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IIoT Every Company is Becoming a Software Company

McKinsey forecasts for IOT economic impact Image credit – McKinsey

Why Should Industrial Companies Embrace the IIoT?

According to the above McKinsey report graphic, ‘factories’ will be the largest value gainers from IoT. Of course ‘factories’ happen to be key customers of industrial suppliers so the key reason industrial suppliers should embrace IIoT is ‘for growth’. Growth from offering new services, new applications and new products – for more detail see CapGemini’s Digital Engineering: The new growth engine for discrete manufacturers. But ‘growth’ isn’t the only reason! Not embracing the IIoT when your current or new competitors do, may lead to being left behind, competitive disadvantages and loss of market share (see this Industrial Internet Consortium case study showing, “upgrading to a modern Industrial IIoT process is unavoidable if they want to stay competitive“)

How to Get Started with IIoT – 7 Recommendations?

In our first IIoT post, IIoT Use is Accelerating Fast – Is Yours? – we recommended that you plan your own use of IIoT and invest in it. Now, in this post, we want to add more detailed recommendations distilled from reading multiple IIoT papers, studies and surveys monitoring what has worked best for early adopters:

  • Start by adding IIoT capabilities to what you already do, make, sell or service rather than entering unfamiliar markets or creating new products. In other words add sensors, IIoT connectivity and analytics to existing products and exploit your incumbency in the markets you already address. Make IIoT inclusion a decision in all new product designs – according to Capgemini, “manufacturers predict 47% of their products will be smart, connected and generating product-as-a-service revenue by 2020.
  • Do this in multiple related use casesbecause a single IIoT use case is unlikely to be transformative. You likely need some breadth across multiple IIoT use cases before you’ll see significant business impact. A single use case may be a pilot to test and prove your capabilities and/or a new business models but it usually takes widespread usage to create a cultural shift to IIoT across your organization. For example equipment monitoring of parameters, anomaly detection, real-time alerts, predictive analytics, timely feedback loops in various use cases such as:
    • Remote monitoring and optimization (through put, energy consumption, process)
    • Predictive maintenance
    • Providing product performance feedback
    • Lead generation to drive new sales (replacements, upgrades)
    • Product as a Service (PaaS)
    • Monetizing data
  • Proactively look for opportunities to improve your business processes by collecting and analyzing IIoT information. For example, connecting factory production machines to the internet enables companies to manage productivity more effectively and better predict when maintenance is needed. That’s great as far as it goes, but additionally using insights gained to improve the business processes themselves will maximize value. For more detail see BCG’s paper Winning in IoT: It’s All About the Business Processes.
  • Build the right industrial networking because that’s the foundation of your IIoT. This new Industrial Networking Enabling IIoT Communication white paper is an excellent introductory guide for IIoT system designers and network engineers with practical solutions to key usage scenarios. On the wireless side, antennas have been more difficult to shrink in size than computers, sensors and RF circuits because they require a certain material thickness to transmit and receive signals efficiently. However Drexel University engineers have developed spray on antennas, transmission lines and RFID tags less than one micron thick that outperform their bulky copper counterparts.
  • Choose the right IIoT platform – there is a shakeout going on as leading players consolidate and build their ecosystems. For example: PTC and Rockwell Automation recently announced a new partnership, Bosch is very advanced, Siemens Mindsphere continues its rapid evolution. As with most technology transitions many users fear being locked into a platform and sit on the fence. As usual the most truly ‘open’ platform with the best APIs will likely win! For more detail see the Gartner magic quadrant for some IIoT platforms or get the ABI Research report on OT/IT integration that ranks 11 smart manufacturing platforms – according to these four come on top: PTC’s ThingWorx, GE Predix, ABB Ability and Siemens MindSphere.
  • Manage risk robustly. IIoT increases the potential for privacy breaches and data-security risks because there are many more information nodes for hackers to penetrate. For a ‘not to copy’ example see this digital security blog post and this McKinsey post, “A new posture for cybersecurity in a networked world.”
  • Apply strong change management – as with any successful new initiative ensure the CEO and executives focus on potential gains and provide visible encouragement and resources for your IIoT initiatives.

3 Conclusions and Implications

1. IIoT is accelerating industrial connectivity, cloud computing (particularly ‘at the edge’) and adoption of digital twins. Collectively these are enabling new business models that are transforming industrial companies. As a result every company is becoming a software company – or at least every industrial company that embraces IIoT is becoming a software company. This has obvious implications for development or recruitment of the software and IIoT skill sets and/or new partnerships industrial suppliers need. This is likely to create a shortage of IIoT skills.

2. IIoT enables business, factory and plant managers to measure the profitability of their operations in real time. Improving profitability starts with optimizing the performance of each industrial asset so that it performs as efficiently and reliably as possible. It continues with big data and predictive analytics to optimize business processes, for productivity, to minimize energy costs and raw material use – all in real time!

3. IIoT and related technologies are wonderful tools but they are not a panacea for the hard thinking needed to design good processes nor are they a magic bullet for bad processes. They can be a shorter route to discovering that the hard work wasn’t done first, for example they won’t make un-calibrated process sensors or instruments accurate or faulty enterprise software work. In short they are just tools and, as the old saying goes, “the hammer isn’t going to design and build the house!

The IIoT is and will have deep impacts on industrial suppliers, not only on their products and services but also on their sales and marketing as we described in ‘The Coming Impact of IIoT on Industrial Sales and Marketing‘. As always please add a comment below or ask a question using the button below or by calling us.



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