There’s been a lot of discussion recently around the changing face of manufacturing, the forces causing that shift, and how those forces are leading to a world that’s smart and connected -- what some refer to as the Internet of Things (IoT). As defined by McKinsey & Company, the “IoT is embedding sensors and actuators in machines and other physical objects to bring them into the connected world.”
There are many ways that end-users and manufacturers alike can benefit from such a world. For example, the IoT lets businesses manage assets, optimize performance of those assets, and even create new business models from those same assets. But perhaps what’s most remarkable about this pervasive network of “things” is how much potential economic impact it carries.
A recent McKinsey Global Institute report, "Disruptive technologies: Advances that will transform life, business, and the global economy," estimates that by 2025, the economic impact of the IoT could be as much as $5 trillion to $7 trillion. A similar Gartner report is a bit more conservative, but still estimates a whopping $1.9 trillion worldwide economic value impact from the IoT by 2020.
So where does that economic value come from? Certainly there are the cool IoT consumer use cases that everyone is familiar with. The FitBit, which tells me at any point during the day just how active -- or lazy -- I have been, is a common example. My car’s fuel gauge reminds me how many more miles I can travel before I am left on the side of the road hiking to the nearest gas station. Connecting that gauge to the navigation system can help me find the nearest gas station to avoid such a fate.
Industry experts agree that one industry sector poised to see great IoT impact is manufacturing. The first point of economic impact is in how products are manufactured. The "Industrial Internet" rapidly increases the complexity of creating ever smarter, connected products. By closing the loop between early-stage engineering design activities, production processes on the plant floor, and the service organization, manufacturers can reduce errors, increase flexibility in how they manage late-stage engineering changes, reduce work-in-process, and, ultimately, accelerate new product introductions with products they'll hope can be financially successful.
When you take it one step further though, that’s when things really start to get interesting. When you manufacture that smart, connected product, it can then give you back real-time data to help maintain and service it at optimal levels. Being able to maintain a product after the point of sale gives manufacturers a “digital umbilical cord,” which allows for remote visibility, where they can interact with products whenever and wherever.
Imagine if your washing machine itself were the diagnostician, as opposed to having to schedule a service man to come to your house to determine the problem -- and then hoping that he has the right part in his truck. Imagine if the machine could detect the problem, send information back to the manufacturer through a connected service system, and alert the manufacturer to deliver a new part, which is then replaced by a licensed company professional on the first service visit. This process would not only satisfy a customer in the short term by providing a product that performs successfully at all times, but that positive experience would help establish a loyal relationship over the long term. Meanwhile, the company would stand to slash the wasteful costs of repeated service visits and overstocking parts.
Today, all signs point to the value of the IoT. It’s here, it’s not going anywhere, and it has the potential for a multitrillion-dollar worldwide economic impact by giving manufacturers an opportunity to engage customers beyond the purchase, using service-based contracts to create a partnership built around product performance.
— Lee Smith is the divisional general manager, Service Lifecycle Management (SLM), at PTC.