following the lead of consumers,who tend to use AI to augment rather than automate,can be a savvy approach.Generate endless inspiration.Generate endless inspiration.Brands and marketers can leverage consumers confidence and trust in generative AI tools as a springboard for inspiration.Top tasks include idea generation,holiday planning,fashion selection,home design,and more.The potential applications span across industries and are a safe and easy starting point for marketers looking to dip their toes into AI-powered experiences.Adopt transparent marketing/advertising.Adopt transparent marketing/advertising.Its no secret gen AI has the power to meet consumer expectations for customization at scale.Yet,alongside this capability,consumers are seeking transparency from brands regarding the use of AI technologies.As expectations evolve in this new landscape,clear communication and disclosure about the involvement of AI becomes paramount.In essence,transparency emerges as the cornerstone of trust and ethical practice in the utilization of AI-driven marketing.05dentsu Consumer Navigator Generative AI 2024Implications for MarketersContinually evaluate search practices.Continually evaluate search practices.With a majority of users turning to gen AI to answer a question,its clear that these tools will revolutionize how people find and consume information.In the immediate future,marketers have a unique opportunity to harness the power of generative AI tools to create compelling,tailored content that aligns seamlessly with search intent,thus enhancing SEO efforts.Marketers should continue to work with agency partners to monitor evolutions in the search space.Develop industry standards.Develop industry standards.While more consumers are using gen AI for a growing list of tasks,its clear that skepticism and caution remain key barriers to adoption and acceptance.To instill trust,companies can work with creators and agencies to create industry standards.By fostering accountability within the industry,businesses can actively address concerns.Moreover,developing and adhering to industry-wide best practices also cultivates a more conducive environment for the sustainable growth and advancement of gen AI technologies.Organizations cant afford to wait.Organizations cant afford to wait.With AI already in the hands of their workforce,and widespread concern about job replacement,organizations need a clear policy for AI in action.This includes robust training programs to equip employees with the skills needed to work alongside AI,transparent communication about the role of AI in their roles,and clear guidelines on how AI will be integrated into workflows.05Dentsu is the network designed for whats next,helping clients predict and plan for disruptive future opportunities and create new paths to growth in the sustainable economy.Taking a people-centered approach to business transformation,we use insights to connect brand,content,commerce and experience,underpinned by modern creativity.As part of Dentsu Group Inc.(Tokyo:4324;ISIN:JP3551520004),we are headquartered in Tokyo,Japan and our 71,000-strong employee-base of dedicated professionals work across four regions(Japan,Americas,EMEA and APAC).Dentsu combines Japanese innovation with a diverse,global perspective to drive client growth and to shape society.https:/ dentsu

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DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Contents Letter from the Secretary.4 Leveraging AI to Advance the DHS Mission.5 AI-driven Challenges to Homeland Security.6 Responsible Use of AI .7 A Coordinated,Government-Wide Approach.8 Who Does What at DHS.9 DHS External Engagement on AI.11 Overview of the Lines of Effort Responsibly Leverage AI to Advance Homeland Security Missions .13 Promote Nationwide AI Safety and Security .18 Continue to Lead in AI through Strong,Cohesive Partnerships.22 Glossary.24 3 4 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Letter from the Secretary Artificial Intelligence may well be the most consequential technology of our time.It has the power to innovate beyond measure,and to reshape how we secure our nation and protect our communities.At the Department of Homeland Security,we embrace the responsibility to ensure that AI is developed and adopted in a way that realizes its full potential while protecting the public from any harm its irresponsible or adversarial use might cause.DHS is at the forefront of employing AI and machine learning technologies and leads by example.With our talented and dedicated team of 260,000 personnel in 22 agencies and offices across the country and around the world,Americans interact daily with DHS more than with any other federal entity.Our use of AI not only delivers real-time benefits to the public,but also fuels our strategic efforts across all areas of homeland security.We are excited to introduce the DHS AI Roadmap.This document outlines our AI initiatives and the technologys potential across the homeland security enterprise.It is the most detailed AI plan put forward by a federal agency to date,directing our efforts to fully realize AIs potential to protect the American people and our homeland,while steadfastly protecting privacy,civil rights,and civil liberties.This initiative aligns with President Bidens Executive Order 14110,“Safe,Secure,and Trustworthy Development and Use of Artificial Intelligence,”which tasks DHS with critical roles to:manage AI in critical infrastructure and cyberspace;promote the adoption of AI safety standards globally;reduce the potential risk of AIs use to facilitate weapons of mass destruction attacks;combat AI-related intellectual property theft;and,ensure our nation attracts talent to develop responsible AI in the United States.Our roadmap for the coming year includes exploring new AI applications and pursuing a whole-of-government strategy for ensuring the safe,secure,and trustworthy development and use of AI.We are seeking to engage partners across the government,private sector,and academia to bolster our nations security.We invite you to collaborate with us in this important mission.Together,we can responsibly and ethically leverage AI to strengthen our national security,improve our operations,and provide efficient services to the public we serve.Alejandro N.MayorkasAlejandro N.MayorkasU.S.Department of Homeland Security SecretaryEric HysenEric HysenU.S.Department of Homeland Security Chief Information OfficerDEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Leveraging AI to Advance the DHS Mission Committed to safeguarding the American people,our homeland and our values,DHS continues to innovate in support of its missions.While it is now frequently in the news,the concept of AI has been around since the 1950s.Initially understood as a machines ability to perform tasks that would have previously required human intelligence,now AI encompasses systems capable of reasoning,inference,and learning.The sophistication of AI systems has grown substantially in the past decade,and particularly in the past few years.AI systems are available to users through internet-based interfaces,increasingly integrated into software,and deployed by businesses and governments around the world.DHS has used AI for well over a decade and continues to increase the breadth,depth,and maturity of AIs application across the Department.For example,as early as 2015,the Department piloted the use of machine learning(ML)technologies to support identity verification tasks.Since then,DHS has successfully implemented other AI-powered applications to enhance efficiencies and foster innovation in border security,cybersecurity,immigration,trade,transportation safety,workforce productivity,and other domains critical to protecting the homeland.Every DHS component and office is working to meaningfully assess the potential benefits of AI to the DHS mission,and to responsibly harness its potential to further transform our operations.The Department has already published 41 different uses of AI in the AI Use Case Inventory at https:/www.dhs.gov/data/AI_inventory,and the list will grow as we expand use of AI.Some examples include:DHS is using AI to keep fentanyl and other dangerous drugs out of our country.The United StatesCustoms and Border Protection(CBP)uses an ML model to identify potentially suspicious patternsin vehicle-crossing histories.CBP recently used the model to flag a car for secondary review,whichyielded the discovery of over 75 kgs of drugs hidden in the automobile.DHS is using AI to aid our law enforcement officers in investigating heinous crimes.In 2023,theUnited States Immigration and Customs Enforcement Homeland Security Investigations OperationRenewed Hope identified more than 300 previously unknown victims of sexual exploitation thanks inpart to an ML model that enhanced older images to provide investigators with new leads.DHS is using AI at the Federal Emergency Management Agency(FEMA)to more efficiently assessdamage to homes,buildings,and other properties after a disaster.This approach allows FEMAinspectors the ability to look at some impacted structure damage remotely instead of conductinginspections exclusively in-person,leading to swifter delivery of disaster assistance to survivors.DHS is using AI to make travel safer and easier.By introducing customer-facing technologies such asTouchless Check-In at the airport,the Transportation Security Administration(TSA)provides travelersan optional way to navigate TSA security processes,check bags,and board their flights by taking justa photograph.These and other efforts are already saving time at security checkpoints and reducingphysical touchpoints.These and other current uses of AI are conducted in partnership and consultation with the Departments Offices of Privacy,Civil Rights and Civil Liberties,General Counsel,and other appropriate oversight bodies.5 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024DHS Secretary Alejandro Mayorkas participates in a fireside chat at DEFCON 2023.AI-driven Challenges to Homeland Security While there are tremendous opportunities for AI to enhance the DHS mission,AI also introduces new challenges and risks.The proliferation of accessible AI tools likely will bolster our adversaries tactics.Cyber actors use AI to develop new tools that allow them to access and compromise more victims and enable larger scale cyber-attacks that are faster,more efficient,and more evasive.Nation-states seeking to undermine trust in our government institutions,social cohesion,and democratic processes are using AI to create more believable foreign malign influence campaigns.Of particular concern are impacts of AI attacks on critical infrastructures,which could result in nefarious actors disrupting or denying activities related to Internet of Things(IoT)technologies or networked industrial systems.Generating and passing poisoned data into a critical sensor could trigger downstream impacts,such as service disruptions or system shut-offs.AI enabled technologies are also being used to undermine the trust we place in information derived from digital content and is distinct from traditional cybersecurity threats,requiring additional research to understand and build knowledge to inform protections.Similarly,while AI has already enabled innovation in the physical and biological sciences,it also has the potential to substantially lower the barrier of entry for non-experts to design,synthesize,acquire,or use chemical,biological,radiological,or nuclear weapons.Cyber and physical security is foundational to the safety and security of AI.DHS and the Cybersecurity and Infrastructure Security Agency in particular will continue to work to improve the nations overall cyber resilience and to identify and manage risks associated with the misuse of AI/ML technologies.Additionally,as sector risk management agencies,TSA and the United States Coast Guard will continue to assess AI-related risks across the transportation and maritime sectors.6 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 TSA uses new credential authentication technology to improve checkpoint screening capabilities.Responsible Use of AI DHS is committed to ensuring that our use of AI:Is responsible and trustworthy;is rigorously tested to be effective;safeguards privacy,civil rights,and civil liberties;avoids inappropriate biases;and is transparent and explainable to our workforce and to those we serve.Where appropriate it should be interpretable to meet due process requirements in legal or administrative proceedings.DHSs use of AI should advance equity and not function in ways that amplify existing social inequalities.DHS policy aligns with the Departments commitment to lean forward in deploying AI tools to enhance operations and lead the government in the responsible use of AI.The Departments governance and oversight of the responsible use of AI are closely coordinated,highly collaborative efforts that unite operational components and oversight offices from across DHS around the common goal of ensuring responsible use.From day one,DHS components and offices have coordinated closely with our Privacy Office,the Office for Civil Rights and Civil Liberties,the Office of the General Counsel,and additional stakeholders.These collaborations ensure compliance with all applicable laws and policies and establish clear guardrails to prohibit inappropriate use of AI/ML technologies,as well as safeguard privacy,civil rights,and civil liberties.In 2023,DHS announced new policies and measures to promote the responsible use of AI to guide the acquisition and use of AI/ML technologies across the Department.DHS applies the principles of the blueprint for an AI Bill of Rights and will implement the National Institute of Standards and Technologys AI Risk Management Framework within the Department.As new laws and government-wide policies are developed and there are new advances in the field,we will continue to update our internal policies and procedures.7 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 A Coordinated,Government-Wide Approach The Presidents Executive Order 14110,which establishes a comprehensive strategy for AI innovation,directs DHS to partner with other federal agencies to drive a coordinated,government-wide approach.Specifically,DHS will partner with other sector risk management agencies,such as such as the National Institute of Standards and Technology,the Department of Justice,and the Department of Defense,to:Support sector-specific AI risk identification;issue guidance to agencies on how to label and authenticate their content;perform security reviews on AI foundational models and other measures;and develop guidelines,standards,and best practices