The ROI of Digital Twin for Industrial Companies

Written by: Colin McMahon

Read Time: 6 min

In the fable, “The Three Little Pigs”, we are presented with three houses. On the surface, they’re all the same – right? Each house is designed for one little pig, and that little pig always, at least going by the story, seems very content with their home. It’s not until the story progresses that we realize that, while the homes may be outwardly the same, they have crucial differences that, in this extreme scenario, can mean the difference between life and death.  

One aspect the story does not focus on is cost, but any adult can estimate that a pure brick house probably costs more than a wooden (depending on the wood) or a straw home. And any shrewd executive would likely ask: “Why pay more for the brick house when no external factors scream out that I immediately need to?”  

This is how many organizations approach digital twin – and frankly, many aspects of digital transformation (DX). There is no wolf trying to actively destroy everything, so why make the investment? Especially when, and let’s be clear: digital twins are not cheap. They often cost at least one million USD to implement and, oftentimes, go well beyond that. That’s no small chunk of change, even in a very stable and growing economy. So, why invest in digital twin?  

What is a Digital Twin? 

First off, organizations should know what they are getting with a digital twin, and what they’re not. PTC defines a digital twin as a virtual representation of a physical product, process, person, or place (commonly referred to as a spatial twin) that can mirror and measure its physical counterpart. That “mirror and measure” aspect is crucially important, as it separates a digital twin from a simulation – which only mirrors the physical at exactly one moment in time. Digital twins are a constant exchange of data between the real and the virtual, whereas simulations only take information from the physical one time without ever really having a back-and-forth.  


Important to note: While many digital twins utilize a 3D visual representation of some kind, this is not essential. The data is essential, and many organizations choose to visualize that data through a 2D or 3D model of some kind – both on PC displays as well as through augmented reality (AR), but strictly speaking you do not have to do this.  

The Upfront Investment Costs of Digital Twin

Deploying a digital twin isn’t as simple as purchasing and installing software. In part because, while digital twins are products, it is also beneficial to see them as ecosystems, since each twin requires physical and virtual components working together. Not all ecosystems are healthy, and problematic environments do not function nearly as well as their less troubled counterparts. For instance, the key to a successful digital twin is data, specifically data clarity. Digital twins need information to function so – if they cannot properly read and extract what they need – they will not deliver any ROI, at least nothing meaningful.  

Sourcing data, or a lack of data standardization, is actually a struggle for many organizations when it comes to digital twins. Before you build a tower, you need a strong foundation and information is the foundation for some many DX initiatives, digital twin included. So, before companies decide on a digital twin plan, they should first ask themselves “How accessible is my data?” If you need a specialized human employee just to sort between what’s viable and what’s duplicate information on any kind of regular basis – that’s a red flag that work needs to be done.  

Investing in an accessible data infrastructure is part of the upfront cost of digital twin deployment and should never be overlooked. Even one silo can greatly reduce the potential ROI – and when you’re already spending millions, you likely can’t afford to leave money on the table. 

The Business Impact of Digital Twin

Again, though – where’s the wolf, right? Why pay for the brick house when you’ve been operating in a straw house in the past? Well, it would be easy to say that digital twins solved one problem – but that would be a lie. Think back to the brick house, sure it can keep the wolf out, but that’s far from its only function. The reality is that, when successfully deployed, digital twins have a myriad of positive benefits

Many cite predictive maintenance as a key improvement that is only really possible with digital twin. The ability to fix equipment before it breaks is crucial to maximizing revenue and productivity. Digital twins provide that insight by granting an unprecedented level of transparency and visibility into hardware operation.  

But it’s not like installing digital twin creates a button that says “predictive maintenance.” It goes beyond that, and to the core of why digital twins have multiple benefits. Digital twins remove uncertainty in operations. They crystallize the generic into the specific.  

This has power with maintenance and service lifecycle management, yes, but it also empowers training and onboarding. It also provides new insight into product lifecycle management and operations management in general. It can dictate better resource allocation (people and machine), and reduce the waste accidentally created by imperfect work. Digital twins, in short, provide a baseline improvement that elevates the quality of work surrounding the digital twin at every level. That is their power, and that is why PTC (and so many others) advocate so fiercely for their utilization.  

This litany of uses also ties back into ROI. As stated before, digital twins aren’t cheap – but look at all they can do. Not only do they help directly solve key challenges like maintenance and downtime reduction, but savvy organizations can utilize their infrastructure for a host of other issues as well. It would be an exaggeration to say that digital twins can do everything, but – when properly deployed – they produce a myriad of cost-savings that well recoup the initial investment, and then some.  

Understanding If and How Digital Twins Will Help your Business

Digital twins are key components of broad, sweeping initiatives that produce results at numerous stages, so it stands to reason that most industrial companies (and large organizations in general) will benefit from their deployment. Industrial organizations, however, may have more need than most because oftentimes we are talking about a company that is multi-location, multi-department, and multi-purpose across at least dozens of people – if not vastly more.  

Digital twins provide visibility, and visibility is key in manufacturing the best product possible. It can say when hardware will break down, when a factory is being under-utilized or over-worked, and how best to create an effective workflow chain that will lead through product development.  

If you’re an executive who has ever wondered at any aspect of hardware performance, short-term or long-term, then digital twins will benefit you. If you’ve ever wondered if your process is wasteful or could be improved – digital twins will benefit you. If you’ve thought that your factory layout could be optimized – digital twins will benefit you. And if you’ve wished that your technicians and your service people had access to better insight in their decision making, then digital twins will benefit you.  

The brick house is stronger than the straw house, that’s how the story goes. There may not be a wolf howling at your door, but that’s no excuse not to look for ways to improve. History will show, and already is showing, that organizations properly utilizing digital twins are stronger than those that must utilize guesswork and fragmented data sets when trying to make key decisions and improvements. Yes, it’s likely a million-plus investment, but it can and will return incredible cost savings and revenue opportunities across multiple areas of your business.  

For more information on the current state of digital twins, including use case examples and how they’re being utilized, please check out our latest white paper, State of Digital Twin 2022. Readers can also check out the below video to see how PTC’s Chief Strategy and Sustainability Officer, Catherine Kniker, views digital twin technology: 

State of Digital Twin 2022

Read how industrial companies are using digital twin across engineering, manufacturing, and service. Read Now
Tags: Connected Devices Industrial Connectivity Industrial Internet of Things Digital Twin Digital Transformation Predictive Maintenance

About the Author

Colin McMahon

Colin McMahon is a senior market research analyst working with PTC’s Corporate Marketing team, helping to provide actionable insights, challenging perspectives, and thought leadership on trends, technologies, and markets. Colin has been working professionally as a research analyst for many years, and he enjoys examining and evaluating just how large the overall impact of digital transformation technologies will be. He has a passion for augmented reality and virtual reality initiatives and believes that understanding the connected ecosystem of people and technology is key to a company fully realizing its potential in the 21st century.