29 May Business Opportunities with the Internet of Things (IoT)
Stéphane Poirier, Marketing Director at Nubik & IoT Advisor
The Internet of Things (IoT) presents manufacturers and high-tech companies with a number of growth opportunities. These include increased sales through the augmentation of existing products to create uniquely differentiated offerings, new product launches based on rich insights regarding product usage, and new value-added services that can be monetized in the form of regularly recurring subscription revenues. The Internet of Things can also be used to optimize production efforts while reducing costs such as those associated with equipment downtime.
What is the Internet of Things?
According to Wikipedia, the Internet of Things is,
“the network of physical devices … embedded with electronics, software, sensors, actuators, and connectivity which enables these objects to connect and exchange data. Each thing is uniquely identifiable through its embedded computing system but is able to inter-operate within the existing Internet infrastructure.”
In the context of business, there are two IoT dynamics at work. With the first dynamic, IoT sensors and connectivity are embedded into manufactured goods that are shipped to customers, whether these be consumers or business users. These goods (or products) capture and transmit data back to the manufacturer regarding their usage. (Where those goods are used in manufacturing or delivering business services, the term the “Industrial Internet of Things is often used.) In the second case, these same sensing and connectivity capabilities are embedded in equipment used in the manufacturing of goods, providing businesses with real-time instrumentation of their assembly lines.
What is the business opportunity?
The business opportunities provided by IoT are two-fold: one grows the top line whereas the other optimizes the bottom line.
The revenue growth case is as follows: harness the sensing and connectivity features of the Internet of Things by embedding IoT capabilities into goods to generate, capture, aggregate, and interpret data about their usage. Then take that insight and use it to augment existing product offerings with personalized value-added services that enhance the customer experience and drive ongoing value creation, while at the same time endowing them with the competitive advantage and price protection that comes with truly unique differentiation. Then use that same insight derived from customer usage to design and launch new Internet-enabled products that are enhanced from the start. In parallel with all of this, reimagine the business model to monetize those services in the form of regularly recurring, subscription revenues.
The cost savings case is as follows: Deploy new IoT-enabled manufacturing equipment and production systems with wireless connectivity and data protocols to provide instrumentation of the assembly line. Capture data produced by production equipment during manufacturing operations and transmit that data to centralized systems for subsequent storage, pooling, and analysis. With the support of artificial intelligence-powered decision support systems, achieve a real-time holistic view of operations. Discover new opportunities for improvement, eliminate production defects, and pro-actively manage downtime through predictive analytics. Drive subsequent business process reengineering efforts as part of a continuous cycle of improvement and adaptation to market and customer realities. With respect to IoT-enabled final products, leverage product usage data to enhance product development decisions and to support customer service activities.
How do businesses use IoT?
Manufacturers and high-tech companies are discovering the value of adding sensing and connectivity capabilities to their manufactured goods and wrapping them with a services component. Here are some examples:
Manufacturing: GE Aviation
GE Aviation is the arm of industrial conglomerate GE that builds and services aircraft engines. GE Aviation aggregates data from engine units that are deployed with customers, analyzes that data, and draws inferences about the value that they create as well as their optimal operation. In the case of the latter, GE Aviation can offer recommendations to its customers on how to improve their usage of its products.
“For example, GE Aviation can optimize the operation and management of the post sales use of its engines through the implementation of predictive maintenance tools to detect potential sources of faults and rectify them before they occur. Finally, the company also offers operational data capture and analysis tools that its client can use to optimize their own operations.” (source)
A heavy equipment manufacturer Caterpillar has indicated that there are,
“more than 3.5 million pieces of Caterpillar equipment in the field, many of them fitted with sensors that send out continual status updates about important mechanical systems and operator performance.” (source)
While such a services approach enables Caterpillar to develop and maintain a relationship with the final customer, it is not incompatible with a business model that sees local dealers and distributors as the immediate point of customer contact.
