Creating and Capturing Value with the Internet of Things (IoT): Accelerating IoT
Every day, companies are introducing products enhanced by new technologies, and there is no doubt they will have a transformative impact on the global economy. A 2015 McKinsey report estimates that IoT has the potential to represent 11% of the world’s economy in 10 short years. Given the huge economic opportunity, it is no surprise that most manufacturers are exploring ways to develop IoT devices or accelerate their projects to capture new revenue streams.
In a panel session facilitated by Blue Canyon Partners at MAPI’s 2017 Executive Summit, a small group of manufacturing company CEOs and presidents met to discuss strategies for creating and capturing value from IoT. The panel featured executives with experience from companies such as Emerson, Zebra Technologies, Johnson Controls, and Komatsu. This blog post is the second in a three-part series outlining the key takeaways and lessons learned from the session. It explores common challenges companies face when accelerating their IoT development, including data security, organization obstacles, and talent.
Read the first blog post to learn what panelists would have done differently on their IoT journey.
The Value-Security Trade-Off
IoT demands that more devices collect and capture often-confidential data. This data is subject to hacking, ransom, and theft, particularly if networks connect to the internet. The rapid growth of connected devices leads to a delicate balancing act between value and security. It’s a catch-22. The more connected the business, the more value you can derive from your equipment and systems. However, this value comes at the expense of the security of your networks and infrastructure. Unfortunately, CIOs are forced to manage this ever-growing nightmare of interconnectivity. A panelist discussed the struggle of connecting everything—in particular, legacy equipment and systems—and the danger of exposing data to potential hacking. "You have got this balancing act when you talk about information security. As you start to connect things, overall systems become less secure. Old systems are very vulnerable to attacks because they were not designed to be connected to the outside world. To mitigate that risk, we decided to architect new products and platforms instead of expanding on legacy pieces. But the good news is that tools are getting better, easier, and cheaper... You have to build connected systems and continuously improve on it."
Change Has Its Enemies
Change is hard, even when the change may be simple. The large-scale changes associated with the introduction of new technologies can be even more challenging. The reality is that not everyone has kept up with tech trends and can say they are tech-savvy. Others seem allergic to change and oppose anything that changes their processes, even if those changes are for the better. This means that some customers will be slow to adopt new IoT solutions even if they deliver new and better benefits. It is just a matter of human nature. As one panelist described, "Before, a cross dock manager had to physically walk around to see the problem in the warehouse; but now, these managers are able to do a virtual dock walk. In every case, our customer’s challenge was to change the way work gets done. What often gets lost is, you can get C-suite buy in, but when you go talk to the people on the ground, they push back because it changes the way they do their work. So, a top down deployment of an IoT solution often overlooks the impact this has on lower-level work processes and can slow down implementation. Getting over this barrier requires lot of training and hand holding which can be done through a consulting or services arm."
Customers are not the only ones who resist change. Our own teams often fall victim to the same aversion to change. Fortunately, we have more control over them. It is important to start with a clear IoT strategy and paint the vision for the organization. In B2B markets with commoditized products, adding even a small cost from a new sensor can lead to severe push back, which is why it is critical to communicate why the product’s enhanced value proposition is a performance enabler or competitive differentiator. As one panelist concluded, "Adding 10 cents to a building material product is often questioned, but making the product intelligent needed to be done to remain competitive."
The Key to Success Is Your People
A strategy without the employee competencies to enable it is doomed for failure. When it comes to digital talent in manufacturing, most companies struggle to draw top talent away from high tech hubs without breaking the bank. On-the-job training or retraining, which can work for some skills, is less realistic for emerging technologies such as AI, blockchain, and advanced analytics techniques that are becoming increasingly central to IoT strategies. The resource scarcity is making companies creative. Some are hiring a few key people in transformation roles, like data scientists, while others are opening offices in talent-rich locations to attract talent. In contrast, others supplement their teams with consultants to prop up a team after a failed hire or guide insight generation and data driven solutions. Each approach seems to work for some, but not for others. When discussing digital talent, two panelists shared what worked for them: "We needed critical mass. We started a design center in India where we could get talent faster, but it came at a cost. It is not the cheapest way. You have management cost, and we sent our U.S. people there frequently so that the teams could share knowledge and work together." Another panelist added, "We hired a Ph.D. data scientist very early on to dig through data and generate stats, but it was tough to keep him busy, and we did not realize the cost of having smart data scientists. Now, we do the basic analytics in-house, but bring in consultants when we need expert advice."
When considering your own digital talent needs, think through the following key questions:
- What capabilities do I need to develop in-house versus where can I rely on external experts?
- Do I need data scientists or data generalists?
- How will we integrate our digital talent with our industry/product experts to maximize collaboration and value creation?
The final blog in this series will explore how companies monetize and commercialize their IoT products and services.