How new Internet of Things business models will benefit manufacturing

Product Manager IoT Division - Connected Products, IBM

What do you think of when you think of the Internet of Things (IoT)? Perhaps popular examples such as the connected home, connected car, wearables, smart lights and smart washers and dryers come to mind. These are all common examples of how IoT is changing peoples' lives.

With this in mind, most of the hype around the Internet of Things (IoT) has been largely focused on the consumer. People often envision how IoT will transform their everyday routines, such as a push to start feature on their car, direct from their phone, or proactive notification of a traffic jam up ahead, while in route. Maybe it's about comfort: as you return home, your connected house will know the ideal temperature and lighting for you, but change that configuration when your wife or kids return home. People envision controlling their entire lives remotely from a smart phone, a smart car or a tablet at the office.

It’s easy to understand why these popular scenarios resonate: we can all relate to traffic jams, losing your keys, leaving the stove on or running out of coffee. Wouldn't it be nice if these household devices worked together to make life a little easier?

The other side of the Internet of Things

But there’s another side to IoT, which most people don’t typically think about. That’s because these other use case scenarios pertain to technologies and industries that few fully understand—yet, without noticing, we’re all benefiting from their existence.

Manufacturing, the icon of the Industrial Revolution, is going to benefit in unprecedented ways as a result of the second revolution, taking place right now. GE, a pioneer in the embrace of IoT technologies and their application to industrial scenarios, has termed it "the Industrial Internet," but that’s just marketing. Beyond the marketing are the results and benefits companies like GE are experiencing from applying elements like low cost sensors, ubiquitous wireless connectivity and powerful computing power.

Consider this scenario: My company manufactures multimillion dollar robotic surgical equipment which is sold globally to hospitals, universities, clinics and so on. These high-priced devices are fully IoT enabled, so my company is able to capture, store and analyze constant streams of usage and performance data from hundreds of thousands of units across the planet. In doing so, my company is able to predict and detect, with high levels of confidence, potential part failures—failures that, if allowed to happen, would cost my customers thousands of dollars an hour in delayed surgeries and, even worse, may threaten the lives of patients scheduled for an operation.

Since my company is able to predict and detect these failures, we’re able to preempt failure with proactive maintenance or, if needed, the sale and delivery of replacement parts. In some cases perhaps the entire unit needs to be replaced, which may mean additional units sold or, at the very least, my clients are able to get replacement units faster so disruption to their business (and to the health of their patients) is minimized.

In this scenario, what is my company actually selling? While many reading this will answer the obvious, my company isn’t actually selling medical devices at all—in this scenario my company is selling results. We’re selling results in the same way that software as a service sells results: we’re selling continuous up time and we’re selling predictability.

In his blog on the Industrial Internet, Dadong Wan, Accenture Technology Labs Fellow, writes:

However, companies that wish to tap into the disruptive potential of the Industrial Internet need to evaluate how the shift to an outcome-based business model will transform their industry and their overall business strategy. In particular, they need to consider how their investment in operational efficiency and new products and services can also help set them up in an outcome-based marketplace. Because delivering customer outcomes require collaboration with players outside their own industries, companies may also want to reassess the current state of their ecosystem before deciding what capabilities to be built internally versus sourced from partners. Early market leaders such as GE, Philips and John Deer provide useful models for the rest of the industry.”

Consider airlines, wind turbines, overhead cranes, commercial vehicles and power plants (see figure). These are all examples of manufactured products or, more accurately, products fabricated by assembling thousands of other manufactured products. If each component were fitted with sensing and transmitting capabilities, then that information could be used to improve performance and up time across the industry.

What does this have to do with commerce?

I spent 10 years of my life selling software to very large companies, and during those 10 years I came to deeply value the importance of a lead. How you determine good or bad leads is largely based on the industry, the customer and the sales rep. The best lead possible is one where you know your customer will have to buy, and that information is largely unknown by anyone but you and perhaps your client. Imagine, as a sales rep, what it would be like if you had a crystal ball and knew six months before anyone else did that there was a genuine sales opportunity within a client’s business. Imagine how powerful that is.

Being able to leverage IoT-produced data with predictive analytics allows manufacturers of all shapes and sizes to proactively initiate sales and services which benefit themselves and their customers in unprecedented ways. It allows the manufacturer to shift away from selling widgets and start selling results.  

The Industrial Internet, and IoT in general, isn’t just a disruptive set of technologies—they’re disruptive business models. Manufacturing organizations that integrate CRM, Configure – Price – Quote and intelligent fulfillment with their overall IoT strategy will be in a position to truly capitalize on the emergence of the Industrial Internet. Those that don’t will see their market share slip away as more forward-thinking companies eat away at their revenue streams.

Manufacturing is a very old industry, but, for the first time in a very long time, it sits on the cutting edge of a massive technological revolution. That revolution will likely reset common expectations on travel, delivery logistics, energy availability and urban development. My hope is that forward-thinking organizations fully appreciate the true scale of what’s happening within the industrial and manufacturing industry as it relates to IoT and that they are aligning sales and fulfillment strategy to capitalize on this significant opportunity.

Agree? Disagree? Let's continue the conversation. Tweet me @peter_ryans