“Caterpillar believes dealers could be billing for billions of dollars more each year if they did a better job of thinking of those machines as smart digital devices, constantly pinging them with sales and service opportunities—not just dumb pieces of iron.” (source)”
High-tech: Tesla Automotive
Each of Tesla’s hundreds of thousands of vehicles deployed on North American highways comes with IoT capabilities. Software updates can be deployed to individual vehicles to fix vehicle capabilities, offer new configuration options, or provide entirely new features, such as basic autonomous driving or new performance driving modes. Whereas other autonomous vehicle development efforts rely on laboratory testing or text fleets of cars, Tesla captures and aggregates data—generated by onboard cameras, GPS tracking and other sensors in real-world conditions—from its customers’ vehicles to drive the development of its autonomous driving efforts.
Tesla pushes software updates on a regular basis, including ad hoc updates based on real-world events. For example, in September 2017, Tesla remotely deployed a patch to just its vehicles in Florida, enabling them to access the full battery capacity—typically an option at the time of purchase—so that their owners would have enough driving range to escape from Hurricane Irma. In November 2017, vehicles owners received an enhancement to one of the car’s driving modes to make it less intense. In March 2018, version 2.0 of Tesla’s Autopilot autonomous driving software was pushed out to all compatible vehicles.
Garmin manufacturers devices that use the Global Positioning System (GPS) and other satellite arrays to provide location services to drivers, outdoors sport enthusiasts such as golfers and fishermen, and athletes, whether for tracking and recording their running, swimming, or cycling activities. Garmin’s GPS devices for athletes offer Internet connectivity via Bluetooth or Wi-Fi protocols, enabling them to receive software patches and transfer recorded activities. These user activities are transmitted to an internet portal (Garmin Connect) where users can view and analyze their activities, generate historical reports, and participate in challenges with other athletes.
While Garmin Connect is free to use, its cost is built into the price of each GPS tracking device (with Garmin’s accounting department making assumptions regarding the cost of each user and their average lifecycle). However, Garmin Connect’s true value is as a powerful source of stickiness for the Garmin brand. The fact that an athlete has saved all of his or her historical activity data with Garmin—and doesn’t want to lose it—will influence the decision to stay with Garmin when the time comes to upgrade to a new GPS device.
IoT and cloud computing
IoT capabilities and the data they generate can be integrated with existing enterprise IT infrastructure, including customer relationship management (CRM), customer support, field service, and enterprise resource productivity (ERP) packages such as the cloud-based solutions provided by Salesforce and FinancialForce, among others. These solutions support IoT capabilities and value-added services, including subscriptions, that are offered to end customers, as well as support for the data generated by IoT-enabled equipment on the production line.
What are some next steps?
If you are interested in exploring how IoT can add value to your manufacturing and product efforts, here are some steps you can take:
- Determine where and how you can embed sensing and connectivity capabilities into goods and products
- Determine the types of data that could and should be captured
- Determine who can benefit from the data
- Service personnel
- Product development
- Determine how to monetize such data (i.e., the business model), whether as part of initial sale (bundled service) or as an add-on subscription
Nubik’s free Industry 4.0 Digital Transformation eBook walks you through the ins and the outs of achieving digital transformation with attention paid to the integration of IoT capabilities in goods as well as production equipment, the analysis of data captured during product use and manufacturing activities, and the application of cloud-based artificial intelligence to deliver new customer and production insights.
In “Field Service Reimagined for a Connected World”, we explore the case of a multinational company that provides irrigation management and automation solutions to growers of water-intensive crops such as almonds, pistachios, and cotton. The company’s solution combines wireless-enabled hardware probes located throughout the farm with a secure, cloud-based platform that aggregates data from probes to present a real-time overview of soil tension and crop performance across the farm. The company aggregates data from across farms, combines it with analysis using expert systems backed by research, and then recommends those areas of the farm requiring additional irrigation.
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