for AI safety and security;The direction provided in the Executive Order is consistent with DHSs innovative work to ensure the safe,secure,and responsible development and use of AI.DHS will continue to manage AI in critical infrastructure and cyberspace,promote the adoption of global AI safety standards,reduce the risk that AI can be used to create weapons of mass destruction and other related threats,combat AI-related intellectual property theft,and help the United States attract and retain skilled talent.8 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Who Does What at DHS The Secretary sets the Departments AI strategy,priorities,and policies,and is the key interlocutor with the private sector,federal interagency,state officials,and key international counterparts.The Secretary represents the Department on the White House AI Council,which coordinates the activities of agencies across the federal government to implement AI policies.In April 2023,the Secretary established an AI Task Force within DHS that drives specific applications of AI to advance critical homeland security missions.The Secretary has also established and will chair a new AI Safety and Security Board(AISSB),which will provide recommendations and advice to the Secretary,the critical infrastructure community,and the broader public on the development and deployment of AI.In the Office of the Secretary,the Secretary has designated the Senior Counselor for Cybersecurity and Emerging Technology to serve as the Executive Director of the AISSB and to advise the Secretary on deploying AI and other advanced technologies to fulfill the Departments mission and support related policymaking across the Department and throughout the US government.The Departments Chief Information Officer(CIO)serves as the designated Chief Artificial Intelligence Officer(CAIO).The CAIO promotes AI innovation and responsible use across the Department and develops,in partnership with DHS offices and components,the Departments internal policies regarding its use of AI.The CAIO sets strategic priorities for AI deployments across the Department,and on behalf of the Secretary,coordinates AI-related efforts in partnerships with DHS offices and components.The CAIO also directs the Departments information security,data governance,information technology,and customer experience functions which enable DHSs use of AI.The Science and Technology Directorate(S&T),on behalf of the Department,is leading AI-related research and development to provide federal,state,and local officials with cutting-edge technology and capabilities to protect the homeland.S&T leads Test&Evaluation(T&E)of AI-enabled systems,as well as the development of AI enabled T&E in partnership with the Privacy Office and operational components.The Office of Strategy,Policy,and Plans(Policy)develops the Departments policy for AI,which includes overseeing the implementation of tasks directed by Executive Order 14110 and enhancing cooperation with international allies and partners on AI governance and risk mitigation.Policy supports the Secretary on the establishment and agenda of the AISSB.The Privacy Office(PRIV)and the Office for Civil Rights and Civil Liberties(CRCL)oversee and provide guidance on the responsible use of AI to ensure the Departments use of AI is transparent,explainable,trustworthy,avoids inappropriate biases,and safeguards privacy,civil rights,and civil liberties.PRIV oversees DHSs use of AI to safeguard personal privacy and ensure compliance with privacy policies.CRCL works to preserve individual liberties,fairness,and equality to ensure compliance with applicable individual rights protections,including(but not limited to)due process and non-discrimination standards,and works to advance equity across all DHS AI use cases.The Countering Weapons of Mass Destruction(CWMD)Office works to prevent attacks using weapons of mass destruction and other related chemical,biological,radiological,and nuclear(CBRN)threats,and leads the Departments work in identifying and reducing risks at the intersection of AI and CBRN threats.CWMD strengthens federal interagency coordination and provides direct financial aid and support to the Departments operational components and state,local,territorial,and tribal partners,and first responders.The Cybersecurity and Infrastructure Security Agency(CISA)conducts cyber defense to protect against AI-enabled threats and secure AI-based software systems,as well as drive related risk reduction and resilience.CISA is also responsible In 2023,CISA released a Roadmap for Artificial Intelligence to outline as set of comprehensive actions that comprise its AI mission.1 9 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024HSI uses AI to investigate heinous crimes.for communicating AI-related threat and risk information,including to critical infrastructure sectors,and responsibly integrate AI software systems across DHS.Operational Components,including the Transportation Security Agency,United States Citizenship and Immigration Service,United States Immigration and Customs Enforcement Homeland Security Investigations,Federal Emergency Management Agency,and the United States Coast Guard,responsibly integrate AI into their operational capabilities to harness the potential of AI.These capabilities include enhanced border security,counter-fentanyl efforts,travel screening,protecting intellectual property,grant and other assistance allocation,and maritime security.The Office of Intelligence and Analysis conducts and provides analysis examining how AI impacts threats,including those related to cybersecurity,foreign malign influence,and counterterrorism,to critical infrastructure and the Homeland Security mission.The Private Sector Office,within the Office of Partnerships and Engagement,fosters strategic communications with businesses,trade associations,and other organizations to create stronger relationships with the Department.The Private Sector Office also helps inform the Secretary on the impacts of AI policies and regulations to the private sector,as well as promotes public-private partnerships and best practices to develop innovative approaches to homeland security challenges.The Office of Partnerships and Engagement will provide administrative support to the AISSB on behalf of the Secretary.The DHS AI Task Force includes representation from across DHS components and is chaired by the Undersecretary for S&T and the CIO.The Task Force was established in April 2023 to drive specific applications of AI to advance critical homeland security missions.In collaboration with CRCL,the Task Force provides guidance,risk assessment,mitigation strategies,and oversight for the protection of individual rights.The Task Force also coordinates work to affect internal Departmental policy changes and applies oversight to all DHS AI activities.10 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 DHS External Engagement on AI DHS works across sectors with critical stakeholders nationwide and conducts strategic engagements and outreach with state,local,territorial,and tribal governments,elected officials,the private sector,faith-based and non-governmental organizations,academia,and communities across the nation.The Department convenes representatives of these stakeholder groups through various channels,ranging from standing advisory bodies to workshops and other targeted gatherings,to ensure the interests are represented through DHSs policy-making process.DHS also shares information and develops recommendations or guidance for increasing security and resilience.Some of the DHS-convened groups that bring together a diverse group of stakeholders to address AI-related issues are listed below:1.The AISSB,established by the Secretary at the direction of the President,pursuant to Executive Order 14110 Executive Order on the Safe,Secure,and Trustworthy Development and Use of Artificial Intelligence,to bring together AI experts from the private sector,civil society,academia,and government.The purpose of the Board is to advise the Secretary,the critical infrastructure community,and the broader public on the development and deployment of AI;provide information and recommendations for improving security,resilience,and safety,including promulgating specific and actionable principles,guidelines,and best practices for the use of AI;and develop effective processes to review and respond to incidents related to the use of AI in critical infrastructure.2.The Homeland Security Advisory Committee(HSAC)leverages the experience,expertise,and national and global connections of the HSAC membership to provide the Secretary real-time,real-world,and independent advice to support decision-making across homeland security operations.In 2023,the HSAC issued recommendations on AI to the Secretary,which helped inform many of the actions outlined in this roadmap.3.DHS has existing structures in the cybersecurity domain that will be called upon to the extent that cybersecurity issues arise in the context of AI use.Chief among them is the Joint Cyber Defense Collaborative,which brings together cyber defenders from organizations worldwide to gather,analyze,and share actionable cyber risk information to enable synchronized,holistic cybersecurity planning,cyber defense,and response.In the event of a significant cyber incident either enabled by AI or on AI systems,the Cyber Safety Review Board will review what happened and produce specific recommendations to limit the likelihood or impact of such an incident in the future.Additionally,the CISA Cybersecurity Advisory Committee is comprised of experts on cybersecurity,technology,risk management,privacy,and resilience,who advise the Director of CISA on policies and programs related to CISAs mission,and specifically,how to drive adoption of secure software design practices.Other advisory panels and committees can be found here DHS Advisory Panels and Committees.11 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 202412 Overview of the Lines of Effort Throughout 2024,DHS will focus on the following lines of effort and associated workstreams:Responsibly Leverage AI to Advance Homeland Security Missions Promote Nationwide AI Safety and Security Continue to Lead in AI through Strong,Cohesive Partnerships DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024Responsibly Leverage AI to Advance Homeland Security Missions While Protecting Individuals Privacy,Civil Rights,and Civil Liberties DHS will lead across the federal government in the responsible use of AI to secure the homeland and defend against the malicious use of AI.We will ensure that our use of AI fully respects privacy,civil rights,and civil liberties,is rigorously tested to avoid privacy harms or impermissible biases and can be explained to the people we serve.WORKSTREAM Continuously and responsibly pilot and implement ONE AI technologies in DHS mission spaces DHS will use AI to support essential functions required to sustain and secure government operations.Generative AI tools,including Large Language Models(LLMs),could become integral in reducing the effort expended on business processes such as managing help desk tickets.This pragmatic approach seeks to leverage AI to streamline administrative tasks,fostering efficiency and cost-effectiveness in the day-to-day functioning of government.AI,applied strategically,serves as a transformative tool by boosting productivity and improving customer experience.In addition to the three pilots listed below,DHS expects to initiate additional pilots across the enterprise,to include using generative AI for language translation.2024 Goals Officer Training Using LLMs U.S.Citizenship and Immigration Services(USCIS)will pilot using LLMs to help train Refugee,Asylum,and International Operations Officers on how to conduct interviews with applicants for lawful immigration.USCIS will generate dynamic,personalized training materials to supplement human training that adapt to officers specific needs to ensure the best possible knowledge and training on a wide range of current policies and laws.The pilot will help enhance officers understanding and retention of crucial information,increase the accuracy of their decisions,and limit the need for retraining.Planning Assistant for Resilient Communities Federal Emergency Management Agency(FEMA)will pilot using generative AI to assist underserved communities and local governments with developing hazard mitigation plans to identify hazards,assess risks and vulnerabilities,and developing mitigation strategies.Approved mitigation plans are a requirement for local governments eligibility for projects funded under FEMAs Hazard Mitigation Assistance program and several other types of FEMA grants for building community resilience.The pilot will specifically support state,local,territorial,and tribal governments understanding of how to craft a plan that identifies risks and mitigation strategies and help those governments draft plan elementsfrom publicly-available,well-researched sources that they can customize to meet their needs.Enhanced Search and Document Comprehension using LLMs Homeland Security Investigations(HSI)will pilot allowing officers to use LLMs to support their investigative processes by,(1)semantically search millions of documents,(2)retrieving relevant case documents,and(3)providing officers a summarized response to a specific query based on relevant documents.These tools should enable investigators to rapidly uncover key information and patterns.These efforts are in support of HSIs work to combat fentanyl,human trafficking,child exploitation and other criminal networks.13 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Transform Border Security U.S.Customs and Border Protection(CBP)will continue to roll-out Non-Intrusive Inspection technology to make border screenings more efficient and to combat the risks associated with smuggling fentanyl and other illicit goods.Non-Intrusive Inspection is a capability used by CBP to conduct secondary screenings at border entry points via x-ray or imaging technologies,which helps CBP identify the need for any additional manual screenings.CBP will use data generated through these screenings to further enhance the imaging to more accurately detect anomalies.Enhance Federal Cyber Defense Cybersecurity and Infrastructure Security Agency(CISA)will assess the impact of using AI-enabled capabilities for cybersecurity vulnerability detection and remediation.CISA will deliver a report to the Secretary of Homeland Security with recommendations for actions that should be taken based on lessons learned from this assessment.WORKSTREAM Build technical infrastructure to accelerate secure TWO AI adoption throughout