Show Me the (IIoT) Money
We are in the midst of the inescapable growth spurt of the internet of things (IoT) and the industrial internet of things (IIoT). One estimate puts the number of all globally connected devices at 8.4 billion, one-third of which are business and industrial products. The digital revolution of our corporate offices, design centers, and production environments promise transformational improvements to productivity, quality, cost, and service. In our markets, new technologies offer the chance to differentiate core products and sidestep commoditization through IoT enhancements. As new technologies deepening their foothold within our lives and companies, manufacturing companies are exploring ways to monetize the IIoT through revenue-generating products and services that help their customers solve increasingly specific challenges.
To get a better picture of how and why manufacturers are pursuing IoT initiatives to generate new sources of revenue or enhance the value proposition of existing products, MAPI and PwC surveyed and interviewed select US-based manufacturers in early 2017. Their answers and experiences paint a clear picture. Nearly all of the companies in the study have adopted IIoT in their own operations and are currently selling or developing IoT enabled products of their own. However, most still face a lot of heavy lifting to actualize full benefits from their investments. Highlights from the study include:
- IoT deployments are accelerating. 38% of manufactures are now offering IoT-driven products and services; an additional 48% are currently in the process of developing them.
- The most common reason manufacturers develop IoT-driven products and services are:
- Competitive pressures
- Prospects for new revenue streams
- Customer demand
- Over the next five years, manufacturers expect revenue from IoT-based products and services will increase to an average of 10% of total revenue.
The digitalization of manufacturers’ product portfolios has not been without speedbumps. Like with any innovation, many new IoT investments stall at the proof of concept stage and even fail when launched to market. Some assumptions about customer demand and product value have proven wrong. Early product IoT enhancements were offered for free, now making it hard to impossible to monetize. From our conversations and survey data, we offer the following recommendations to support successful IoT investments:
- Identify doable, realistic entry points (or expansion plans) into the IoT products and services market. Your competition likely already have a strategy.
- Define and demonstrate how IoT products and services create value for your company and customers.
- Create IoT go-to market strategies that stack upon traditional transaction-based initiatives
- Create scalable and future-proof IoT business models.
- Learn from your products and customers to improve, accelerate and scale up your IoT products and services, creating an “entrepreneurial culture.”