In collaboration with

Unveiling the next frontier

of engineering simulation
Digital engineering in an AI world
This article is a collaborative effort by McKinsey and NAFEMS. Its authors include Alessandro Faure Ragani,
Paul Stein, Roger Keene, and Ian Symington.
 Product development is an essential part Cloud-based simulation platforms are emerging as
of economic growth and social progress. Big an alternative or addition to traditional workstation-
industries, including automotive, aerospace and based infrastructure. New analytical approaches,
defense, telecommunications, medical devices, and such as meshless methods and multiscale modelling,
consumer products, expect a third of their sales to are extending the application of simulation to new
come from new products. Over the next five years, domains and new types of problem. Inputs derived
that means $30 trillion in revenues depend upon from sensor data, closed loop simulation and digital
successful product development projects in those twin technologies are narrowing the gap between
sectors. the real and virtual worlds.

With so much value at stake, advanced product Finally, recent rapid progress in the evolution of
development capabilities are a key strategic priority artificial intelligence (AI) and machine learning
for companies. And those capabilities increasingly (ML) technologies is changing the way simulation
depend upon access to sophisticated digital is done. Supplementing computationally intensive
technologies, along with the skills, processes, and numerical models with AI systems trained to
organizational structures to use them effectively. generate comparable outputs can deliver orders-
of-magnitude increases in simulation speed.
In one 2021 McKinsey survey of R&D leaders, three Between 2016 and 2021, for example, the number
quarters of respondents said that digital product of academic papers on the use of deep learning
development is essential in their organizations. models as surrogates for conventional numerical
Those leaders acknowledge that digitization is still a simulation increased thirty-fold. AI can also reduce
work in progress, however, with half admitting that the level of expertise required to perform simulation,
they don’t currently have the capabilities they know a consistent limitation on its wider use.
they need.

In this paper, we focus on one area of digitization Where are we going next?
with central relevance to the product development Together, the desire for further digitization of the
process: simulation. The ability to simulate product product development process and the availability
performance and behaviors in a virtual environment of powerful new tools and technologies are driving
has been the catalyst for profound changes in increased investment in simulation. This dynamic
the way engineering is done, offering product and fast moving environment creates challenges
development teams the ability to derive new for users, however. Should they be racing to adopt
insights, identify and fix issues earlier in the cycle, cutting edge simulation technologies, or working
and accelerate product testing and validation. to embed existing tools more firmly into their
organizations and processes? What are the key
factors driving the success of simulation-based
Simulation in flux digital product development, and what is holding
Simulation is also going through a period of companies back?
significant technological disruption that is creating
new opportunities and challenges for users in To investigate these questions, a new survey,
multiple areas. Those disruptions are affecting conducted by McKinsey in partnership with
almost every aspect of the simulation value chain. NAFEMS, explores the current and expected future

2 Unveiling the next frontier of engineering simulation

state of simulation in product development. The 1. The business case for simulation is shifting
survey was distributed in April 2023 to NAFEMS Our survey shows that expectations about the
members representing simulation technology value provided by simulation are shifting. Asked
providers and users from a wide range of industry about their use of simulation tools today, improved
sectors. The 176 respondents work at organizations product performance was the top value driver by
of different sizes, with annual revenues that range a significant margin, mentioned by 87 percent of
from less than $500 million to around $50 billion. respondents. When we asked about expected
57 percent of respondents were users, rather than future sources of value, however, performance
providers of simulation tools, and they represent improvement dropped to third place, squeezed
many different organizational levels, from frontline between product cost and engineering cost
engineers to senior executives. reduction. The new top priority, jumping from fourth
place today into a narrow lead, was faster time-to-
We asked participants 24 questions about their market.
current and future priorities for the selection and
use of traditional numerical simulation tools. And This shift may be indicative of changes in the
to build a picture of the adoption of emerging way simulation tools are integrated into product
simulation technologies, we included a deep dive development. When it is expensive and difficult
into use of AI- and ML-based tools in the product to do, companies may use their limited simulation
development process. Here are five key insights capacity to solve difficult, product performance
from the survey. problems. As tools get faster and more accessible,

Exhibit 1
The business case for simulation is shifting, with faster time-to-market and reduced
The business case for simulation is shifting, with faster time-to-market and
product cost as key future value drivers.
reduced product cost as key future value drivers.