DHS Enabling effective AI infrastructure is pivotal to the successful operation of DHSs AI ecosystem.This involves strategic considerations across:Data and tool management;storage,computing power,and networking infrastructure;ML operations;continuous integration,delivery,and monitoring;processes to support effective collaboration in governance and management processes;and implementation of privacy enhancing technologies.Chief Data Officers(CDOs)across DHS offices and Components play a critical role in supporting the overall technical infrastructure for AI systems,which relies on high-quality,well-structured data,for reliable and efficient performance.CDOs drive data management across the Department,focusing on model training,data ontology,and privacy as the Department develops AI algorithms.CDOs also ensure precision and responsiveness in outputs,thus enhancing the overall effectiveness of AI applications.2024 Goals AI Sandbox Office of Chief Information Officer,in coordination with Privacy Office,Office for Civil Rights and Civil Liberties,and Office of the General Counsel,will launch an AI Sandbox for an initial set of DHS users to experiment with implementing the responsible use of LLMs in their systems.The aim is to expand the AI Sandbox to additional DHS users within one year and integrate evolving testing and validation standards fitted to DHS mission and use cases.Initial Operating Capability for SURVEYOR Integrated Data Environment United States Coast Guard(USCG)will introduce the SURVEYOR Integrated Data Environment,a suite of technical components serving specific functions within an integrated cloud architecture.This enables capabilities for advanced analytics and AI,including metadata management,data access and discovery,data quality management,data transport,data processing,data storage,data visualization,data analytics,and AI/ML operations.14 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024WORKSTREAM Establish rigorous development,testing,and THREE evaluation practices for AI systems Effective development and independent evaluation processes are paramount to ensuring the responsible adoption of AI systems.A well-defined development process,including an understanding of risk assessment,documentation,and tolerance,fosters the creation of robust and reliable AI systems and helps mitigate and manage risks associated with privacy,inappropriate biases,errors,security,or unintended consequences.Comprehensive evaluation processes are equally critical in assessing the performance,compliance,fairness,transparency,and ethical implications of AI systems.This requires rigorous independent testing,validation,and continuous monitoring to build trust and accountability in AI applications.As a part of Testing and Evaluation(T&E)needs,DHS requires comprehensive AI assurance activities to ensure the effectiveness and robustness of AI applications.These activities include benchmarking,which involves the comparison of AI models against established performance standards,as well as updates and retraining of AI models to enable the integration of new data and insights.When maintained along with testing and validation at appropriate places in an algorithms lifecycle,AI applications can remain accurate,agile,and responsive.To support these efforts,DHS will engage the security researcher community to help identify potential weaknesses in DHS IT systems as part of this commitment to a rigorous and secure development process.DHS will also continue to develop department-wide guidance and policies for use of AI-related technologies,as needed.2024 Goals AI/ML T&E Working Group S&T will establish a Testing&Evaluation working group to support the T&E of DHS systems and publish an Action Plan for T&E of AI/ML enabled systems covering pilots and use cases,algorithm training and test data,acquisition of AI-enabled systems,use of AI for T&E,and AI-enabled adversaries.DHS AI/ML Test Facility S&T will create a federated AI testbed that will provide independent assessment services for DHS components and homeland security enterprise operators.Initial build out will include initial use case,testbed capability stand-up,and a five-year execution plan.Hack DHS for AI Systems The Chief Information Security Officer will host a HackDHS exercise to execute a crowdsourced assessment by vetted researchers on DHS IT Systems with AI.The vetted researchers will be tasked with identifying cybersecurity vulnerabilities in these systems to drive further security enhancements to DHS systems.15 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Establish safe,secure,and trustworthy use of AI WORKSTREAM by DHS through robust governance and oversight FOUR policies and practices In August 2023,Secretary Mayorkas signed DHS Policy Statement 139-06,“Acquisition and Use of Artificial Intelligence and Machine Learning Technologies by DHS Components,”to define the Departments guiding principles for acquiring and responsibly using mission-enhancing AI at DHS.It includes DHSs commitment to meaningful oversight of its AI activities and safeguarding privacy,civil rights,and civil liberties.Among other commitments,DHS will not collect,use,or disseminate data used in AI activities.DHS also will not establish AI-enabled systems that make or support decisions based on the inappropriate consideration of race,ethnicity,gender,religion,sexual orientation,gender identity,age,medical condition,or disability.Furthermore,DHS will only acquire and use AI in a manner that is consistent with the U.S.Constitution and all other applicable laws and policies,especially those protecting privacy,civil rights,and civil liberties.In addition to the commitment to avoid improper profiling,targeting or discrimination,the Policy requires the establishment of an AI risk management framework suitable to the Departments AI activities.DHS will build on this foundational policy by issuing additional policies that institutionalize responsible AI use throughout the Department and implement tailored governance approaches to different types of AI technology.2024 Goals DHS-wide Policy Directive DHS will issue enterprise-wide AI policy building on the guiding principles in DHS Policy Statement 139-06.In line with the FY2023 National Defense Authorization Act,the policy will address the acquisition and use of AI;considerations for risks;privacy,civil rights,and civil liberties impacts;and security against misuse,degradation,or rending inoperable of AI-enabled systems.2 Internal Governance DHS will conduct assessments of new controls and how these controls balance the use of mission enhancing AI with any potential impacts on safety or rights.Through oversight by the highest levels of the Department,DHS will ensure all strategies and Departmental guidance are consistent with Administration policy concerning managing risks in procurement and reducing barriers to responsible use.2 Title LXXII,Subtitle B,Section 7224(b)of the Fiscal Year 2023 National Defense Authorization Act(NDAA)(Pub.L 117-263)16 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Grow an AI-ready workforce through AI literacy for all WORKSTREAM employees,programs to atract,retain,and develop FIVE AI experts,support teams,&sustaining partnerships DHS will direct resources toward initiatives that attract,recruit,develop,and retain talent with technical skill sets to drive oversight and integration of AI capabilities.The Department will encourage interdisciplinary collaboration and forming cross-functional teams that include AI experts alongside other subject matter experts to enhance problem-solving capabilities and ensure that AI is effectively and responsibly integrated into operational and oversight processes.DHS will also prioritize continuous training for employees to expand AI-related skill sets.In late 2023,the Department issued a policy to enable and encourage DHS personnel to responsibly use certain commercial products to harness the benefits of generative AI and ensure they can adapt to the future of work.By early 2024,hundreds of employees had taken training to use generative AI responsibly in some aspects of their daily work.These trainings are the forerunner of a larger effort to upskill our workforce over the course of the year.DHS also plans to integrate more technical personnel into leadership and decision-making roles to achieve necessary development and retainment goals,and to AIcultivate a culture of innovation that effectively integrates data,analytics,and AI capabilities.DHS will create flexible service structures,reward diverse career paths,and foster a culture of continuous learning,to include leadership training and adaptability.2024 Goals AI Corps In February 2024,DHS launched a first-of-its-kind initiative to hire 50 AI experts this year using new direct-hire authority for AI talent.The Department will deploy successful candidates to this DHS AI Corps across the Department to support mission needs and fill key roles,including in the oversight offices.Department-wide Training DHS will grow the number of employees across the Department who are trained and approved to leverage conditionally approved commercial generative AI tools for aspects of their work.DHS S&T will publish recommendations for updating future DHS-wide tiered AI training content and delivery approaches,in line with the AI Training Act.The Act requires that the federal workforce has knowledge of the capabilities and risks associated with AI.DHS will expand education for its governance and oversight personnel to understand AIs technical and operational architecture,as well as policies and standards governing the development and use of AI.Data Analytics and AI Competencies aligned with Department of Defense Cyber Workforce The USCG will continue to mature its data and AI workforce by establishing five new military competencies in the field of data,analytics,and AI.The USCG will implement training for each new competency to upskill our workforce and better align personnel to emerging service demands.Finally,the USCG will conduct data and AI literacy programs at various levels throughout the service to increase cooperation and the effective use of AI capacity.17 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Promote Nationwide AI Safety and Security Advances in AI will revolutionize the delivery of essential goods and services upon which Americans rely.AI can create tremendous efficiencies and benefits for citizens,but it will also present new and novel risks.To protect national networks and critical infrastructure,the President has directed DHS to take several steps to help govern the safe and responsible development,and use of AI.WORKSTREAM Protect AI systems from cybersecurity threats and ONE guard against AI-enabled cyberatacks DHS will capitalize on AIs potential to improve cyber defense.Within DHS,we will conduct operational tests to evaluate AI-enabled vulnerability discovery and remediation techniques for federal civilian government systems.Furthermore,CISA is already actively leveraging ML tools for threat detection and prevention.CISA will continue partnering with government and private sector experts to assess and counter the use of AI by malicious actors targeting government and critical infrastructure systems.For example,in November 2023,CISA and the United Kingdoms National Cyber Security Centre published Guidelines for Secure AI System Development,co-sealed by 23 domestic and international cybersecurity organizations.It provides essential recommendations for AI system development and emphasizes the importance of adhering to Secure by Design principles.2024 Goals Actionable Risk Management Guidance CISA will publish guidance on AI security in partnership with international partners and other federal entities,such as the National Institute of Standards and Technology(NIST),the National Security Agency,and the Federal Bureau of Investigation.Its ongoing AI security guidance will provide suggestions and mitigations to help critical infrastructure owners and operators,data scientists,developers,managers,decision-makers,and risk owners make informed decisions.The guidance will highlight decisions related to the secure design,model development,system development,deployment,operation,and use of AI systems.CISA will provide recommendations on external testing for AI to the Office of Management and Budget for incorporation into guidance for the federal government.CISA will also work with NIST to develop best practices and guidance for AI red teaming,with a focus on the cybersecurity red teaming of AI systems.18 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024Combat AIs use to generate CSAM,CBRN threat WORKSTREAM information,and other material that threatens TWO homeland security The advent of AI may make it easier for malicious actors to develop weapons of mass destruction and other related threats.Of particular concern is the risk of AI-enabled misuse of synthetic nucleic acids to create biological weapons.Also,AI can be used to generate child sexual abuse material(CSAM),either in the form of computer-generated imagery or of benign imagery of real children that has been digitally manipulated to make it appear as though the children are engaged in sexually explicit conduct.To mitigate these risks,DHS will work with the White House Office of Science&Technology Policy(OSTP)and other relevant US government agencies to evaluate the potential for AI to lower the barriers to entry for developing weapons of mass destruction and chemical,biological,radiological,or nuclear(CBRN)threats.Furthermore,DHS will develop a framework to evaluate and stress test synthetic-nucleic acid screening,build a culture of shared expectations for third parties that audit AI systems for misuse,and prevent the risk of abuse and proliferation by malicious actors.DHS will work to combat the use of AI to produce and distribute CSAM,particularly in the forms of new AI-generated content and in the manipulation of benign images of children.2024 Goals CBRN Report and Framework Countering Weapons of Mass Destruction Office(CWMD)will draft a report for the Secretary to deliver to the President on AI CBRN Risks and Benefits as required by Executive Order 14110 section 4.4(a)(i).CWMD will develop a framework to stress-test the OSTP developed system for screening synthetic nucleic acid.CWMD works with NFL,Nevada,and Las Vegas partners to secure Super Bowl LVIII.19 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Assist AI developers in combating AI-related IP thef,developers WORKSTREAM and copyright holders in mitigating AI-related IP risks,and THREE agencies in labeling and authenticating oficial digital contentProtecting intellectual property(IP)is