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The Impact of Internet of Things (IoT) on Manufacturing: Defining a Strategy, Pt. 1
Atlee Valentine Pope, President and CEO of Blue Canyon Partners, recently chaired a panel discussion among four senior executives with experience at leading industrial and technology firms, including Emerson, Zebra Technologies, Johnson Controls, and Komatsu, on the topic of Internet of Things (IoT). The session, Evolution or Revolution: How Internet of Things (IoT) Will Change the Face of Manufacturing, was held during MAPI’s Executive Summit, an exclusive CEO and President member only event. Blue Canyon will be detailing the key takeaways and lessons learned from this session in a three-part blog series.
This first blog shares important insights from the panelists on how to get started on the IoT journey: the key aspects to address in developing an IoT strategy and approaches to define an initial IoT offering. Most importantly, these panelists also shared in hindsight what, if anything, they would have done differently, and why.
To begin, all panelists were unanimous that success comes from defining a business reason for developing IoT capabilities. The IoT purpose must also be accompanied with a clear set of reasonable expectations. Quite simply, they argued that in order to avoid getting lost in data overload or going down blind alleys, management needs to ask first and foremost: what business outcome we are trying to achieve with IoT? As one of the panelists commented, “The key question is… what are you trying to do with your business? If you just do IoT, you will have something but it won’t go anywhere. You need to have a why for taking on the initiative.”
And these business purposes can vary. Each panelist shared their experience on how their organization decided to use IoT as a revenue generator and build new service offerings for customers who valued these new services. Ultimately, these IoT capabilities provided their companies with a unique value proposition and competitive advantage. For example, while discussing how they defined their IoT offering, an executive talked about how his firm has embraced digitization and data-driven solutions as the core of their offering to customers. “It is driven by our customers who want more visibility of the data, so that they can find a more efficient way of doing business and to close visibility gaps or eliminate blind spots in their operations.”
Conversely, another panelist shared that their company’s goal with IoT was not customer-oriented, but instead was focused on ways to increase internal productivity within their organization. He explained “we wanted to create savings across our operations. In one use case, we began to look at ways to become more productive by speeding up our overseas shipping from China to multiple destinations around the world. While it was not possible to increase the speed of the shipments, we could increase the number of shipments from our various Chinese-located businesses to manage the load more effectively. Although this may sound easy, we needed to collect information from disparate systems, analyze millions of transactions, and normalize the information into a common language so it could be understood.”
Whether the IoT objective is driven internally or externally, it’s important to undertake a systematic approach to understand the problem/need, determine the capabilities required to address the need, and develop the IoT offering necessary to provide the solution.
In discussing the key aspects that an organization should address to understand the need, determine the requirements, and develop an IoT strategy, one panelist shared the story of how her organization initiated its IoT strategy. “We had a 20-year-old platform which had grown to be complex and expensive. In addition, the platform was not being fully utilized by our current customers. We were spending a lot of money building on this old platform and we couldn’t spend enough to stay current. We concluded it was time to build a new platform. So, we went back to the drawing board, conducting tons of research and customer panels to understand the different use cases that the customer would pay for. Then, we also thought about the capabilities that we needed to expect from this platform, such as short product development cycle, faster time to market, and segmented services, so that customers could choose what they want to use and pay for.”
This example underscores the importance of first having a clear business goal for offering IoT solutions. Once you have defined the objective or problem related to that goal, you can then work backwards to identify what data you need from where, and how you want to gather, normalize, and analyze this data to get to actionable decisions. A poor strategy, or a lack thereof, can leave you with a sea of data and significant costs with no near-term returns. In addition, an ill-defined effort can inadvertently welcome a disruptor or a competitor with superior focus who can become an immediate threat to your business.
Lastly, a panelist member shared the challenges of their company failing to initially define a clear IoT strategy. Even though the company was first to market with equipment enabled to gather valuable operating data, well before competitors, the organization fell short of understanding the potential value of the data in the marketplace. The company amalgamated this data for its own benefit and to encourage customers to adopt this capability; in doing so, the company inadvertently offered customers access to this data for free. In hindsight, the organization should have developed a roadmap to better understand when and how to capture the value it creates from the data and insights it generates in early development, and also later stages. They concluded, “we have trained our customers to expect the data and related insights for free, and, as a result, we are struggling to now change those expectations.”
In conclusion, there are three key insights that emerged from the discussion on getting started with IoT:
- Build a Clear IoT Strategy: Clearly define your objective and understand the problem you want to solve to build successful data-driven business models. At Blue Canyon, we have helped numerous companies to not only identify the IoT use cases that have the greatest value potential, but have also defined how to build out and deploy optimal business models.
Download Blue Canyon’s White Paper: Creating New Data-Driven Business Models for Profitable Growth
- Understand Market Drivers: At the core of building a successful IoT strategy is understanding customer needs, with either external or internal customers. What do your customers want and care about? What are their objectives and goals? Use this knowledge to build valuable use cases for your IoT offering. At Blue Canyon, we have helped B2B executives gain a deeper understanding of needs emerging from their complex and unique internal and external customer chains. Customers who don’t necessarily ask for or aren’t discussing IoT still have problems, and sometimes those problems can be resolved with an IoT solution.
- Stay Ahead of the Curve: As one executive explained, “Disruption is where companies have figured out how to close gaps through a different business model.” You risk losing your position in the marketplace if you are not continually monitoring for disruptive threats. Understanding how to identify and respond to IoT disruption is just as important as developing your IoT offerings.
Download Blue Canyon’s White Paper: What’s Your Play? A B2B Executive’s Guide to Identifying and Creating Disruption