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The Impact of Internet of Things (IoT) on Manufacturing IoT Acceleration and Key Challenges to Address, Pt. 2

The Impact of Internet of Things (IoT) on Manufacturing: IoT Acceleration and Key Challenges to Address, Pt. 2

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 second blog addresses some of the challenges that organizations encounter while accelerating IoT development: how to deal with issues such as data security and ownership, finding the right talent, and internal/external organizational impediments to overcome.

Data Security & Ownership
Increasingly, data hacking, ransomware attacks, and identify theft have CIOs taking a step back and thinking about whether or not they really want to be connected to everything. Yet, IoT demands that more and more devices are connected to collect and capture data, and as this trend progresses, there is a greater risk that confidential data becomes exposed to the outside world. It is not surprising that security is one of the top concerns when it comes to IoT adoption.

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.

The data breach concern may cause customers who own the data to be more reluctant to share their privileged information. One panelist shared her experience on dealing with this hesitation. “Initially, customers were nervous. They did not want to share information or release their data beyond their firewall out of confidentiality fears. We overcame this challenge by neutralizing the data, which removed sensitive information before it was transmitted out of their systems, without compromising the integrity of the data. We also had several legal discussions to define terms and conditions for using the data. Neutralization, along with terms & conditions, helped customers become more accepting of sharing data with us.

Organizational Impediments
It is also common to encounter organizational impediments, both internal and external, when it comes to changes introduced by implementing an IoT solution. To take advantage of what IoT can provide, customers often need to change their processes which can slow or even deter adoption. With IoT, often the nature of the work changes. 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.”

However, it is not just the customer who is reluctant to change; it also can be an internal team. IoT requires that devices have sensors to collect data, but this can be an expensive proposition to some organizations. In B2B markets where companies are selling commoditized products, adding even a small cost to the product can incur severe push back. 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.” This underscores the importance of having an IoT strategy that has buy-in and support from top management. When a company is moving forward with an IoT offering, it is not just one function, but the entire organization that needs to be on board.

Talent
Access to talent, or lack thereof, brought about an interesting discussion among the executives. It is quite challenging to find talent that is well-versed in nascent technology, interested in the manufacturing sector, and willing to locate outside of high tech hubs. It is also difficult to train existing employees on new technologies not in their core areas of expertise. So, finding the right talent in the right place at the right time, without breaking the bank, is a big challenge. In addition, the decision to build in-house or out-source is not an easy one either. Panelists had varying experiences when it came to this topic. What worked for some firms, failed for others. For instance, one organization resorted to consultants after a failed hire, while another hired a team with IoT skills in India where it was faster and more economical to find talent, and yet another opened a new office in a major city to attract talent.

When discussing developing competency in-house, one panelist mentioned, “Focus more at the data level and what it solves within a particular domain. This deep vertical domain knowledge is where the differentiation comes from. That’s the path I would go down when thinking about competency in-house. It is about where data adds value, and not underlying technology. We don’t need to develop hosting services or our own in-house analytics systems; we prefer to partner with companies who have that competency.”

When discussing talent acquisition, 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 PhD 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.”

Even though there was no definitive answer for this challenge of talent, organizations need to think through key questions before making a decision: What capabilities do I want to develop versus rely on domain experts? Do I need a few data scientists versus an army with a variety of skills? If I bring in an IoT team, how do we best commingle the team with industry/product experts in the company to maximize collaboration and value created? Factors such as a company’s scale and organizational structure, and their need for costs effectiveness versus speed versus control, will determine the best path.

In terms of accelerating IoT and addressing key challenges, three key insights emerged:

  • Data security and ownership are solvable problems: While security continues to be a concern, the tools are getting better and more sophisticated in handling data security. You cannot avoid data security challenges, especially when you consider the potential value of the data and the corresponding value-added solutions it can bring. You can overcome security and ownership barriers through systematic thinking on how to incorporate security and constant dialogue with your customers addressing their data sharing concerns. We at Blue Canyon Partners have helped firms understand in detail the different needs customers have around suppliers’ offerings—including IoT offerings—and identify solutions to address them.
  • Prepare your organization and customers for change: It is highly likely that an IoT offering will change the way you work and how your customers operate. It is important to manage this change through support from your C-suite, change management, and/or training services that make the change adoptable at all levels. In developing new IoT offerings, we have helped clients identify how customer’s processes will change and the implications for the feasibility and successful adoption of different IoT offerings in the marketplace.
  • Be strategic about talent acquisition: Before you decide if you want to build, buy, or partner, consider your core competencies and knowledge you want to keep or build in-house. What is not in your current, or future, core competencies, you should buy or partner to acquire. Unfortunately, there is no one-size-fits-all solution to solve the talent challenge; each organization much determine the path that works best given the company’s scale, organizational structure, and trade-off between cost, speed, and control.

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