Most of the technology used in IoT solutions has been around for some time. A recent trend driving its growth is commercial: the reduced cost of sensors and the affordability of cloud computing. Yet companies must still assess the business value that can be achieved before deciding to go ahead with a project. Technology providers need to understand this before investing in solution development. Manufacturing companies are benefiting from IoT in a number of ways, and technology vendors are providing solutions that are having an effect on the market.
The Business Case for IoT
As for any investment in business systems or technology, there are two main reasons to invest in IoT. One is efficiency, which means doing more for less. Another is the reduction in the total cost of design, production, supply, distribution, marketing, or general administration. Quality can also improve, and regulatory compliance becomes more efficient.
|Peterson Corp. uses an IoT system to monitor customers' equipment remotely. Image courtesy of Peterson Corp.|
As an example, the German air-systems company, Kaeser, has worked with its ERP supplier, SAP, to improve efficiency in operations and provide predictive maintenance.
Fusheng, a Chinese company that makes compressors, used Intel’s Adlink IoT Gateway to channel data from the sensors on its compressors to the cloud and at the same time provide security. The cloud platform they use is Microsoft Azure, which provides the analytics engine. By monitoring their compressors in the field, Fusheng achieved valuable data analysis and predictive maintenance.This has improved down-time, reduced “Mean Time to Repair” and improved energy efficiency, by fixing poorly operating compressors.
Efficiency Savings Are Low Risk
The advantage of going for efficiency savings, is that it is a low-risk effort. Problems or areas for improvement can always be identified, and an incremental solution can be implemented as in the examples above. Yet there is more overall value in IoT. Cutting costs will save you money, cutting your customers’ costs will help you stay competitive, but an IoT vision can be larger.
A well-executed IoT solution can offer competitive advantage This can include introducing a new (disruptive) business opportunity; a new payment model (making it easier for a customer to buy); enhancing an existing product or service to attract new customers or more revenue; and on the other side of the coin, disruptive actions may be needed in order to remain competitive.
Competitive IoT in Action
Although the benefit of competitive advantage is harder to calculate than efficiency savings, its value can be much greater. Here are two examples of companies disrupting their industries:
Peterson Corp. saw the opportunity to add a new recycling line to its forestry equipment business. Last year, Matt Prenevost, the company’s remote monitoring IoT manager, began the company’s digital transformation by focusing on IoT technology. Microsoft Azure IoT was retrofitted to active machines and built into new ones. The Peterson team can now work directly with people using their machines, walk through problems remotely, and analyze data to obtain insights and anticipate issues before they happen. These efforts lifted customer satisfaction while also offering data to guide product development.
CNH Industrial embarked on a transformation to make smart connected products an integral part of its portfolio of customer offerings. One goal was to build customer loyalty through greater visibility into the total cost of ownership of the machines; this involved performance monitoring as well as integration with core enterprise business systems, such as ERP and CRM.
Currently CNH Industrial enables three categories in its IoT offerings:
- Monitoring: allows for the comprehensive monitoring of a product’s condition, operation, and external environment through sensors and external data sources.
- Control: uses software, embedded in the product or in the cloud, to allow customization of product performance and personalization of the user experience.
- Connected vehicles: CNH can predict failures and reduce downtime via remote services and help farmers monitor their fields and equipment to improve efficiency.
As a participant in “Internet of Food and Farm 2020” (IoF2020), a European consortium fostering large scale IoT adoption in the farming and food value chain, CNH Industrial will lead a use-case on interoperability. IoF2020 will help shape public policy and drive the agriculture business towards an open and connected ecosystem.
Starting an IoT Implementation
In whatever ways companies decide to balance efficiency and competitive advantage, there are three ways to get started. First, build from scratch, using an IoT platform and other components. Second, use a packaged solution or build upon an existing enterprise system, such as ERP or MES. Third, go for a proof-of-concept’ experiment to learn from and create a plan.
The choice will depend on budget availability, in-house expertise, and the strength of the relationship with the enterprise system provider. To get a clear idea where to start, Maciej Kranz, in his book Building the Internet of Things identifies four paths to IoT payback:
- Connected operations, such as joining meters to a network.
- Remote operations, such as asset management.
- Predictive analytics, to identify an issue and quickly take corrective action.
- Predictive maintenance, to increase uptime by pre-empting failures.
Making the Business Impact Clear
The business impact on a company using IoT will depend on the overall approach a company takes. Going for efficiency is incremental and doesn’t require major changes to the business. Going for competitive advantage may require business transformation, and it may change the relationship with the customer.
The impact of IoT on each industry will be very different. Some – like the process industry – have been using sensors and systems to control production for many years, and the effect of new capabilities in IoT enhance this approach. In other industries, such as agriculture and transport, the effect could be transformative, resulting in winners and losers. Even though big things move slowly, IoT will have a massive impact on most industries.
Alan Griffiths is a principal consultant at Cambashi, an industrial IoT provider.
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