Past value drivers of applying

simulation techniques, % Future value drivers, %

Improved product Faster time-

87 73
performance to-market

Reduction of Reduction of
73 72
product cost product cost

Reduction of Improved product

73 72
engineering cost performance

Faster time- Reduction of

68 70
to-market engineering cost

Zero protoyping 67 Zero protoyping 65

McKinsey & Company

Unveiling the next frontier of engineering simulation 3

 organizations begin to use simulation as a standard development processes. Interest in these
part of their engineering workflow, aiming to emerging technologies is high, however, with
streamline and accelerate the product development just over 60 percent of other respondents saying
process. that their organizations are using them in proof of
concept or pilot projects.
2. Still early days for AI and ML
Classical techniques, such as finite element 3. Automotive pulls away
analysis, computation fluid dynamics, and multibody Our survey reveals clear differences between
simulation, are still the dominant approaches industries in the adoption of leading-edge
to simulation. Given that all respondents had simulation technologies. Users from the
a connection to leading simulation industry automotive sector were most likely to have
association, it is unsurprising that 99 percent of experience of AI and ML approaches, with 76
them were using these approaches to some degree percent saying that their organizations were at
in their organizations, with more than half applying least experimenting with these systems. That rate
them at scale. is 7 percentage points higher than aerospace
and defense, the second-place industry. And
In stark contrast, only five percent of respondents automotive respondents were 1.6 times more likely
say that their organizations have fully integrated to use AI-based simulation than those from the
AI- and ML-based methods into their product machinery sector.

Exhibit 2
Classicsimulation
Classic simulationuse
useisissignificantly
significantlyahead
aheadofof AI-
AI- and
and ML-based
ML-based simulation use.
simulation use.

Companies’ uses of classical vs AI/ML simulation techniques by technology maturity level,

% of companies
1 None
Mostly proof of concepts or pilots
Use of highly mature virtual
34
engineering technologies at scale
48

10× 61 2/3
more companies use classic organizations already use
simulation compared to AI/ML- 51 AI/ML for simulations at least
based simulation at a high in pilot projects
maturity level

5
Classical simulation AI-/ML-based simulation
techniques (eg, MBS, techniques (eg, neural
FEA, CFD) network, deep learning)

McKinsey & Company

4 Unveiling the next frontier of engineering simulation

Exhibit 3
Automotive pulls away as the leading industry to put AI and ML to use.
Automotive pulls away as the leading industry to put AI and ML to use.

AI/ML usage by industry, %

Simulation users
within automotive are

1.6×
more likely to use AI/ML-
76 based simulations
59 58 50 compared to machinery
47

Automotive Aerospace Basic Medical Machinery and

(n = 42) and defense materials devices fabricated metals
(n = 16) (n = 27) (n = 19) (n = 18)

McKinsey & Company

This difference is likely to reflect differences in the We don’t believe that’s because these users
overall level of digital maturity between sectors. don’t care about accuracy. Instead, it probably
Automotive companies have pursued ambitious indicates a good understanding of the capabilities
digitization strategies for decades, an effort that and limitations of simulation systems. Advanced
has equipped them with a solid foundation of digital users know how to integrate simulation into their
infrastructure and capabilities that supports the use processes and how to operate these systems to
of advanced tools. support decision-making in product development.
Hence, they are more likely to be able to leverage
Differences in business priorities may be another the strengths while working around potential
factor. The automotive sector is characterized by drawbacks of AI-/ML-based simulation approaches.
complex products and short development cycles,
an environment that stands to benefit from the 5. Talent, understanding, and trust are key
significant improvements in simulation speed impediments
offered by deep learning surrogate technologies Our survey asked about factors that stand in the way
and other AI-based tools. of greater adoption of AI- and ML-based simulation
in their organizations. The top answers, mentioned
4. Confidence drives adoption by 61 percent of respondents, were shortages of the
We found further evidence of a link between the right talent and skills, and a limited understanding
digital maturity and the adoption of advanced of the benefits these tools provide. The picture was
simulation approaches when we looked at the slightly different among survey participants who are
criteria considered by companies when selecting already using AI-based simulation. They were more
simulation tools. Users that were not concerned likely to suggest that persuading other stakeholders
about “accuracy of results” in their tool selection to trust these new tools was a key impediment to
were more than twice as likely as other users to their wider application.
have successfully operationalized AI- and ML-based
simulation.