critical to the United States global competitiveness;IP theft threatens businesses and jobs and negatively affects our national security.To address this challenge,DHS,through the National Intellectual Property Rights Coordination Center,will create a program to help AI developers mitigate AI-related IP risks by leveraging Homeland Security Investigations(HSI),law enforcement,and industry partnerships.WORKSTREAM Mitigate AI risks and threats to critical infrastructure FOUR by providing guidelines for secure AI use DHS will work with stakeholders inside and outside of government to develop AI safety and security guidance for use by critical infrastructure owners and operators.CISA,TSA,and USCG are assessing potential risks related to the use of AI in critical infrastructure sectors,including ways in which deploying AI may result in failures,physical attacks,and cyberattacks.We will take a global,harmonized approach by working with international partners on these guidelines.2024 Goals Managing IP Theft Risk HSI will deploy a training and outreach program to educate industry on AI-related IP threats as well as best practices,protection,and mitigation strategies.HSI will launch a program to assist AI developers in identifying AI-related IP theft risks.2024 Goals Sector Risk Assessments CISA will build on its work completing Critical Infrastructure Risk Assessments for AI across all 16 sector risk management agencies.Based on these assessments,CISA will highlight common risk categories and mitigation strategies,then use the analysis to inform future planning efforts and advise critical infrastructure owners and operators.DHS,led by CISA,will incorporate the National Institute of Standards and Technology AI Risk Management Framework and other relevant AI security guidance into safety and security guidelines for critical infrastructure owners and operators.20 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Establish the AI Safety and Security Board as an authoritative WORKSTREAM public-private partnership to enable the safe and secure use of FIVE AI in the delivery of critical services to AmericansAt the direction of the President,the Secretary 2024 Goals will establish and chair the Artificial Intelligence Establish and Commence the Work of the AISSB Safety and Security Board(AISSB)to support the responsible development and deployment of AI.DHS will stand-up and convene the AISSB to provide The AISSB will bring together preeminent industry advice,information,and recommendations to the experts from the AI technology industry;critical Secretary,the critical infrastructure community,infrastructure owners and operators;federal,state,and the broader public on the development and and local governments;academia and research deployment of AI.The AISSB will begin issuing its organizations;and non-profit organizations.recommendations and public facing guidance on improving the security,resilience,and safety of AI usage in critical infrastructure.WORKSTREAM Streamline visa processes to recruit more AI SIX talent to the United States Attracting and cultivating diverse talent in AI and other emerging technologies is critical to the global competitiveness of the United States.DHS will streamline processing times of petitions and applications for noncitizens who seek to travel to the United States to work on,study,or conduct research in AI or other critical and emerging technologies.DHS will also clarify and modernize immigration pathways for such experts,including those for O-1A and EB-1 noncitizens of extraordinary ability;EB-2 advanced-degree holders and noncitizens of exceptional ability;and startup founders using the International Entrepreneur Rule.DHS has already advanced policy consistent with direction in the Executive Order.In October,2023,USCIS published a Notice of Proposed Rulemaking to modernize the H-1B visa specialty occupation worker program and enhance its integrity and usage,and in February 2024,certain provisions were finalized in an H-1B registration rule.USCIS continues to work on rulemaking to enhance the process for noncitizens,including experts in AI and other critical and emerging technologies,as well as their spouses,dependents,and children,to adjust their status to lawful permanent residents.On September,2023,USCIS clarified guidance on evidence for EB-1 individuals of extraordinary ability or outstanding professors or researchers.2024 Goals USCIS Enhancements USCIS will publish updated policy guidance for international students,including how F-1 visa holding students seeking an extension of optional practical training OPT based on their degree in a science,technology,engineering,and mathematics(STEM)field may be employed by startup companies.USCIS will publish a data report,consistent with Executive Order 14110 section 5.1(g)(iii),that shows increased utilization of the O-1 and EB-2 pathways by global STEM talent.21 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Continue to Lead in AI through Strong,Cohesive Partnerships Expanding strategic partnerships through collaboration with industry leaders,research institutions,other government agencies and non-government organizations,and international partners can provide DHS with access to cutting-edge technologies,diverse expertise,and a broader knowledge base.This exchange of knowledge accelerates the development and deployment of AI solutions tailored to the unique challenges faced by the DHS.By fostering a collaborative ecosystem,DHS can harness the collective intelligence of the broader AI community,resulting in more robust,adaptable,and innovative solutions.Foster strong relationships with private sector,academia,WORKSTREAM SLTT governments,international partners,non-government ONE organizations,and thought leaders to advance these objectivesDHS will continue to build on its work through industry collaboration and coordination,and through bilateral engagement within and outside already established channels.In particular,the Secretary will continue to share the Departments vision and mission related to AI with international counterparts and in forums such as the Munich Security Conference.Through the Private Sector Office,DHS will build on successful and widely attended stakeholder convenings to share resources and address questions.CISA,as well,will leverage existing structures to advance industry collaboration and coordination around AI security.For example,CISA will use the Information Technology Sector Coordinating Councils AI Working Group,and the Joint Cyber Defense Collaborative to catalyze focused collaboration around threats,vulnerabilities,and mitigations affecting AI systems.Across the federal government,S&T will participate in the US AI Safety Institute Consortium and manage the Departments related memoranda and agreements that define the partnerships with academia and the private sector.WORKSTREAM Communicate DHS eforts in AI through public TWO messaging and engagement In line with the DHSs commitment to transparency Additionally,the Secretary will communicate the and visibility into the Departments vision for AI and Departments AI-related efforts through engagements to ensuring responsible use,DHS will continue to with the media and across diverse audiences,ranging publicly share information about its own activities and from critical infrastructure owners and operators use.The information will be presented in a way that to technology executives to civil society.Other DHS is accessible for the people it serves.DHS will share leaders will continue to share information broadly products on its public facing website(dhs.gov/ai)and through DHS platforms,at industry conferences,and on its social media channels.in media outlets.22 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024Create transparency and build trust around DHS WORKSTREAM use of AI through engagement with oversight THREE entities and CongressDepartment leadership will continue to engage with Congress,as well as external and internal oversight entities,to provide updates on DHSs use of AI.In 2023,for example,the Chief Artificial Intelligence Officer testified before Congress on“How Federal Agencies are Harnessing Artificial Intelligence,”and has continued to work with committees of jurisdiction across the Senate and the House to describe DHSs planning efforts for both future AI use and protecting against AI-enabled threats.DHS,and Office for Civil Rights and Civil Liberties in particular,will collaborate with federal civil rights offices and independent regulatory agencies to WORKSTREAM Engage with communities,advocates,and partners FOUR to demonstrate responsible AI use The Privacy Office,Office for Civil Rights and Civil Liberties,and Office of Partnerships and Engagement will facilitate Department outreach to communities,advocates,and partners to receive feedback from privacy,civil rights,and civil liberties experts,and communities potentially impacted by the Departments use of AI.This engagement comprehensively use their respective authorities and offices to prevent and address discrimination in the use of automated systems,including algorithmic discrimination.Among other actions,DHS will join the interagency Joint Statement on Enforcement Efforts Against Discrimination and Bias in Automated Systems affirming the Departments responsible use of AI and commitment to ensuring federally conducted and assisted activities comply with civil rights law and policy,as applicable.will be used to inform the development of AI that supports DHS missions,specifically to help build in protections of privacy,individual rights,and fundamental fairness.DHS will continue to host convenings with privacy,civil rights,and civil liberties advocates to share information about DHSs work.23 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCE ROADMAP 2024 Glossary The definitions of the following terms referenced in this document are drawn from Executive Order 14110,unless otherwise specified.ARTIFICIAL INTELLIGENCE(AI)The term“Artificial intelligence”(AI)meets the definition spelled out in 15 U.S.C.9401(3):a machine-based system that can,for a given set of human-defined objectives,make predictions,recommendations,or decisions influencing real or virtual environments.Artificial intelligence systems use machine-and human-based inputs to perceive real and virtual environments;abstract such perceptions into models through analysis in an automated manner;and use model inference to formulate options for information or action.AI MODEL The term“AI model”means a component of an information system that implements AI technology and uses computational,statistical,or machine-learning techniques to produce outputs from a given set of inputs.AI SYSTEMS The term“AI systems”means any data system,software,hardware,application,tool,or utility that operates in whole or in part using AI.GENERATIVE AI The term“generative AI”(or,GenAI)means the class of AI models that emulate the structure and characteristics of input data in order to generate derived synthetic content.This can include images,videos,audio,text,and other digital content.INTERNET OF THINGS IoT(as defined by DHS)refers to the connection of systems and devices with primarily physical purposes(e.g.sensing,heating/cooling,lighting,motor actuation,transportation)to information networks including the Internet via interoperable protocols,often built into embedded systems.LARGE LANGUAGE MODEL According to the Department,the term large language model(LLM)means a type of machine learning model that is trained on a broad set of general domain data for the purpose of using that model as an architecture on which to build multiple specialized AI applications.MACHINE LEARNING The term“machine learning”(as defined by DHS)means a set of techniques that can be used to train AI algorithms to improve performance at a task based on data.CBP uses AI to keep fentanyl and other drugs out of the country.24 DEPARTMENT OF HOMELAND SECURITY ARTIFICIAL INTELLIGENCEROADMAP 2024

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The future of smart industrialsThe race to digitally enabled services2Signals of changeStrategic imperativesDigitally enabled servicesCase studiesForewordThese are pivotal times for industrial manufacturing.Manufacturers must navigate an unfamiliar environment shaped by advances in disruptive technology,economic turmoil,shifting customer expectations,uncertain labor and materials supply markets,and the worlds emergence from the COVID-19 pandemic.In our view,this sector will continue to experience increasing disruption in the near future.We see the sector migrating towards a smart industrials strategy,shifting from a legacy product-centric focus to a customer-centric focus empowered by digitally enabled aftermarket and field service.Future-focused manufacturers can win by embracing digitally enabled services as the foundation of both their business and operating models,pursuing smart practices in a multitude of strategic areas from operations to customer value to sustainability.KPMG International,in a commissioned survey conducted by Forrester Consulting,engaged 395 industrial manufacturing leaders across the globe to understand their perspectives on the opportunity and impact of digitally enabled aftermarket and field service on the sectors future.Participants included manufacturers that classify themselves as machinery and component as well as project or solution providers.A primary takeaway from the survey is the extent to which these business leaders recognize the shifting landscape and are investing in making the transition.More than six out of 10 of executives in our survey indicate their organizations are currently investing in or have included investment in their capital plans for digital transformation and connected products.In this report,we explore the opportunity for industrial manufacturers to drive improved customer experience while enhancing efficiency and effectiveness through digitally enabled aftermarket and field services.We also discuss the challenges manufacturers are experiencing with their current efforts and the capabilities that are needed for success.If you would like to discuss how KPMG professionals can help you evaluate and accelerate your organizations journey towards a digitally enabled aftermarket and field services transformation,please contact us or your local contacts listed.Stphane Souchet Global Head of Industrial Manufacturing KPMG International ssouchetkpmg.frVinodkumar Ramachandran Global Head,Industry 4.0 KPMG International Service is the new growth engine 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials3Signals of changeStrategic imperativesDigitally enabled servicesCase studiesContentsSignals