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Digital Strategy

Understanding the Approach to a Successful Digital Strategy

Internet of Things (IoT) has become a key topic across a wide range of industries, and business-to-business (B2B) leading companies have already invested in, or have begun to consider investing in, IoT and other digital technologies, such as digital commerce and advanced analytics, to name a few. However, despite its notoriety, the digital landscape rarely means the same thing for all players, nor does it have a consistent definition across industries.

During a discussion with senior executives on the topic of IoT and related digital technologies, when asked to define IoT most answers included the connection and monitoring of equipment, products, or people. One manufacturer commented, “I think IoT is a way of connecting devices that were never previously connected. IoT creates a new way to solve problems with data.” However, another manufacturer countered, “For me, Internet of Things isn’t the right description. It’s really the ‘Internet of Everything.’ It’s not just things; it’s software programs and services as well.” For this executive, IoT goes beyond the connection and monitoring of inanimate objects.

For distributors, as transactions have become more frequently completed online, IoT has been linked to the transition from eCommerce toward digital commerce. Digital commerce allows for the entire transaction process—from discovery to after-sale support—to be completed online. Successful digital commerce requires the tracking and monitoring capabilities of IoT for the purchase and delivery capabilities shown below.

In most industries today, digital solutions allow suppliers to offer a differentiated capability in several places along the customer chain to help customers become better off. A manufacturer can employ IoT and advanced data analytics to connect and monitor equipment and products; such installed equipment with IoT-enabled smart systems and products can be connected to the larger building management systems to provide input and information on human traffic flow, maintenance staffing needs, etc.

Meanwhile, distributors look for information from IoT-enabled devices and equipment to better manage inventory, anticipate product orders, and monitor delivery. Distributors are focused on spare parts and consumables, and IoT, along with analytical capabilities, can better enable the distributor to provide on-time replenishment and changes in formulations, as needed.

Business Model

Across many industries, five levels, or building blocks, to evolve the IoT advanced data business model are evident today.

There are two important points to note from the IoT Data Evolution figure above. The first is the importance of open architecture, which allows for interoperability of devices, legacy systems, and new systems. This becomes particularly important when extending beyond Level 2 of the model. To aggregate data for software, applications, predictive analytics, and benchmarking capabilities, all the systems must speak the same language and be able to communicate. Additionally, open architecture gives companies the capability to stay ahead of advancing technology.

Secondly, to enable benchmarking capabilities, a robust amount of data is required. The data necessary must not only be part of a large dataset, but it must also vary by the company collecting the data, the location of collection, and it must be measured over a long period time.

Place in the Ecosystem

Big players in the facilities world—such as building automation system, access control solution, elevator system, and HVAC system providers—generally have more influence than smaller industry players. The larger systems are more complex, more expensive, and operate at a bigger scale.

There are both benefits and drawbacks in being a smaller player. As one manufacturer said, “We are the supporting actor. We are never the lead. And there is a strength in that. I’m all for someone else putting the big bucks in.” Connectivity comes at a cost; it requires an investment of resources and time. Additionally, with new technology comes new regulations, and it pays off not to be the first at bat.

One of the drawbacks discussed by the executives is the inability to set standards and the resulting necessity of open architecture. For smaller players, digital solutions are only a small piece, or an add-on, to existing larger systems. Open architecture will be a key to success for smaller players investing in digital technologies and platforms.

Conclusion

Across many industries, manufacturers and distributors are seeking approaches to create successful digital strategies. At the onset, we found that conflicting definitions of the digital landscape—including IoT and other digital technologies such as digital commerce, advanced analytics, etc.—often confuse and complicate strategies. Once understood, successful digital strategies must first and foremost enable suppliers to bring deliberate, quantifiable value to customers. Although not all customers value and want the same solutions, effective digital solutions must prove that the customer will be better off—gaining in cost savings, better service, and/or other additional value.

Business models, including roles and responsibilities and place in the IoT digital ecosystem, must be addressed. The pace of change in technology is rapidly increasing, and while some industries will see slower adoption, many will not. Developing a strategy to stay abreast of these changes and be proactively positioned to take advantage of digital opportunities will be an important determinant of future success.

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