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February 27, 2015
What’s the business value of the Industrial Internet of Things? Part Two
By: Mark McDonald

The Four R's
Part 2: Roles and resources

In Part 1 of this blog I wrote that the Industrial Internet of Things (IIoT) has enormous potential to create new customers and new sources of value. That means that executives should be thinking about the IIoT in business terms, not only in technical ones. Such a business mindset requires asking and answering questions that I called the “four R’s”:

  1. How can you create new revenue streams?
  2. What are the new rules and strategies to monetize the IIoT?
  3. What new roles are created by IIoT capabilities?
  4. What new combinations of resources are most important?

Following my discussion of the first two R’s in Part 1, let’s look at numbers 3 and 4.

  1. What new roles are created by IIoT capabilities?

The Industrial Internet of Things covers the first and last meter of business. IIoT capabilities externalize roles, processes and business rules as machines communicate with each other. These same capabilities also open new opportunities for you to embed your products and services into your customers’ daily lives. Making that happen requires new roles for your company, both internally and externally:

  • Internally

    • Don’t delegate the IIoT to technologists alone. IIoT capabilities demand creating a new technology governance coalition that replaces administrative and control-oriented approaches to IT. Pay particular attention to building agile relationships between the Chief Operating Officer, Supply Chain Officer, CIO and Customer Service Lead, as these roles complete the operational loop for any organization.
    • Bring third-party technologies into your operations. Third-party network and communications providers will become the common carrier of all IIoT commerce. The cloud is just one example of how IIoT models engage third-party technology providers. Eventually, almost every business model will include a significant role for a public communications service.
  • Externally

    • Become a business services provider seeking positions between traditional players, particularly places with high-frequency transactions, where your technology and knowledge contributes to efficiency, trust, reliability or security. For example, IT products and solutions provider CDW’s future growth strategy builds on transforming its role from IT product supplier to business services provider.
    • Transform internal back-office processes into external business services, particularly in areas where your customers do not want to make the operational investments to handle the volume and velocity of IIoT-generated data. The Harry Fox Agency (HFA)—a rights management and licensing services provider—has done this by providing micro-royalty services to those looking to license digital content.
  1. What are the new combinations of resources that are most important?

The Industrial Internet of Things provides technology that raises the information intensity and connected potential of every resource in your value chain. New combinations of previously separate resources enabled by these technologies create one or more of the following changes in an organization:

  • Better capabilities and performance available to your customers and workforces because IIoT technologies enhance the ability to put the right people with the right skills in the right places working on the right situations. Think of augmenting personal knowledge with sensory information with access to the best available knowledge, and subject matter experts sent directly to the place where their interaction matters the most.
  • Better process performance because these technologies enable deeper integration and more precise interaction among machines, people and other processes. Think beyond improving uptime and avoiding production failures; in addition, think about creating adaptable processes that incorporate context into their operation. The result is being able to handle a greater diversity of demands with the same resources—for example, a single production line that produces multiple products without requiring retooling.
  • Better management performance because these technologies raise both situational awareness (through sensors, drones, telemetry, etc.) and collaborative capacity (using expert networks, analytics-driven knowledge, etc.). The result is that management has the ability to both know more and to do more with what they know. The IIoT should lead to a transformation of administrative and support work because the information previously assembled, checked and presented by people—think sales, production, HR, budget, etc.—is provided instead by an organization’s sensory network of IIoT-enabled processes, workers and equipment.
  • Better capital performance as these technologies reduce required capital investments that accelerate returns on invested capital. They achieve this goal by reducing latency and redundant equipment investments to handle peak operations. They also expand the productive work day.

It’s time to go beyond discussions of the Industrial Internet of Things that focus primarily on technical issues. It’s time to take a broader business view because the ability of IIoT to spur growth for your company is more than promising—it’s phenomenal.

Think about the four R’s through the lens of your company’s capabilities, goals and customers. And let us know what you think.

Related reading:

From Productivity to Outcomes: Driving Business Strategies with the Internet of Things

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