Unveiling the next frontier of engineering simulation 5

 Exhibit 4
Confidence
Confidenceininthe capabilities
the of AI
capabilities of and MLML
AI and is driving adoption.
is driving adoption.

“Accuracy of results” as a criterion for tool selection, % of survey results

9 AI/ML-based simulation
20 operationalized
No or very limited usage of
AI/ML-based simulation

91
80

Accuracy of results is Accuracy of results is not

a criterion for tool selection a criterion for tool selection
(n = 70) (n = 30)

McKinsey & Company

Exhibit 5
Talent
Talentand
andtrust stand
trust in the
stand wayway
in the of greater adoption
of greater of simulation.
adoption of simulation.

Key impediments for broad adoption of AI/ML-based simulation versus classic simulation,
% survey responses
Classic AI/ML-based
61 61
3/5
47 of organizations consider a lack of talent
44
40 and a limited understanding of the benefits
36 as a critical impediment towards adoption
of AI/ML-based simulation

Lack of talent / skill Limited understanding Limited trust in

of the benefits of AI/ML-based
AI/ML-based simulation methodologies

Source: NAFEMS and McKinsey “Future of simulation” survey (Apr 2023)

McKinsey & Company

6 Unveiling the next frontier of engineering simulation

Takeaways of tools. Users can streamline and accelerate their
Our snapshot of the state of simulation offers a few product development processes addressing the
key insights for both users and providers of these challenges preventing greater adoption of simulation
technologies. We believe that today’s big challenges and assessing the potential benefits offered by high-
and opportunities arise in three main areas: speed AI- and ML-based tools.

Capabilities are a perennial barrier to the integration Providers can align themselves with their changing
of new technologies. Users should take a systematic customer priorities by ensuring their tools integrate
approach to address skills shortages, hiring smoothly into customer workflows and digital thread,
new talent to fill gaps and investing to upskill and by communicating their ability to address new
their existing workforce. And capability building value drivers such as time-to-market.
shouldn’t be limited to the engineers with hands-on
responsibility for simulation tools: educating other Scalability is the next frontier for advanced simulation
stakeholders, including senior managers in the technologies. While adoption varies between
benefits and limitations of simulation technologies industries, two thirds of the respondents to our
will support their wider adoption and integration into survey are already experimenting with advanced
the product development process. AI-based simulation tools. Moving from pilot to full
scale adoption is as much a cultural as a technological
Technology providers also have a role in the efforts challenge. Users can foster understanding of, and
to overcome skills shortages. They can support trust in, new approaches by creating best practice
their customers with training and support services, lighthouses within their organizations and using
and foster a broader understanding of the value of top-management support to communicate success
advanced simulation through wider communication to other stakeholders. Providers can support their
efforts. customers in those efforts, with a particular focus on
industry sectors with a high impact potential and high
Efficiency is becoming a key value driver for the likelihood to invest.
adoption of simulation approaches and the selection

Alessandro Faure Ragani is a senior expert in McKinsey’s Milan office, and Jan Paul Stein is an associate partner in
McKinsey’s Munich office. Roger Keene is a consultant for NAFEMS Americas, and Ian Symington is NAFEMS’ chief technical
officer.

The authors wish to thank NAFEMS and its members for providing deep real-life insights and expertise to this article.

NAFEMS is the independent home of engineering modeling and simulation, establishing high-quality simulation guidelines and
benchmarks for the industry since 1983.

Copyright © 2023 McKinsey & Company. All rights reserved.

Unveiling the next frontier of engineering simulation 7