of change05Strategic imperatives11Case studies How KPMG firms can help24Digitally enabled services in the connected enterprise 16The eight capabilities of KPMG Connected EnterpriseHigh-maturity organizations continue to outpace their less mature peersEvaluating your capability maturityBusiness and technology blueprintConnected productsShift to XaaS ModelsDigital transformationInstallation excellenceResilient supply chainsOmnichannel serviceDeployment of digital twins as service enablersIntelligent analyticsCase study 1:Helping a global manufacturerCase study 2:Helping enable a target operating model(TOM)transformationCase study 3:Helping a transport and commercial vehicle manufacturerHow KPMG can helpMaking a world of differenceEmbrace the digital transformation of industrial manufacturing aftermarket and field serviceUnderstand the potential benefits of digitally enabled services Evolve aftermarket and field service business modelsDrive culture and capability changeAddress privacy and security challenges7070808090991212131515 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials4Signals of changeStrategic imperativesDigitally enabled servicesCase studiesThe current environmentFor many,the first image that comes to mind when considering manufacturing is not aftermarket and field service.Manufacturing typically conjures images of products and the factories and supply chains that produce them.In fact,products have long been the lifeblood of manufacturers.The manufacturing industry has been able to produce an incredible track record of product innovation and productivity improvement,which has buoyed the sector and contributed significantly to customer value.However,recent supply chain,workforce,and macroeconomic challenges have chipped away at opportunities for manufacturing productivity,revenue,and margin growth.In fact,according to the Bureau of Labor Statistics,“labor productivity decreased in 21 of the 24 three-digit NAICS manufacturing and mining industries in 2022.”1For many manufacturers,an answer to these challenges in the core manufacturing business is to increase their focus on the service business.Service in manufacturing is not new.Based on our survey findings,37 percent of manufacturers already drive revenue by selling service parts.Twenty-eight percent provide field technician service to their customers,and 27 percent provide system integration services.In fact,based on our study,23 percent of total revenue for manufacturers already comes from services.With product lifecycles of 10,15,or even 50 years,manufacturers have many years of potential services revenue to earn for a given product sale.Further,through service relationships,manufacturers can shape customer experience and drive customer loyalty over that period.However,several barriers have held back service growth:For 22 percent,service growth has simply not been a priority.For 25 percent,a top barrier has been that compensation and incentives are not aligned with service growth.Another 27 percent cite field workforce management challenges.Thirty-seven percent cite competition for service sales as a top barrier in growing services.In many cases,that competition comes from distributors,installers,and other channel players that have local presence,reach,and resources,as well as close customer relationships.In other cases,customers self-service the equipment they buy from manufacturers.However,services in manufacturing are poised for dramatic growth.Study respondents are targeting annual service growth of 17 percent through 2025.Much of that growth will come from digitally enabled services.In fact,digitally enabled services are expected to grow 28 percent annually from 2022 to 2025.By 2025,manufacturers expect that digitally enabled services will comprise 72 percent of their services revenue.Manufacturers expect that non-digitally enabled service revenue will actually decline by 1 percent over that same period.This dramatic growth of digitally enabled services is unlocked by the convergence of several technology trends and capabilities that are turning traditional industrial manufacturers into smart industrials.New technology capabilities allow manufacturers products to be“connected”to send and receive data that allows manufacturers to monitor the equipment and gain operating and maintenance insights.Manufacturers can use those insights to inform and improve service.Technology advances also mean that manufacturers can increasingly provide remote or even automated service.Simultaneously,solutions for managing aftermarket and field service have matured,and been cloud and mobile enabled,giving manufacturers better capabilities for managing and delivering the services they provide to customers.In addition to standard capabilities such as service ticket management and technician dispatch,generative AI enables improved interaction,service recommendations,solution engineering,and service knowledge management.Additional new capabilities include digital twin modeling and augmented reality for service support.The shift to digitally enabled services is key for several reasons.Thirty-eight percent of study respondents cite the ability of digitally enabled service to provide incremental service growth.Twenty-three percent of respondents see the opportunity for higher margins from digital service.Forty-one percent see digitally enabled service as an enabler of greater customer insights,and 43 percent of study respondents cite customer loyalty as a primary outcome.Fully 44 percent expect that digitally enabled service will lead to increased product sales.1“Manufacturing and Mining Labor Productivity,”bls.gov,April 27,2023 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials5Signals of changeStrategic imperativesDigitally enabled servicesCase studiesSignals ofchangeEverywhere you look,there are signals of change for aftermarket and field service in industrial manufacturing.KPMG firms experience and research indicate that industrial manufacturers are facing a rapidly evolving market characterized by technology disruption,changing customer demands,privacy and security challenges,and operational challenges.KPMG professionals identified eight signals of change based on the investment priorities that industrial manufacturing survey respondents reported.Manufacturers should gauge the presence and strength of these signals in their own market and customer base to help set their strategies and priorities.2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials6Signals of changeStrategic imperativesDigitally enabled servicesCase studies1.Connected productsDevelopment and deployment of connected products will create digital services that improve service efficiency and effectiveness,increase customer lifetime value,and drive services growth.In our survey,85 percent of respondents indicated current plans to invest in connected products,with another 22 percent anticipating including investment in later horizons of their capital plan.Only 5 percent have no plans to invest.Signals of change in industrial manufacturing aftermarket and field serviceResilient supply chainsInstallationexcellenceShift toXaaSConnected productsOmnichannel serviceDigitaltransformationDigital twinIntelligent analytics21 %Visibility of equipment use and performance,enabling improved service effectiveness and efficiencyUse of digital twin capabilities to develop visibility of the install base of deployed products,modeling/simulation capIncrease in opportunity to“attach”services to product sales and to maintain ongoing service agreementsConnected products factors with the greatest impact on aftermarket and field serviceSignals of changeSource:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials7Signals of changeStrategic imperativesDigitally enabled servicesCase studies2.Shift to XaaS models3.Digital transformationManufacturers shift to an anything-as-a-service(XaaS)model involves the development of new services as well as the capabilities to price,sell,deliver,and bill for a broad range of services through subscription,pay-for-use,or other models.Seventy-three percent of our survey respondents indicated current plans to invest in XaaS,with another 22 percent anticipating including XaaS investment in later horizons of their capital plan.Only 5 percent have no plans to invest.This level of adoption of XaaS models in the manufacturing sector signals likely changes to customer buying behavior and manufacturer business,revenue,and contracting models.Manufacturers are modernizing and transforming their organizations technology architecture,applications,and infrastructure.This is allowing them to establish seamless technology integration and adopt advanced digital capabilities,such as generative AI and augmented reality(AR)/virtual reality(VR)/mixed reality(MR).Ninety percent of respondents indicated current plans to invest in digital transformation with another 10 percent anticipating including investment in later horizons of their capital plan.Fewer than 1 percent have no plans to invest.23 %Introduction of intelligent digital servicesTransformation of technology applications across the service lifecycleMonetizing data from connected products and sensorsShift in talent acquisition strategy and internal talent upskilling around technological capabilitiesShift to outcome-based servicesDevelopment of enhanced integration to support connected products and services XaaS factors with the greatest impact on aftermarket and field serviceDigital transformation factors with the greatest impact on aftermarket and field serviceSource:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022Source:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials8Signals of changeStrategic imperativesDigitally enabled servicesCase studies4.Installation excellence5.Resilient supply chainsManufacturers are optimizing capabilities to install/implement solutions that maximize value to the customer while increasing service attach rate for digital services and customer lifetime value.Eighty-five percent of respondents indicated current plans to invest in installation and implementation,with another 15 percent anticipating including investment in later horizons of their capital plan.Fewer than 1 percent have no plans to invest.Manufacturers are building resilient supply chains that connect customers,channel partners,sales,field service,supplier development,and procurement processes to orchestrate visibility and collaboration across the lifecycle of a customer solution.Seventy-six percent of respondents indicated current plans to invest in their supply chain,with another 20 percent anticipating including supply chain investment in later horizons of their capital plan.Only 4 percent have no plans to invest.35&%Overall project profitability managementConnection of customer,sales,supplier development,and procurement processesOptimizing project and resource scheduling,management,and trackingOptimizing management of product and service parts supply networksEffective coordination of project materials availability and deliveryShift toward creating more resilient supply network for products and service partsProduct installation factors with the greatest impact on aftermarket and field serviceSupply chain factors with the greatest impact on aftermarket and field serviceSource:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022Source:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials9Signals of changeStrategic imperativesDigitally enabled servicesCase studies6.Omnichannel service7.Deployment of digital twins as service enablersRedefining contact center capabilities will enable efficient operations while providing proactive support across an expanded range of support areas with an omnichannel interaction model.Eighty-three percent of respondents indicated current plans to invest in contact center modernization,with another 16 percent anticipating including contact center modernization investment in later horizons of their capital plan.Only 1 percent have no plans to invest.Use of information,including install base and data from connected assets/sensors,will enable manufacturers to develop and model a digital view of customer solutions and the operations they support.Eighty-five percent of respondents indicate plans to invest in digital twin.Another 14 percent anticipate including digital twin investment in later horizons of their capital plan.Only 1 percent reported no plans to invest.17&!%Improving field service performance and efficiency through improved technician scheduling,management,and enablementUse of digital twin to support service executionOptimizing customer experience across the full-service cycleUse of digital twin for modeling and simulating solution operation and effectivenessProactive customer serviceCustomer access to digital twin modeling as a serviceContact center factors with the greatest impact on aftermarket and field serviceMost important digital twin use cases for aftermarket and field serviceSource:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022Source:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials10Signals of changeStrategic imperativesDigitally enabled servicesCase studies8.Intelligent analyticsIndustrial manufacturers are utilizing intelligent analytics to optimize pricing,sales,quoting,service planning,and service execution.Seventy-five percent of respondents indicated current plans to invest in intelligent analytics,with another 21 percent anticipating including intelligent analytics investment in later horizons of their capital plan.Only 3 percent have no plans to invest.21%Optimizing customer quotes to maximize win probability and margin by applying intelligent analyticsArming technicians and customer service representatives with analytical insights to improve service deliveryOptimizing service and item pricing by applying intelligent analyticsIntelligent analytics factors with the greatest impact on aftermarket and field serviceSource:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart IndustrialsStrategic imperativesBased on these signals of change,KPMG professionals have identified five strategic imperatives that manufacturers should focus on to accelerate and complete this shift.These imperatives include embracing the digital transformation,understanding its benefits,evolving business models,and addressing privacy and security challenges.These moves should help to enable makers of industrial equipment to respond to these forces and take advantage of new growth opportunities.The percentage of revenue from digitally enabled services is expected to increase significantly in the next two years.