For U.S. Manufacturers, The IIoT Future is Now: Part 3
Five things to keep in mind as you build IIoT products and services
While technology advancements surrounding connected devices and data analysis hurtle forward – and costs and barriers to entry generally are falling – some companies still feel as if they’re missing out on something, scrambling to get on the cutting edge.
But it’s also an exciting time.
At the consumer level, there’s high-octane connectivity – we notice that even house plants are getting into the act, alerting their owners that they need water. In the industrial space, which we are exploring, plant machinery signal the need for maintenance, aircraft send thousands of data points to ensure optimum performance, and so on.
But manufacturers are also looking for ways to monetize IIoT. It’s not an easy path. But, as long as companies can choreograph the right moves at the right time – talent, identifying the right customer needs and wants from “connectivity,” and committing to do-able, well-executed IIoT product and service development, for example – there also seems to be money to be made in IIoT.
So far, our blog series on the Industrial Internet of Things (IIoT) has maintained that IIoT has crossed into the mainstream. A couple of findings we shared from our recent MAPI survey of U.S. manufacturers developed with PwC tell this story in a nutshell: 38% of manufacturers are now offering IIoT-driven products and services, and an additional 48% are developing them.
In Part 2, we followed the money that manufacturers and other investors are pouring into IIoT products and services developmental initiatives. Just consider, for instance, that four in ten manufacturers are earmarking 5-20% of their total research and development budgets to IIoT products and service development – and that, over the next five years, the same number expect that investment to amp up to 10-20%. We also took a look at IIoT business models being rolled out by manufacturers, including product performance self-monitoring; data analysis/diagnostics from the manufacturer; IIoT-driven field services; and “the pay-per” model.
What now? However, while survey results and prognostications provide us with a snapshot of today’s IIoT adoption landscape and a peek at tomorrow’s vista, they do not tell us the multitude of experiences – from humbling misfires to rousing successes – that countless adopters of IIoT are seeing. Those stories are many and varied and will continue to unfold in ways we can only imagine in the coming years as IIoT marches up its maturation curve.
In this third and final blog of our series on IIoT, we attempt to answer what many enterprises are asking themselves: “What’s the best IIoT plan for us now?”
Building out an IIoT plan that feeds into a company’s existing strengths and growth strategies requires working on numerous fronts. As we explore IIoT for manufacturers, we recognized five overarching issues that stand out as critical to developing and even expanding an IIoT products and service strategy.
- Be prepared that failure may well be part of your success. While there’s a lot of excitement and promotion around the Internet of Things (and has been for some time), a recent Cisco survey adds a sobering, cautionary tale surrounding IIoT adoption. It showed that among companies with completed IoT projects, one in three projects were not considered successful. Interestingly, 60% of IIoT initiatives stalled at the proof-of-concept phase. Indeed, our recent survey of U.S. manufacturers also painted a similar dose of experiential reality. Amidst the hype, we are also at a crossroads, with a camp of manufacturers still sitting on the IIoT sidelines. Consider that more than half of those companies not yet offering IoT services cite “no customer demand” as the reason for not doing so, and nearly half cited “unclear return on investment” or “no proven solutions.” Such perceived challenges in (or reasons against) developing and selling IIoT products and services suggest that assumptions about the future deployment of IIoT products and services are in flux and will likely be tested over time through trial and error. Some companies may be overestimating customer demand and potential ROI around a given connected product or IIoT service; likewise, others may be understating (or not seeing) the demand for a given product or service. Some of these speed bumps could include lack of executive-level buy-in; underestimation of expertise or capital needed; lack of vision and quantification of enterprise value creation possibilities; underestimation of cultural and organizational change; or overestimation of customer needs and preferences.
- Build the right team. Manufacturers exploring IIoT products, business models, and go-to-market strategies might well heed the following advice: You don’t need to go it alone. It’s revealing that three of four manufacturers “leveraged internal resources” to build their IIoT products and services strategy. At the same time, they also looked elsewhere for help, with 26% doing so through partnerships and acquisitions or hiring an IIoT specialist vendor, and 25% purchasing an industrial IIoT platform developed by a third-party provider. Convening a diverse group of leaders at the outset helps integrate IIoT product development through the business. A robust IIoT initiative would ideally need to include business, user experience and technology expertise joining efforts on what would be multi-functional teams.
- Find new stakeholders and markets for collected data. As enterprises capture value from data gathered by their products, they may well find other, often incongruous, suitors for that data. For example, the driving habits measured by an automobile and captured by automakers hold obvious intrinsic value to automakers (e.g., predictive maintenance, research and development advancements). But what about other sectors that might also find that data valuable – yet for entirely different reasons? While acquiring, sharing or selling data could well benefit manufacturers and their customers, doing so also clearly comes with challenges, including data privacy and ownership issues, which, if not well managed, could potentially erode digital trust with customers. As manufacturers expand their data offerings, they will also benefit by partnering not only with other enterprises, but also with the public sector, non-profit, and academia to deliver data to enhance IoT products (such as real-time data on weather, crime statistics, transportation traffic, data on energy use from public utilities, to name a few).
- Learn from your products to enhance customer experience. Another way businesses can capture value from IIoT products is to use data as a feedback loop to unveil how their products are used, which functionalities are most utilized and, just as important, least popular. To future-proof a connected product, manufacturers need to have the capability to remotely update the apps customers use to access the data as well as to update or add next-generation software (for greater functionality or cybersecurity). Or, perhaps customers are not optimizing the products as much as expected; this can prompt a real-time, virtual feedback loop with customers to inform – and accelerate – product design, development improvements, and new product introductions. Presently, about three in five manufacturers selling IIoT products are using data collected from those products to improve product development. Using predictive analytics enables manufacturers to enhance the customer experience.
- Keep a fixed, vigilant eye on cybersecurity. Manufacturers using IIoT-connected equipment and supply chain tracking realize the importance of keeping data secure and incorporating enterprise-wide cybersecurity risk management. Large manufacturers building out IIoT throughout their operations, especially those in critical infrastructure sectors (including energy, chemicals, and industrial defense), are already aware of the importance of investing in strong operational technology security. But securing customer products from attacks requires an extra dose of vigilance.
Some of these issues explore monetization in indirect ways, such as improving product development and customer relationships and loyalty. Others are more direct revenue generators, such as charging for data analytics and maintenance alerts, or for industrial-strength cybersecurity offerings. Manufacturers, in the end, need to be judicious in where they spend their time and capital in building out their IIoT programs – both in internal operations and externally, in their products. So, yes, it may seem an awkward time now, but in the next few years, we should expect the IIoT to come of age and become a more reliable, productive earner for enterprises who make the efforts to patiently nurture it into adulthood.