%of revenue coming from digitally-enabled servicesTodayBy 2025237se:395 customer-centric strategy decision-makers at manufacturers with aftermarket service offeringsSource:A commissioned study conducted by Forrester Consulting,June 202211Signals of changeStrategic imperativesDigitally enabled servicesCase studies 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart IndustrialsThe digital transformation of the industry has arrived.Today,decision-makers report an average of 58 percent of their organizations services are digitally enabled,and this number is risingthey predict that by 2025 74 percent of services will be digitally enabled.In total,they expect digitally enabled services to represent 27 percent of their total revenue by 2025,more than double the 13 percent it represents today.They expect this digital enablement to increase product sales(44 percent),improve customer loyalty(43 percent),and improve customer insights(41 percent).And while the groundwork is being laid for digital infrastructure,organizations admit there is still important work to be done.Decision-makers in our survey listed developing data,analytics,and AI capabilities as the top actions their organization will need to take over the next 5 to 10 years to address the changing digital aftermarket services landscape.Understand the potential benefits of digitally enabled services2Reduce the cost to serve:Manufacturers can address service calls via lower-cost channels such as remote contact centers,equipment self-healing,or customer self-service.They can optimize technician productivity using advanced scheduling and dispatch.Further,they can implement AR,VR,and MR tools and insights based on generative artificial intelligence(AI)and machine learning(ML).These changes can unlock a variety of efficiency improvements.Through digital enablement,many service activities can be partly or fully automated or can be delivered through lower-cost channels(e.g.,remote versus on-site technician).Additionally,capabilities such as predictive maintenance can reduce the number of service events.Efficiency improvements will enable manufacturers to reduce service pricing,gaining market share from competitors that lack digitally enabled capabilities and taking on service tasks from self-performing customers.Efficiency improvements can also provide opportunities for margin growth.Benefits member firms clients have targeted and/or realized include:Enhance service effectiveness:Manufacturers can use digital enablement of services to reduce response/resolution times and maximize equipment performance by using connected product data to predict and resolve service needs.Through digital enablement,manufacturers can take advantage of automation,remote service centers,or technicians enabled with digital tools.These changes offer customers greater uptime and output from the equipment they purchased.These changes can also provide customers with reduced maintenance and operating cost,and often,a longer equipment lifetime.Benefits member firms clients have targeted and/or realized include:Embrace the digital transformation of industrial manufacturing aftermarket and field service1In addition to considering the signals of change just described,it is important to recognize the potential benefits that manufacturers can derive from digitally enabled aftermarket and field service.Based on the gains that member firms clients have targeted and,in many cases have already realized,KPMG professionals see significant and tangible opportunities.Digitally enabled services can help boost value to the customer,in turn unlocking revenue and margin growth for manufacturers.Manufacturers will also be able to improve on current service efficiency.20%to 30 %to 300%to 40%to 30%of technician tasks delivered remotely or automaticallyreduction in service callsreduction in truck rollsservice part inventory reduction50%to 60%to 20 %to 50%5%to 25 %to 30%to 20ster response timeimprovement in first visit repair ratesequipment downtime reductionenergy efficiency improvementmaintenance cost reductionequipment lifespan improvement12Signals of changeStrategic imperativesDigitally enabled servicesCase studies 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart IndustrialsEvolve aftermarket and field service business models3Create new offerings:Manufacturers can market and deliver new value-added services that drive customer value and,in turn,provide new sources of revenue for manufacturers reducing customers total cost of ownership.Additionally,manufacturers services can help customers with the use of and value realization from the equipment.Examples of such new offerings made possible by digitally enabled services include:Automotive:Self-driving car capabilities Smart buildings:Net-zero buildings Aerospace:Predictive maintenance Industrial automation:Remote service center support Agricultural equipment:Precision agriculture(i.e.,autonomous equipment)1.5 to 2X customer lifetime value increase More than 5%net promoter score improvement More than 20%new service revenue growth 8%to 20%customer churn reduction More than 5%net promoter score improvement 8%to 20%customer churn reductionCreate new loyalty:Manufacturers can use digitally enabled service to deliver winning customer experiences and orchestrate each interaction across the customer journey to increase revenue.Loyalty in service relationships over the course of the product lifecycle also increases the opportunity for the next product sale.Benefits member firms clients have targeted and/or realized include:Grow customer lifetime value:Manufacturers can use insights about customers,install base,and operations to optimize offers and service contracts for annuity-based revenue streams.They will be able to monetize the value they deliver to customers by selling more services over the products lifetime,growing the margin on those services,and increasing customer loyalty to enable service renewals and further product sales.Benefits member firms clients have targeted and/or realized include:The digitization of aftermarket and field services opens the door for organizations to move beyond a traditional manufacturing business model.This allows them to evolve along multiple dimensions and even adopt separate business models for different offerings and customer segments.Our survey indicates that manufacturers are transforming their business models along five different dimensions to take advantage of the opportunities presented by digitization of aftermarket and field services.Revenue models:Innovative technology and the growing prevalence of anything-as-a-service(XaaS)models are encouraging manufacturers to look for new ways to enhance revenues.Manufacturers have typically offered services on an as-needed labor and materials basis as well as under service contracts or warranties.While these models remain common,a number of new revenue and contracting models are emerging.These include subscription-based models,performance-based models(e.g.,charging for equipment uptime),and outcome-based models(e.g.,charging for achieved cost savings).Emerging as-a-service models are better aligning service charges with customer value and are enabling manufacturers to take greater control of the maintenance and use of the install base they sell to customers in order to achieve the targeted improvement in performance and outcomes.In addition,manufacturers are offering asset-as-a-service payment models to complement more traditional financing models.Companies are offering many flavors and permutations of the revenue and contracting models mentioned above,enabling offers that are tailored by customer tier or by individual customer to best align with customer needs,value realization,and budgets.As-a-service(XaaS)revenue models are designed to shift from transactional sales of product and service to annually recurring revenue(ARR)models.In fact,many manufacturer service subscriptions auto-renew by default,instead of awaiting a customer order for renewal.Manufacturers are aligning their internal metrics to reflect the emphasis on ARR.For example,61 percent report measuring retention rate as a key metric to assess the sustainable growth of a service business.13Signals of changeStrategic imperativesDigitally enabled servicesCase studies 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart IndustrialsMarket offerings:As the capabilities and models for digitally enabled aftermarket and field service mature,manufacturers are launching new services such as autonomous equipment,net-zero solutions,AI-enabled precision operations,and healthy buildings.Manufacturers are also shifting to selling integrated offer bundles that combine product,financing,field service,remote service,training and education,advanced digital services such as cybersecurity,managed services,and service parts sales and inventory management.Operating models:To deliver the customer experience,efficiency,and effectiveness required to profitably grow aftermarket and field service,manufacturers must define and build an integrated target operating model for that business.All six layers of the target operating model(functional process,people,service delivery model,technology,performance insights and data,and governance)must be designed to work together.In addition,the target operating model must span the Connected Enterprise,linking front,middle,and back office to create integrated end-to-end service value streams.Cost models:As manufacturers move to as-a-service models,many costs will continue to be incurred up-front,while revenues will more likely come in over the equipments lifetime.Break even in an as-a-service model may take 3 to 4 years or more depending on the offerings.Manufacturers will need to adjust their expectations to operate in this new model,but they will have the opportunity to reduce costs of service through automation,customer self-service,better enablement of field technicians,and predictive maintenance.Delivery models:To meet increasing customer expectations for service experience,efficiency,and effectiveness,manufacturers are redesigning their delivery models.Increasingly,manufacturers are supplementing or replacing onsite field technician service delivery with self-service,remote support,and even autonomous equipment self-healing.Manufacturers are also optimizing their remote service operations centers,call centers,and analytics centers of excellence to best support the shift to remote and digital service delivery.Eighty-four percent of manufacturers say they are investing or planning to invest in contact center modernization.Companies cite the following as the top capabilities they are expecting from call center modernization:Improving field service performance and efficiency through improved technician scheduling,management,and enablement Optimizing customer experience(CX)across the full service cycle Proactive customer serviceTraditional service market offerings:Emerging service market offerings:Professional services Installation/implementation services On-site field service Remote monitoring Remote or automated service Knowledge and analytics access Value-added(i.e.,cyber)Managed services14Signals of changeStrategic imperativesDigitally enabled servicesCase studies 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart IndustrialsAddress privacy and security challenges5Todays manufacturing businesses are data-driven and internet-dependent,so the effective management and protection of information is essential.In Europe,the General Data Protection Regulation(GDPR)gives individuals power over the use of their personal data and holds organizations accountable for their data collection and usage practices.Similar regulations that involve the secure generation,use,and protection of personally identifiable information(PII)are in place or planned for in the U.S.As manufacturers transition to connected products and platforms,the amount of data generated and transmitted is increasing exponentially,and as equipment gains features such as remote servicing,remote control,and autonomous operation,the importance of data security is further elevated.Manufacturers must allow selective access to the equipment and data to their own onsite and remote technicians as well as to customers,channel partners,and other third parties.This access must be secured at the equipment panel and in service portals or other systems that connect to the equipment and the portal.A security strategy must be developed to manage the risk of intrusion and hacking of equipment and prevent breaches of the data accessible through the connected platform.Drive culture and capability change4For many manufacturers,the culture and capabilities that have previously underpinned their success are not what they will need to succeed in an aftermarket and field service business that is increasingly powered by digitally enabled services.Many manufacturers digitally enabled service growth is hampered by competing metrics and incentives that pit traditional manufacturing business and legacy service models against those of the emerging digitally enabled service business.A particular point of tension tends to be pricing that is often set to drive adoption and growth in digital services,impacting metrics and incentives for teams responsible for products and legacy services.Organizations are finding that they need to move beyond a product-focused culture or even a culture of functional excellence.The goal should be a customer-centric culture that prioritizes customers end-to-end experience over the metrics of any particular function.In fact,study respondents reported that optimizing end-to-end customer experience is among the top three actions they will take over the next five to 10 yearsManufacturers are evolving their metrics to better align the goals and incentives of the organization to drive growth and performance in digitally enabled services.Beyond changes in measures,manufacturers are working to help their workforce adopt and adapt to the changes brought about by digitally enabled service models.For example,manufacturers are driving initiatives to help field service technicians adopt digital tools and capture field service activities and technician knowledge in service management tools.Future-focused organizations have prioritized culture as an enabler of this change.Future-focused organizations reported a good or excellent ability to build a customer-centric organization and a culture that inspires people to deliver on the customer promise and drive up business performance at a rate more than 50%higher than followers.Future-focused organizations are also differentiating themselves from followers through their investments in experience centricity by design.They report making moderate or significant investment in experience centricity by design at nearly double the rate reported by follower organizations.48C97%are measuring service attach rateare measuring percent of install base with connected capabilitiesare measuring percent of service delivered without human interventionare measuring percent of service on subscription61X%are measuring retention rateare measuring customer lifetime value15Signals of changeStrategic imperativesDigitally enabled servicesCase studies 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials16Signals of changeStrategic imperativesDigitally enabled servicesCase studiesDigitally enabled services in the connected enterprise 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials17Signals of changeStrategic imperativesDigitally enabled servicesCase studiesThe eight capabilities of KPMG Connected EnterpriseManufacturers can benefit from adopting a set of fundamental capabilities to support the connected enterprise.These capabilities can help industrial manufacturers define a customer-centric approach to digital transformation that connects the front,middle,and back offices.Enhancing these capabilities will help ensure that every process,function,and relationship of the organization is focused on meeting customer expectations,creating business value,and driving sustainable growth.Our research shows that firms that make a moderate or significant investment in all eight capabilities of the connected enterprise are two times more likely to deliver a positive customer experience,successfully execute on one or more customer-centric objectives,and increase ROI according to one or more metric.*Note:Base 395 leaders involved with customer-centric strategy decisions.Source:A commissioned survey conducted by Forrester Consulting on behalf of KPMG,June 2022.Insight-driven strategies and actionsExperience-centricity by designInnovative products and servicesAligned and empowered workforceIntegrated partner and alliance ecosystemDigitally-enabled technology architectureSeamless interactions and commerceResponsive operations and supply chain2xImpact*2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials18Signals of changeStrategic imperativesDigitally enabled servicesCase studiesThe following table shows how the eight connected enterprise capabilities can be applied to the previously described strategic imperatives:Insight-driven strategies and actionsHarness data,advanced analytics and actionable insights with a real-time understanding of the customer and the business,thereby helping to shape well-integrated business decisions.Innovative products and servicesDevelop compelling customer value propositions on price,products,and services to engage the most attractive customers and drive profitable growth.Experience-centricity by designDesign seamless,intentional experiences for customers,employees,and partners,thereby supporting the customer value propositions and delivering business objectives.Seamless interactions and commerceInteract and transact with customers and prospects across marketing,sales,and service to achieve measurable results.Responsive operations and supply chainOperate the business with efficiency and agility so the customer promise can be fulfilled in a consistent and profitable way.Aligned and empowered workforceBuild a customer-centric organization and culture that inspires people to deliver on the customer promise and enhance business performance.Integrated partner and alliance ecosystemEngage,integrate,and manage third parties to increase speed to market,reduce costs,mitigate risk,and close capability gaps in the delivery of the customer promise.Digitally powered technology architectureCreate intelligent and agile services,technologies,and platforms,enabling the customer agenda with solutions that are secure,scalable,and cost-effective.00708 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials19Signals of changeStrategic imperativesDigitally enabled servicesCase studiesHigh-maturity organizations continue to outpace their less mature peersSurvey findings indicate that,compared with companies that lag behind,future-focused manufacturing organizations are:2.3x More likely to harness data,advanced analytics,and actionable insights with a real-time understanding of the customer and the business to shape integrated business decisions.1.5x More likely to design seamless,intentional experiences for customers,employees,and partners to support customer value propositions and deliver business objectives.More likely to create intelligent and agile services,technologies,and platforms,enabling the customer agenda with solutions that are secure,scalable,and cost-effective.More likely to interact and transact with customers and prospects across marketing,sales,and service and achieve measurable results.More likely to develop compelling customer value propositions on price,products,and services to engage the most high-value customers and drive profitable growth.More likely to operate the business with efficiency and agility to fulfill the customer promise in a consistent and profitable way.1.8xMore likely to engage,integrate,and manage third parties to increase speed to market,reduce costs,mitigate risk,and close capability gaps to deliver on the customer promise.1.6xMore likely to build a customer-centric organization and culture that inspires people to deliver on the customer promise and drive up business performance.2.0 x1.5x1.4x1.4xSource:A commissioned study conducted by Forrester Consulting on behalf of KPMG,June 2022 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials20Signals of changeStrategic imperativesDigitally enabled servicesCase studiesEvaluating your capability maturityThrough our research and project experience,KPMG professionals have developed a variety of assets and accelerators to support manufacturers aftermarket and field service transformation.One key asset is a maturity model,with associated benchmarks,to help organizations assess the current maturity of their aftermarket and field service capabilities and define their target maturity levels.KPMG professionals will work with you to shape and define your digitally enabled transformation or optimization vision,using the eight capabilities to inform and evaluate plans,prioritize the roadmap and align investments.How connected capabilities apply in Smart IndustrialsInsight-driven strategies and actions Leverage customer lifetime value(CLV)and voice of customer(VOC)data to better understand and anticipate customer expectations across channels.Apply CLV principles and segmentation to enhance aftermarket services revenue.Leverage connected product insights to make service recommendations and provide proactive service.Use(real-time)insights from analytics across the value chain to personalize the customer journey and make faster,better-informed decisions.Use insights from across the enterprise to optimize service delivery,operating costs,product and service part order fill rates,inventory levels,ESG,etc.Innovative products and services Utilize VoC to inform product and service offerings.Maximize CLV by aligning product and service pricing with the value customers realize.Develop products with connected and software-enabled capabilities that serve as the basis for integrated solutions to maximize value and customer experience(CX)for customers and maximize CLV through attached service sales.Develop service offerings that generate value for customers through reduced equipment TCO,improved equipment efficiency,and even improvements in customers overall operational capabilities.Maximize CLV by sharing in those benefits and by capturing service renewals and repeat sales of service parts and products.Experience centricity by designSeamless interactions and commerce Use VoC to identify customer preferences and as an input to CX design.Design an integrated customer experience across the full customer journey/relationship lifecycle,including customer interactions involving channel partners and suppliers.Incorporate CX goals into objectives and metrics throughout the organization to drive customer centricity.Develop a channel strategy that enables the organization to deliver on customer expectations and orchestrate consistent customer journeys profitably.Provide customers with omnichannel engagement and interaction options over the full customer journey/relationship lifecycle.Deliver a seamless and consistent experience spanning customer interactions related to product purchases,installation,service parts,and service operations.Create a fully integrated,consistent,digital-first customer experience across the full customer journey/relationship lifecycle(including marketing and sales,commerce,product delivery,service delivery,and billing).Support efficient,secure,and frictionless commerce and payment interactions including shopping,buying,fulfillment,returns,and service.CapabilityApplicability(Smart Industrials)2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials21Signals of changeStrategic imperativesDigitally enabled servicesCase studiesResponsive operations and supply chain Establish supply chain visibility from customers and channel partners to internal operations to suppliers to enable insights into requirements,availability,and capacity that allow for effective supply chain decisions.Develop optimized plans for supply chain operations and service operations.Manage execution of those plans using digital systems and artificial intelligence/machine learning to achieve target performance.Collaborate with tier 1 and tier 2 suppliers to enable on-time delivery to support manufacturing,sales,install projects,and service delivery,while minimizing inventory,operating cost,and risk of obsolescence.Secure supply of scarce materials(e.g.,chips)and plan strategically to avoid lost sales,order backlog,and negative impacts on customer service.Aligned and empowered workforce Align talent around common strategic goals to drive transformation.Embed a culture of innovation and agility alongside a growth mindset to foster innovation and entrepreneurialism.Break down silos between product and service organizations and shift toward customer centricity.Establish aligned incentives geared to maximize Net Promoter Scores,renewal rates,customer loyalty,and CLV.Drive transformational change to ensure that the organization,operating model,and culture reflect a customer-centric,digital mindset,and agile ways of working.Digitally enabled tech architecture Establish a cloud-native technology architecture that standardizes,simplifies,and streamlines the technology environment.Utilize a common enterprise integration strategy,framework,and platform for integrating the organizations cloud and on-premise applications,data sources,and devices to better align processes,data,CX,and EX across the organization.Deploy“wrapper”solutions to build new experiences on core legacy platforms and integrate with new systems and tools.Establish an agile,product-aligned,flexible delivery model geared to customer value realization rather than package implementation projects.Develop technology platforms that are secure by design to safeguard both internal and customer data.Ensure that solutions are compliant with applicable legal and regulatory and customer requirements.Integrated partner and alliance ecosystem Strategically leverage channel partners to extend the organizations market reach and scale while managing channel conflict.Provide channel partners with the enablement,support resources,and incentives to maximize service attach rates for channel product sales,optimize service delivery through the channel,and provide consistent CX that meets customer expectations.Collaborate with market-leading technology providers in development of connected products and digitally enabled services to maximize solution capabilities,scalability,and value for customers.Create an ecosystem of alliance partners that provides hardware or services that complement and extend your companys solutions and maximize the value to customers.2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials22Signals of changeStrategic imperativesDigitally enabled servicesCase studiesKPMG professionals have developed business and technology blueprints that represent the full set of elements that support manufacturers aftermarket and field business.Organizations can use this to benchmark the completeness of their business and technology environments and identify gaps vs.leading practice.Leadership enablement technologyLeading the enterpriseLeading the enterpriseLeading the enterpriseSupport servicesData and analyticsEnterprise value managementHuman resourcesTalent acquisitionFinancial reportingIdeateManaging enterprise and operational riskInternal audit strategy and GovernanceStrategyReturns/compliancePlan properties and facilitiesWorker on-boardingFinancial planning and analysisPlanPrivacy and data securityHuman capital/manage talentIntelligenceBusiness unit support and consultingAcquire,rent,build facilitiesTalent enablementFixed assetsDevelopManaging third-party riskPerform risk assessmentEducation and awarenessTransactional taxOperate and maintain facilitiesWorkforce administrationCapital projectsBuildManaging policiesDevelop dynamic internal auditIdea evaluationInternational taxDispose of facilitiesPayrollAccounts receivableTestManaging complianceIndividual project initiation Secure IP rightsTotal rewardsGeneral ledgerRelease and deployMonitor/improveProject reportingIndividual project execution Manage portfolioTime management Accounts payableTreasuryRun/operateManage and governOrganizational reportingManage issues and action Internal auditITTaxFinanceLegalRisk managementProperty and facility mgmt.Data and analyticsProduct and service managementCustomer and employee experienceEnterprise strategyEnterprise data and analytics strategyMarket researchBrand experience strategyProduct and service managementEnterprise agilityData management and governanceDynamic pricingIntentional experience designEnterprise resilience and trustContinued insights deliveryProduct/service platformsExperience governance and measurement Customer and employee experienceEnterprise operational excellenceAnalytics,AI,and insights generationStrategic planning and scenariosVoice of the stakeholder/customerEnvironment,social,governance(ESG)Activation and continued innovationProduct/service designJourney orchestrationTechnology blueprintBusiness blueprintCustomer engagementCustomer engagementOperationsOperationsMarketingMarketingProjectsProjectsEnterprise asset managementEnterprise asset managementSales/aftersalesSales/after salesResearch,design,and innovationResearch,design,and innovationSupply chainSupply chainCustomer support and serviceCustomer support and serviceProcurementProcurementOrder and quoteOrder and quoteManufacturing operationsManufacturing operationsField serviceField service 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials23Signals of changeStrategic imperativesDigitally enabled servicesCase studiesBusiness blueprint(continued)Leading the enterpriseEnabling the enterprisePartner and alliance managementPeople enablementTechnology enablementPartner and ecosystem designWorkforce shapingEnterprise integration management Partner onboarding and integrationWorkforce experienceEnterprise architecture managementIntegrated business servicesDigitally enabled learningCyberService delivery and governanceWorkforce insightsModern deliveryEcosystem orchestrationEnterprise service management 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials24Signals of changeStrategic imperativesDigitally enabled servicesCase studiesCase studies and how KPMG professionals can help 2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials25Signals of changeStrategic imperativesDigitally enabled servicesCase studiesCase studiesCase study 1:KPMG in the US recently helped a global manufacturer define the strategy,business model,financial case,and transition plan for a major digital services initiativeall within an accelerated,eight-week schedule.How a KPMG member firm helped:The KPMG in the US team reviewed the current business model,service offerings,and operating model of the organization.They evaluated pro-forma field service business financials and developed a growth plan based on external benchmarks.At the same time,they developed a roadmap for implementation and value realization,and also conducted competitive/comparator market research to identify targets,benchmarks,and gaps in TOMs.To support these activities,KPMG professionals gathered and synthesized financial data from more than 100 internal sources.They designed a global,pro-forma financial model with more than 100 tabs and presented their results to stakeholders across the business.They also conducted competitor and comparator research,benchmarking over 20 competitor service models,areas of investment,and digital offerings.In addition,the KPMG in the US team provided ongoing guidance for executives and stakeholders to support effective transformational change.Challenge:The clients competitors had established a lead in the development of connected products,digital platforms,and digital service offerings.Voice of the customer(VOC)research for the client indicated a strong desire for smarter services and frictionless interactions.In discussions with the investor community,the client had already indicated a strong commitment to aggressive digital services growth,but the organization lacked a clear pathway to achieving its goals.Benefits to the client:KPMG in the US helped the clients global service organization:Develop a strategy and operating model design for digital services that boosted annual services revenue growth rate by 20 percent.Define automation and operating model efficiencies that reduced operating expenses for digital services by approximately 15 percent.Identify over 50 key performance gaps and develop a roadmap with supporting initiative plans.Gain the buy-in of the CFO,the executive committee,and business unit leaders across products and regions.The transformation is now led by our client sponsor with KPMG in the US supporting and augmenting the transition team in key areas where additional capabilities and/or support are required.2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials26Signals of changeStrategic imperativesDigitally enabled servicesCase studiesCase study 2:KPMG in the US professionals worked closely with KPMG firms in other regions to help enable a target operating model(TOM)transformation for a global manufacturers field service business.How a KPMG member firm helped:The KPMG in the US team worked closely with KPMG firms in other regions to develop a new vision for the global field service business spanning multiple lines of business.KPMG team members designed a common global business template for processes,roles,technology,data management,service delivery models,and governance.They leveraged leading practice processes and widely accepted,out-of-the box technology.KPMG professionals also established proper governance for master data,designed intercompany processes for integrating core manufacturing and field operations,and deployed pilots in two countries.Challenge:The client was seeking to develop and deploy a unified,cloud-based target operating model(TOM)across its global field service business.A TOM addresses functional processes,people,service delivery model,technology,performance insights and data,and governance.The existing business was highly decentralized,with a fragmented operating model spanning over 500 legal entities.The IT environment was unsustainable and included non-standardized operations and data,more than 100 ERP platforms,and hundreds of different edge systems.This fragmentation led to poor master data capabilities,the inconsistent capture of install-base data,and disconnected silos of service data across multiple systems and businesses.Visibility of customer,project,and service profitability was severely limited.Benefits to the client:The KPMG in the US team helped the client:Successfully adopt a global business template designed to reduce costs and streamline operations for the field service business.Improve margins,reduce expenses,and increase operational efficiencies,with a potential value realization of 10 percent EBITDA.Support IT platform integration by retiring approximately 100 ERP platforms globally and an even larger number of edge solutions.Enhance communication and collaboration with customers,suppliers,and sub-contractors.2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials27Signals of changeStrategic imperativesDigitally enabled servicesCase studiesCase study 3:KPMG in Italy professionals helped a transport and commercial vehicle manufacturer introduce advanced analytics to improve product quality and aftersales processes.How a KPMG member firm helped:The KPMG in Italy worked with the client to develop advanced analytics capabilities designed to improve the aftersales process and draw early insights from analysis generating recommendations.The project included the development of a service analytics platform that integrates several data sources to better estimate the defectiveness and the cost of vehicle components based on product and customer features such as vehicle configuration,telematics data,mission profile,and many others.The KPMG in Italy team also created an emerging-issues control tower to automate analytics processes,boost forecasting accuracy,and enable simulation features to anticipate the issues resolution.Challenge:The client had a high loss ratio for its products,which impaired aftersales costs and resulted a reduction in customer experience.Previously,the client had focused on gathering data and conducting backward-looking reliability analysis diagnostic efforts manually at a slow pace.This approach was primarily reactive and did not generate early insights into vehicle reliability issues,also requiring a high degree of effort.In short,the client needed a better way to define its warranty process leveraging advanced analytics and enabling a data-driven approach.Benefits to the client:The KPMG in Italy team helped the client:Improve accuracy of cost of aftersales analysis,resulting in a 40 percent improvement in defectiveness and cost forecasts.Develop the ability to detect potential emerging aftersales quality issues more than two months in advance.Shift toward proactive management of aftersales quality issues to improve customer experience,reducing downtime and aftersales costs.Increase the sale of original spare parts targeting specific clients and maximizing the profitability.Drive an 80 percent reduction in time spent on data extraction,data preparation,analysis,and reporting.2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart Industrials28Signals of changeStrategic imperativesDigitally enabled servicesCase studiesThe Digital Services strategy helps clients reshape their aftermarket service business model and growth strategy to take advantage of connected products and platforms,technology innovations,and market transition to XaaS.Outputs typically include definition of the service offerings,contracting and revenue models,and strategy for transitioning from transactional product and service sales to an XaaS recurring-revenue model.In addition,the strategy typically defines the required changes in customer and channel partner relationships.KPMG works with clients to define their Digital Services strategy and the financial opportunity associated with the new model.To adopt a digital services strategy,manufacturers must often redesign their current operating model,creating a Connected Enterprise that integrates front-,middle-,and back-office operations for aftermarket and field service.This entails making changes to all six elements of the operating model(functional process,people,service delivery model,technology,performance insights and data,and governance).In addition,manufacturers must develop a range of new capabilities.KPMG professionals help clients identify business and operating model gaps and improvement opportunities and implement aftermarket and field service transformation initiativesTechnology innovations such as connected products and platforms,cloud services management solutions,machine learning,and digital twin solutions are key to enabling new aftermarket and field service models and delivering winning customer experiences and required operational efficiency and effectiveness improvements.KPMG professionals help manufacturers define the technology architecture needed to support the aftermarket and field services business,and customer experiences.KPMG professionals also help manufacturers improve their existing technology environment,implement cloud-based aftermarket and field service technology solutions,and develop advanced machine learning and other data and analytics capabilities.Digital services strategyBusiness and operating model transformationTechnology enablement123Wherever you are on the digital services journey,KPMG firms can help your organization move with confidence into the new reality of digitally enabled services.KPMG firms combine deep industrial manufacturing and business process experience with extensive technology integration experience.KPMG firms also bring tax expertise needed to develop digital centers of excellence to deliver operating model tax savings in a digitally connected aftermarket and field service transformation.This holistic and integrated approach allows us to help our clients design solutions and respond to industry challenges with speed,agility,and scale.How KPMG can helpBacked by an industry-leading approach to enterprise-wide transformation,KPMG professionals can assist you through the following service offerings:2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.The Future of Smart IndustrialsTransformation never stops.Neither do we.At KPMG we believe that business transformation is too good an opportunity to miss.Combining the right tech and the best processes with people whose insight is as broad as it is deep,are essential ingredients to successfully transform.KPMG has worked at the heart of global businesses for many decades,helping our clients realize the full potential of their people and technology and working together to achieve real-world outcomes.Because when people and technology are in harmony great things happen.Making a world of difference:KPMG people can make all the difference on your transformation journey.Together we can help you to orient your business around the customer,optimize functions for a new era,manage enterprise risk and regulation for a safer future,rise to a new level of value creation,and create an environment for managing ongoing change.2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.Smart industrialsThe information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.Although we endeavor to provide accurate and timely information,there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.2023 Copyright owned by one or more of the KPMG International entities.KPMG International entities provide no services to clients.All rights reserved.KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited(“KPMG International”),each of which is a separate legal entity.KPMG International Limited is a private English company limited by guarantee and does not provide services to clients.For more detail about our structure please visit home.kpmg/governance.The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization.Throughout this document,“we”,“KPMG”,“us”and“our”refers to the global organization or to one or more of the member firms of KPMG International Limited(“KPMG International”),each of which is a separate legal entity.Designed by DAS Design.DASD-2023-11375Publication name:The future of digitally enabled service for smart industrialsPublication date:August 2023Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related International would like to thank our contributors:Jono Anderson,USADan Balistierri,USAGreg Corlis,USASerena Crivellaro,USATodd Dubner,USAPhilip Hoskins,USALeon Li,ChinaSilvester Liu,ChinaEric Logan,USAJinping Ma,ChinaJohn Olson,USAThomas Royce,USAAlessandro Spagnolo,ItalyMatthew Swanson,USAYu Takahashi,JapanAnnika Tanttinen,FinlandAndrew Underwood,UKStphane Souchet Global Head Industrial Manufacturing KPMG International 33(0)1 55 68 33 90 ssouchetkpmg.frVinod Ramachandran Global Leader Industry 4.0 Country Leader KPMG in India 91 22 30 90 19 30 Claudia Saran Country Leader KPMG in the USA 1 312 665 3088 csaranKPMG.comUlrich Ackermann Country Leader KPMG in Germany 49 711 9060-42000 Toni Jones Country Leader KPMG in Australia 61 3 9288 6699 .auLen Prokopets IM Aftermarket and Field Service Lead Managing Director KPMG in the US 1 203 233 9077 Grant McDonald Global Industry Leader Aerospace and Defense KPMG International 1 246 233 7866 grantmcdonaldkpmg.bbCamelo Mariano Industry 4.0 Lead KPMG in Italy 39 0 514392611 cmarianokpmg.itMun-Gu Park Digital Transformation Partner KPMG in Korea 82 2 21120573 ContactsJun Okamoto Country Leader KPMG in Japan 81 33 54 85 385 Jonathon Gill Country Leader KPMG in the UK 44 7768 710617 jonathon.gillkpmg.co.ukTammy Brown Country Leader KPMG in Canada 1 416 777 8344 tammybrownkpmg.caNorbert Meyring Country Leader KPMG China 86 21 22 12 27 07

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